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Original Xin Jizhao 21st Century Economic Report
Introduction: was born on December 1, 1948. The RMB has a history of 72 years. No matter how the RMB is revised, the form of its banknotes has not changed.
But this year, the RMB will usher in an unprecedented upgrade - the digital RMB is about to meet the public. Currently, various banks are conducting internal tests on implementation scenarios, and some have already been used by internal employees to pay party dues and other payment scenarios.
What is digital RMB? Why issue digital RMB? What is the difference between digital currency and Alipay and WeChat payment? How to replace cash? Understanding these issues is necessary for everyone.
central bank digital currency (DC/EP) is internally testing application scenarios in payment and other fields.
html On April 16, several people in the banking industry told reporters from the 21st Century Business Herald that the digital currency is led by the central bank. Various banks are testing implementation scenarios internally, and some have already been used by internal employees to pay party dues and other payments. Scenes.DC/EP Many industry insiders pointed out that the central bank digital currency is still in the internal research and development stage. The central bank has been promoting research and development and scenario testing under a high degree of confidentiality. The internal research and development of major banks is generally the responsibility of the Internet Finance Department of the head office, and there is no time for specific launch. surface.
DC/EP pilot scenario
html On the evening of April 14, a photo of the central bank’s digital currency being tested within an Agricultural Bank of China account circulated on the Internet. It was reported that the central bank digital currency was tested in four pilot cities: Shenzhen, Xiongan, Chengdu, and Suzhou.Judging from the screenshots of the Agricultural Bank of China's digital currency wallet leaked online, the main functions displayed are basically similar to the daily payment and management functions of bank electronic accounts. For example, on the homepage of the Agricultural Bank of China's digital currency wallet, there are "scan code payment", "remittance", "receipt" There are four commonly used functions: "Pay" and "Pengpeng".
Image source/Daily Economic News (Internet)
21 Century Economic Report reporter learned that Bank of China has determined the internal scenarios of several pilot digital currencies in a project called "321 Project". After many early trials Testing and preparation work, the internal pilot conditions are basically mature, and is currently being used for payment in some internal scenarios of the bank’s internal App in Shenzhen and other places.
This scenario is an internal application scenario of Bank of China. A dedicated e-wallet App has not yet been developed. Instead, it is embedded into the existing App. There is no obvious difference between the user transaction process and the existing payment tools: after the user binds the bank card, he can Use a bank card to recharge the DC/EP electronic wallet and complete the payment through the electronic wallet.
It is reported that in Xiangcheng District, Suzhou, the pilot area of Central Bank Digital Currency (DC/EP), the salaries of district-level agencies and enterprises and institutions are distributed to staff through the four major state-owned banks of China Industrial and Peasant China Construction Bank , and the Central Bank Digital Currency will be completed in April. digital wallet installation work. In May, 50% of the transportation subsidy in his salary will be paid in the form of digital currency.
In December last year, the central bank's digital currency (DC/EP) pilot plan was divided into two phases:
A small-scale scenario closed pilot at the end of 2019,
A large-scale promotion in Shenzhen in 2020.
The pilot institutions include the four major state-owned commercial banks, Industrial Bank of China, Agricultural Bank of China, China Construction Bank and China Construction Bank, as well as the three major operators of China Mobile, China Telecom and China Unicom.
pilot scenarios include transportation, education, medical care, consumption, etc.
In fact, the central bank’s approach to the development of digital currencies has always been “steady advancement.”
On April 16, the research team of the General Office of the People's Bank of China published an article titled "Building a Modern Central Bank System" in "China Finance" stating that it will promote the research and development of my country's DC/EP legal digital currency.
On April 3, the central bank’s 2020 National Currency, Gold, Silver and Security Work Video and Telephone Conference called for “properly carrying out legal digital currency research and development work.”The meeting pointed out that the first task in 2020 is to strengthen top-level design, unswervingly promote the research and development of legal digital currency, systematically promote the reform of the cash issuance and withdrawal system, and accelerate the advancement of banknote processing business, issuance library guarding and issuance fund pledge operations.
In August last year, Mu Changchun, then deputy director of the Central Bank's Payment and Settlement Department, said: "From 2014 to now, the research on the central bank's digital currency (DC/EP) has been carried out for five years, and it is now 'ready to come out'." Then on September 6, 2019, he officially became the director of the Central Bank’s Digital Currency Research Institute.
It is worth noting that although the implementation of the central bank’s digital currency has not yet been “officially announced”, the market has already made some moves. The concept of digital currency has surged for two consecutive days. Yesterday, 15 stocks including Zhongying Internet, Radio and Television Express , and Hengbao shares reached their daily limit.
What is central bank digital currency
The implementation of central bank digital currency application is undoubtedly big news. However, I believe many people are still confused about what the central bank’s digital currency is.
Central bank digital currency refers to the digital currency issued by the central government. It is a liability of the central bank, has national credit, and is equivalent to legal currency.
China's central bank digital currency is also different from other central bank digital currencies. Its English abbreviation is "DC/EP".
DC=digital currency is digital currency
EP=electronic payment is electronic payment
Previously, Mu Changchun, director of the Central Bank's Digital Currency Research Institute, clearly defined it, that is, "its functional attributes are exactly the same as banknotes, but in digital form. ", "is a digital payment instrument with value characteristics". In terms of
positioning, DC/EP is a replacement for M0 (banknotes and coins), not M1 (M0 + demand deposit), M2 (M1 + time deposit).
Image source/Tu Chong Creative
Specifically, the central bank’s digital currency does not accrue interest and can be used in small-amount, retail, and high-frequency business scenarios; when used, it should comply with all current regulations on cash management, anti-money laundering, and anti-terrorist financing. It stipulates that large and suspicious transactions in the central bank’s digital currency should be reported to the People’s Bank of China.
central bank digital currency is legal currency, and has legal tenderness, that is to say, digital currency cannot be refused. From a legal perspective, its effectiveness and safety are the highest.
The central bank’s digital currency adopts an two-tier operating system. The digital currency is first exchanged to banks or other operating institutions, and then these institutions exchange it for the public.
has nothing to do with "coin speculation"
It is worth noting that "digital currency" is often confused with information such as "currency circle" and "chain circle".
But central bank digital currency is not necessarily related to Bitcoin and blockchain . In February this year, the Blockchain Research Team of the Digital Currency Research Institute of the People's Bank of China jointly issued a document "The Central Bank Digital Currency Research Institute Talks about the Development and Management of Blockchain Technology." The
article pointed out that blockchain sacrifices system processing performance and some customer privacy at the expense of synchronous storage and joint calculation of a large amount of redundant data, and is not yet suitable for high-concurrency scenarios such as traditional retail payments.
The research group pointed out that crypto assets based on blockchain cannot guarantee the stability of their anchored assets, and even lack the endorsement of real assets. They are mainly speculative transactions, and some bookmakers and speculators wantonly manipulate crypto assets through means such as knock-offs. prices, leading to violent market fluctuations and the formation of asset bubbles.
As of the end of September 2019, there were 2,417 types of crypto assets, including Bitcoin, with a total market value exceeding US$219.2 billion. At the same time, some darknet trading websites use encrypted assets to conduct illegal crimes such as money laundering, bribery, tax evasion, and terrorist financing, which poses greater hidden risks.
In addition, the decentralized nature of blockchain conflicts with the centralized management requirements of central banks. The payment services provided by the central bank cannot be separated from centralized account arrangements and need to be built on a centralized system, which conflicts with the decentralized nature of the blockchain. Therefore, it is currently not recommended to transform traditional payment systems based on blockchain. How is
different from Alipay and WeChat Pay?
People from the central bank said that digital currency will not replace WeChat Pay or Alipay.
The central bank’s digital currency replaces M0. Its functions and properties are similar to banknotes, but its form is digital.
Third-party Internet payments such as Alipay and WeChat Pay use commercial bank deposit currency settlement, which belongs to M1 and M2 level digitization. It does not have M0 level legal effect, and it is impossible to replace M0.
M0: generally refers to cash in circulation
M1: generally includes M0 + demand deposits of each unit
M2: includes M1 + resident savings deposits + unit time deposits + other unit deposits + securities company customer deposits.
Mu Changchun said in an online open course that the digital currency planned by the Central Bank of China is a replacement for banknotes. Its functions and properties are exactly the same as banknotes, except that its form is digital.
“As long as you and I have DC/EP digital wallets on our phones, we don’t even need an internet connection. As long as our phones have power, we can transfer the digital currency in one person’s digital wallet to another by touching the two phones. One person." Mu Changchun said.
He believes that DC/EP will not affect the status of Alipay and WeChat Pay. Because Alipay and WeChat Pay currently use RMB for payment, they actually use commercial bank deposit currencies for payment. After the central bank’s digital currency was launched, it was simply replaced with digital renminbi, which uses the central bank’s deposit currency. Although the payment tools have changed and functions have been added, the channels and scenarios have not changed.
In addition, compare Alipay and WeChat Pay to a bank. Your money is stored in this bank, and all transactions are transferred in the bank. Although Alipay and WeChat are large enough, the possibility of bankruptcy cannot be completely ruled out. After all, commercial banks will also go bankrupt. In this way, the safety of hundreds of millions of user assets cannot be guaranteed. Regulators must take precautions.
How to replace cash
What is the driving force for the promotion of central bank digital currency? Senior industry insiders said that one of the reasons is that , based on RMB cash payments, transactions, anti-money laundering, etc., is becoming more and more difficult to manage in modern society, and the cost is also getting higher and higher.
Yu Xuejun, chairman of the supervisory board of key state-owned financial institutions of the China Banking and Insurance Regulatory Commission, said at a public event in November last year that in China, Alipay and WeChat payment far exceeded credit card payment; ATM machines also declined for the first time in 2019. People no longer rely on cash circulation, and many bank counters are even empty.
These changes are reflected in the cash flow of banks. In the 11 years from 2001 to 2011, China's cash flow M0 basically grew by more than 10% every year, reaching a maximum of 16.7% in 2010. However, since 2012, no matter how money and credit fluctuate, the growth rate of M0 has never been large, and has basically remained at a level of a little more than 3% to 4% in recent years.
"DC/EP is a replacement for M0, so no interest is paid on cash, which will not trigger financial disintermediation and will not have a major impact on the existing real economy."
Mu Changchun previously pointed out that it has M1, M2, and M0 (banknotes and coins) that are electronic and digital are easy to be counterfeited anonymously, and there is a risk of being used for money laundering, terrorist financing, etc. Electronic payment tools (mobile payment platforms) cannot fully meet the public's demand for anonymous payments and cannot completely replace M0.
financial analyst Xiao Lei believes that the mission of DC/EP to replace M0 will be gradually realized. In two to three years, 30% to 50% of M0 will be replaced by central bank digital currency, and the nationwide promotion of central bank digital currency will be basically realized. Most of the usual use of cash will be replaced.
In addition, CITIC Securities research report pointed out that in the medium and long term, the current domestic M0 scale is 8.3 trillion (the growth rate has dropped to less than 5% year by year). As a partial replacement of M0, it is expected that the central bank’s digital currency investment will be in the trillions scale , limited by customer habits and technical conditions, depends on the scale of cash transaction replacement and electronic payment replacement scale.
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