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The breaking and building of digital RMB



The so-called breaking first and then establishing, the breaking and establishing of the digital renminbi point to the past and the future respectively. What is broken is the unresolved real pain point, and what is established is the increasingly clear path to upgrade. "The drunken man's intention is not to drink, but to care about the mountains and rivers." In May, Alipay launched the digital RMB module for some users. has been lit. This is enough to show that, as a mixture of public and private solutions in the digital economy era, the digital renminbi is not interested in replacing the already mature third-party payment institutions, and its intention is to achieve higher-dimensional financial stability and currency competition. Compared with the potential risks of the central bank's "broken direct connection" to supervise third-party payment institutions afterwards in 2017, the digital renminbi is an active-zce advance attack, and its follow-up impact is bound to be more far-reaching. The so-called breaking first and then establishing, the breaking and establishing of the digital renminbi point to the past and the future respectively. What is broken is the unresolved real pain point, and what is established is the increasingly clear path to upgrade. Break the segregation of the payment industry and create a fair and open payment environment. Relying on the rise of online shopping, third-party payment institutions take on the responsibility of guaranteeing transactions in the era of lack of trust in online transactions, and fill the gap in China's credit card market with aggregation. Since then, third-party payment institutions have expanded offline around payment scenarios, and have continued to grow and develop with first-mover advantages and network effects. According to iResearch data, the scale of third-party mobile payment transactions in China increased to 71.2 trillion in 2020Q4, while Alipay and Tenpay accounted for 93.8% of third-party mobile payment transactions in 2019, forming a "duopoly" pattern. However, there are three hidden dangers behind the prosperity of third-party payment institutions, which may interfere with financial stability and security: one is the black box of information. account, and the consumer transaction records of the balance in the organization are not transparent; the second is the issue of interest payment on the reserve fund, the third-party payment institution obtains a large amount of liquidity deposited by the user, but does not pay interest on it; the third is beyond the scope of operation, Third-party payment institutions handle inter-bank fund settlement through reserve accounts opened in multiple banks, exercising the inter-bank clearing function of the central bank or clearing organization in disguise. ICBC Shanghai Branch piloted the country’s first POS channel digital renminbi payment social security business: On November 29, ICBC Shanghai Branch actively launched a digital renminbi pilot project. With the strong support of the Shanghai Municipal Taxation Bureau of the State Administration of Taxation, it took the lead in launching digital renminbi POS a few days ago Channel payment of personal social security premium business. According to reports, ICBC Shanghai Branch has realized the pilot implementation of this business scenario at the Tax Service Office of the Shanghai Pudong New Area Taxation Bureau of the State Administration of Taxation. This business is also the first scenario application in the country to use digital renminbi to pay personal social security expenses through the POS channel. The relevant person in charge of ICBC Shanghai Branch said that as an effective supplement to the existing social security payment channels, the digital renminbi payment method has realized the organic combination of financial innovation and digital technology in the field of government affairs and people's livelihood, realized the efficiency improvement of the financial industry through digitalization, and strengthened the government. The institutional service level also improves the convenience and inclusiveness of financial services. (China Securities Network) [2021/11/29 12:39:27] In 2017, the supervision launched "broken direct connection". The proportion of the central bank, on January 14, 2019, 100% of the reserve funds of payment institutions will be delivered to the central bank, so as to effectively prevent the disorderly expansion of credit led by third-party payment institutions. If the "broken direct connection" in 2017 is an ex post response to the potential risks of third-party payment institutions, then the digital renminbi is more like an active-zce attack in the race between regulation and innovation, which will reshape the payment structure from a higher dimension . The digital renminbi transfers data sovereignty back to the traditional financial system supervised by the central bank, and at the same time strengthens the role of market mechanisms in the currency circulation process. As the traffic and data advantages of Internet companies gradually fail, the payment barriers and market segmentation at the retail level will be broken with a high probability. Qualified financial institutions will thus stand at the same starting point and carry out market-oriented competition around digital technology and innovation capabilities. Figure 1: The unique advantages of third-party payment institutions relying on the Internet will be weakened Data: At present, the average daily usage of digital RMB in Beijing rail transit is about 3,100 person-times: news on November 4, passenger information of Beijing Rail Transit Command Center Minister Qiao Lei said in an interview with a reporter from the "Beijing Business Daily": This year, Beijing Rail Transit launched services that support digital renminbi payments by swiping gates and non-cash ticket purchases, as well as NFC-based Miaotong card services. After the passengers have opened the Yitongxing Pay·Miaotong card for free in the Yitongxing App, they only need to put the top of the mobile phone close to the card reader at the gate when taking the subway, and swipe it. There is no need to unlock the device during the whole process, making it more convenient to swipe the brakes and ride the car. At the end of June, the entire road network realized digital renminbi payment to swipe the gate to ride a car. In August, services such as digital renminbi ticket purchase, card purchase, fare replacement and recharge were added. At present, the average daily use of digital renminbi in Beijing's rail transit is about 3,100 people. [2021/11/4 21:24:04] Sources: IMF, Wind, ICBC International 2. To break the barriers to RMB internationalization and build a financial infrastructure suitable for the digital economy. In 2020, China is already the world's largest trading country and the second largest economy, but the international currency status of the RMB still has a big gap with the US dollar. Since the 811 exchange rate reform, the internationalization of RMB has fallen into a bottleneck period, and the market share of RMB international payment has stagnated at about 2% for a long time. IMF research believes that the current global reserve currency status of the U.S. dollar is still stable, mainly based on the depth of its financial market opening and the strong inertia of currency use formed over the past few years. important force. Guangzhou plans to strive for a digital RMB pilot: Jinse Finance reported that according to the newly released "Guangzhou City Financial Development "14th Five-Year Plan", during the "14th Five-Year Plan", Guangzhou City planned a number of key financial projects and tasks, among which key It will strive for the Guangzhou digital renminbi pilot. Liu Yanchu, associate professor of finance at Lingnan College of Sun Yat-sen University, pointed out that if the digital renminbi pilot is carried out in Guangzhou, Guangzhou and Shenzhen will be able to have a deeper linkage by then. It will improve the capital turnover efficiency between Guangzhou and Shenzhen, thereby greatly improving the coordination process between the two cities. In the process of promoting the exchanges between the two cities and Hong Kong and Macao, by establishing an information sharing platform such as digital trade, the digital RMB can act as a Cross-border payment means to promote business exchanges between Hong Kong, Macau and the mainland. (Guangzhou Daily) [2021/9/9 23:11:02] The digital renminbi is the digital form of liabilities of the central bank. Its advantage is not only to improve payment efficiency, but also to reduce credit risk and liquidity risk exposure based on intermediaries. Facing a world dominated by the digital economy, the digital renminbi is committed to becoming a new generation of financial infrastructure. It is not only the carrier for users to realize their digital needs, but also the starting point for currency to adapt to the digital world. At present, China has gained a first-mover advantage in the field of digital economy. If it can combine currency payment with diversified digital services and drive currency use with cutting-edge services, it is expected to become the best entrance for international payment and fundamentally enhance the international competition of RMB. To find another way to shake the US dollar's status as an international reserve currency and reduce dependence on the US dollar-dominated global banking system. Thirdly, it breaks the time lag of policy transmission and provides a precise control tool from aggregate to structure. The traditional monetary policy and fiscal policy are mainly based on the aggregate type, and there is a time lag in the transmission of large openings and closings to the real economy. It is difficult to monitor the flow of funds and easily lead to idling of funds in the financial system. In addition, under the triple pressure of the impact of the epidemic, economic recession, and financial risks, the policy space of various countries is gradually approaching the limit. The first pilot of digital renminbi in the field of consumer loans: According to news on August 27, Shenzhen ICBC recently cooperated with Home Credit Consumer Finance Co., Ltd. to promote the pilot of digital renminbi in the field of consumer loans. After the consumer Mr. Yu (pseudonym) successfully applied for a loan and successfully obtained the goods under normal operations, the fund settlement logic behind it changed. Home Credit directly paid the loan amount to the merchant's digital renminbi wallet through digital renminbi. On the surface, the consumer purchased the new mobile phone in installments through the consumer loan applied by Home Credit, but behind the scenes, Home Credit transferred the funds for the purchase of mobile phones through the digital RMB to the merchant’s public wallet through the digital RMB wallet opened by Home Credit. , Realizing the digital RMB B2B transaction process. (Mobile Payment Network) [2021/8/27 22:42:02] In 2020, China's "direct access" economic policy has become one of the highlights of innovation. The monetary policy emphasizes "direct access to the real economy", and the fiscal policy emphasizes "direct access to cities and counties grassroots". The so-called direct, one is to be fast, and the other is to be precise. The launch of the digital renminbi will help direct policy delivery with independent controllability, and become an important tool to break the transmission time lag and achieve precise drip irrigation. On the one hand, the digital renminbi improves the monitoring of the entire process of currency issuance, and provides quantitative reference for the formulation of monetary and fiscal policies through big data analysis. On the other hand, the traceability and scalability of the digital renminbi provide technical support for policy-oriented transmission. For example, previously, financial subsidies were distributed to governments at all levels through the bank account system, and local governments then allocated funds to rescue enterprises and people. case of deviation. In the theoretical scenario of applying digital renminbi, the central bank can track whether each fund is used reasonably, and after the funds reach the end user, turn off the tracking function to protect the privacy of the user's subsequent use. Judging from the patents published by the central bank, the digital renminbi also has the technical conditions to load smart contracts, which can be triggered according to economic conditions, loan interest rates, flow subjects, and time conditions, thereby effectively avoiding currency idling and improving the ability of financial services to the real economy. (See Attachment 2 for details) Central Bank: Digital RMB can achieve programmability through smart contracts: On July 16, the People's Bank of China released a white paper on "China's Digital RMB Research and Development Progress", which mentioned, "Digital RMB can be loaded without The smart contracts that affect currency functions are programmable, so that the digital renminbi can conduct automatic payment transactions according to the conditions and rules agreed by the two parties on the premise of ensuring safety and compliance, and promote business model innovation.” The central bank also stated that using smart Contract technology endows digital RMB with programmable features, improves scalability, and promotes deep integration with application scenarios. [2021/7/16 0:58:02] Figure 2: The possible application of digital renminbi in monetary policy and fiscal policy based on public patent academic speculation Source: PBOC, ICBC International is the first, and the scale of issuance under academic estimates may exceed 2 trillion. The digital renminbi integrates various payment channels such as commercial banks and third-party payment institutions, and relies on mature online and offline payment scenarios to fully penetrate. Combined with the fact that digital renminbi can be used as a form of various subsidies in public institutions, the speed of popularization of digital renminbi may exceed expectations. Based on Alipay's current national penetration rate of about 65%, we assume that the digital RMB penetration rate may reach 70% within ten years. It is worth noting that although the penetration rate is high, in order to prevent the emergence of "narrow banks" and potential run risks, the average holding amount of digital renminbi per person will always be limited. According to public materials, the upper limit of the total balance of digital renminbi in an anonymous situation is 10,000 yuan, and the upper limit of real-name use is 500,000 yuan. If you want to obtain a higher amount, you may need additional registration procedures. Therefore, the main coverage of digital renminbi is still daily consumption needs. Based on the assumption of a 70% penetration rate and an average holding amount of 2,000 yuan per person, the number of digital RMB issued in 2030 may exceed 2 trillion, accounting for about 6% of the base currency. From the perspective of transactions, the annual payment volume of digital renminbi may exceed 20 trillion yuan, accounting for more than 20% of total social consumption (see Figure 3 for details). Figure 3: Academic calculation of digital renminbi issuance and transaction scale under baseline assumptions Second, accelerate the digital transformation of traditional financial institutions. The digital renminbi is a new type of financial infrastructure adapted to the digital economy, and it will also promote the overall upgrading of the domestic financial system. On the one hand, the digital renminbi will play a "catfish effect", inject fresh blood into the construction of a new financial infrastructure, and encourage traditional financial institutions to accelerate digital transformation. With the transformation and upgrading of the underlying IT system of commercial banks, the digital collaboration among various departments will be smoother, and the digitization of the whole process is expected to bring about double improvements in business processing efficiency and risk management capabilities. On the other hand, the digital renminbi has also created a "reversed effect". The digital renminbi accelerates the iterative upgrade of the financial system and forces traditional financial institutions to introduce technological elements in business exploration. While focusing on optimizing the user experience of the client, it also comprehensively improves risk identification capabilities. , Develop leading financial services adapted to the digital economy era. Under the fair competition environment created by the digital renminbi, the existing experience of financial technology companies also provides samples and references for the digital transformation of traditional financial institutions, helping financial institutions break away from traditional models and seek evolution. Third, open the era of enterprise mutual trust payment. In the past ten years, the platform-based consumer Internet has developed rapidly, but its essence is still focused on improving the efficiency of traditional economic activities, and has recently shown the characteristics of the end of the expansion period when the traffic dividend peaks. With the advent of the digital economy era, the Industrial Internet, which centers on the interconnection of all things, is expected to become the leading force in a new round of industrial revolution. Industrial payment and the industrial Internet go hand in hand. Based on the higher order of magnitude and confidentiality of the industrial Internet, industrial payment also needs to provide new solutions that are compatible. The upgrade of the payment, clearing and settlement system brought about by the digital renminbi is just coupled with the traceability of the blockchain, creating a safe, efficient, and mutual trust-enhancing payment environment, and stimulating the new generation potential of the digital economy. On March 1, Beijing Microchip Blockchain and Edge Computing Research Institute signed a strategic cooperation agreement with the Digital Currency Research Institute of the People's Bank of China. The two parties will promote the application of digital RMB enterprises based on China's first independent and controllable blockchain software and hardware technology system "Chang'an Chain". Promoting the enterprise application of digital renminbi based on the self-controllable Changan chain will fundamentally solve the payment and credibility problems between enterprises and empower the accelerated evolution of the industrial Internet. Fourth, seize the international digital currency competition. In April 2020, Libra (now renamed Diem), which relies on the Internet ecology, retreated to advance, abandoned coins to protect the chain, and was committed to becoming a financial infrastructure in the digital economy era. Immediately afterwards, the digital dollar project, which relies on the inertia of the use of the dollar, released its first white paper, proposing that the digital dollar can help the United States maintain the status of the dollar as an international reserve currency in the digital economy era. The IMF report pointed out that the currency substitution effect of digital currency anchored by a single currency will be even stronger than that of traditional legal currency..


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