Chengdui: The central bank's digital currency is getting closer, how will all parties respond

"At present, the digital renminbi has achieved initial results and is undergoing internal closed testing." This important information disclosed by Fan Yifei, the deputy governor of the central bank, has once again sparked heated discussions on the central bank's digital currency (DC/EP) . Since the establishment of the Central Bank's Digital Currency Research Institute in 2016, China's central bank's digital currency research and development has lasted 5 years. Since last year, officials have stated that the digital currency is "ready to come out", and the official has also explained its design mechanism. The central bank's digital currency has gradually unveiled its mystery; At the end of August, the registration channel of its central bank’s digital currency wallet was briefly opened to the public. There are signs that the central bank’s digital currency is getting closer and will soon “fly into the homes of ordinary people.”

As the technology matures, it is not difficult for the central bank to issue digital currency. But the central bank's digital currency brings not only the complexity of currency operations, but also has a greater impact on the financial system. Blindly issuing the central bank's digital currency will not only fail to achieve the desired effect, but will more easily end in failure. The crux of the problem is: what kind of central bank digital currency do we need? The real central bank's digital currency is not just as simple as issuance. In the circulation and transaction process after issuance, how to better serve social and economic development, serve the central bank's policy objectives, and serve financial regulatory requirements is the key point.

1. The M0 attribute avoids financial disintermediation and adheres to the centralized management of the central bank

Cryptocurrency exchange Zipmex gets creditor protection extension: Jinse Finance reported that according to website updates, South Asian cryptocurrency exchange Zipmex, which froze withdrawals earlier this year due to lack of liquidity, has obtained creditor protection for all its entities until April next year. The extension was granted by Singapore's High Court, which also issued a directive that any acquisition by Zipmex must be completed by Dec. 21. On Nov. 18, Zipmex was still in "advanced talks" on a rescue deal, according to a person familiar with the matter.

It was previously reported that the entity looking to buy Zipmex is venture capital fund V Ventures, a subsidiary of Thoresen Thai Agencies, one of Thailand's largest and longest-serving investment firms. (coindesk) [2022/12/2 21:18:41]

Taking the central bank's digital currency as an example, the digital renminbi is an important part of the supply-side structural reform of the financial industry. It is the digitization of cash (M0) in circulation using new technologies, and aims to provide a universal technical currency for the development of the digital economy. At present, the digital renminbi has achieved phased results and is undergoing internal closed testing.

Judging from the current public information, the central bank's digital currency has value characteristics and legal compensation, and supports controllable anonymity. The digital renminbi is mainly positioned as cash in circulation, and this positioning contains rich theoretical connotations and policy choices.

Report: Americans have the highest trust in encrypted assets, Canada the lowest: September 4 news, Crypto Pulse's second quarter report shows that although the market has entered a bear market, most Americans are still very bullish on encrypted assets.

Americans’ trust in crypto assets rose the most, from 61% in Q1 to 73% in Q2; followed by Brazil (77%), Mexico (70%) and Chile (69%) %); on the other hand, the trust score of retail investors from Atlantic regions such as Europe and the United Kingdom dropped to 52% from 54% at the previous point; Canada is the only country whose trust in cryptocurrencies will fall below 50%. The main concern is the lack of cryptocurrency education.

In addition, in the United States alone, about 61% of retail investors invested in cryptocurrencies in the second quarter, an increase of 42% from the first quarter; Customers recommend using cryptocurrencies.

It is understood that the Crypto Pulse research covered more than 28,000 retail and institutional traders from 23 countries. [2022/9/4 13:08:02]

First of all, in recent years, encrypted assets such as Bitcoin and global stablecoins have tried to function as currencies, and a new round of games between privately minted currencies, foreign currencies, and legal tenders has begun. In response to this situation, it is necessary for the country to use new technologies to digitize M0 and provide a common base currency for the development of the digital economy. Secondly, various payment systems such as the internal system of commercial banks and non-bank payment institutions have been continuously improved and upgraded, which better meet the needs of economic development. Replacing M1 and M2 with digital renminbi will not help improve payment efficiency, but will also cause a huge waste of existing systems and resources.

The number of unconfirmed transactions on the entire Bitcoin network is 13,265: According to news on March 6, BTC.com data shows that the number of unconfirmed transactions on the entire Bitcoin network is currently 13,265, and the computing power of the entire network is 196.55 EH/s, with 24-hour transactions The rate is 2.78 transactions/second, and the current difficulty of the entire network is 27.33 T. It is predicted that the difficulty will be lowered by 0.79% to 27.33 T next time, and there are 12 days and 5 hours left before the adjustment. [2022/3/6 13:40:00]

In the operation of the central bank's digital currency, DC/EP adopts a two-tier operating system of "central bank-commercial bank/other operating institutions". If a single-tier operating system is adopted, the central bank will have to face all users directly, which is back to the era of the "big unified central bank". Commercial banks and other payment institutions are becoming more mature in terms of IT infrastructure applications and service systems, which is conducive to giving full play to the talents and technical advantages of commercial institutions. In addition, DC/EP has a certain competitive advantage over bank deposits. If a single-tier operation system is adopted, it will directly lead to the loss of bank deposits and the phenomenon of "financial disintermediation".

In the user terminal, DC/EP mainly exhibits three major characteristics: first, the balance between privacy protection and combating crimes. For the privacy needs of the public's normal economic life, DC/EP is to be protected, so controllable anonymity must be achieved. The second is the dual offline payment function. Online banking, Alipay and other third-party payment tools need to be connected to the Internet during transactions, otherwise transactions cannot be carried out; and DC/EP’s dual offline payment function, even if the two parties to the transaction are offline, as long as the two mobile phones are touched and the wallet key is exchanged, that is The transfer transaction can be completed. The third is mainly for small retail scenarios, with amount and time limits. It helps to solve the "double spending problem", and it is also out of the consideration of protecting commercial banks and preventing "financial disintermediation".

Tether issued an additional 1 billion USDT on the TRON: According to data from Okey Cloud Chain masters, at 10:02 today, Tether issued an additional 1 billion USDT on the TRON.

The transaction hash is: 43cfd2c8b8ea6ec8729f01c8c5d6b09d35a9a462651e266ba556de1cc54c88ea. [2021/12/27 8:05:59]

From the perspective of the M0 management model, currency issuance is the basic responsibility of the central bank, and the digital renminbi should adhere to the centralized management of the central bank. From a global perspective, it is a common practice for global central banks to implement centralized management of M0 issuance and circulation. In order to ensure the ability to regulate currency issuance and monetary policy, the central banks and monetary authorities of major economies around the world have implemented centralized management of cash issuance and circulation.

In order to maintain the centralized management position of the central bank in the issuance of digital renminbi, the following points must be achieved: First, coordinate the management of digital renminbi quotas and formulate unified business standards, technical specifications, security standards, and application standards. The second is to coordinate the management of digital renminbi information. By mastering the full amount of transaction information, record, monitor and analyze the exchange and circulation of digital renminbi, and improve the central bank issuance system in the digital age. The third is to coordinate the management of the digital renminbi wallet. On the premise of adhering to the unified cognitive system and anti-counterfeiting function of the digital renminbi, and in line with the principle of two-tier operation, the central bank and designated operating agencies jointly develop the wallet ecological platform in a co-construction and sharing manner. At the same time realize their own visual identity and characteristic functions. The fourth is to coordinate the construction of digital renminbi issuance infrastructure, realize cross-operating agency interconnection, and ensure the stable and orderly circulation of digital renminbi.

Reddit is preparing to develop an NFT platform: Golden Finance reported that according to a new job posting, the social news site Reddit is preparing to develop an NFT platform. The company is looking for a senior backend engineer who will be responsible for building services that will enable "millions" of users to mint and trade NFTs. [2021/10/23 20:50:14]

2. Improve the efficiency of cross-border payment and boost the internationalization of RMB

An important feature of digital cryptocurrencies, including Libra, is that it has strong convenience in international payment and settlement. Therefore, some people believe that the central bank's digital currency can boost the internationalization of the RMB, but there are also views that the degree of RMB internationalization It mainly depends on its own competitiveness. Digitalization is only a form, not a decisive factor. Some countries, such as the United States, believe that DC/EP is one of the important ways for the internationalization of China's renminbi. Other countries have expressed concern about how the digital renminbi will interoperate with digital currencies of other countries and how to protect user privacy.

At present, the direct relationship between the digital currency issued by the central bank and the internationalization of the renminbi is not obvious. Whether a currency can be accepted internationally has nothing to do with whether the currency is digitized, but depends on whether the exchange rate of the currency is flexible, whether the market is open, and whether foreign investors have the confidence and willingness to use the currency. Therefore, the internationalization of RMB is a step forward, and then our digital RMB can help the process of RMB internationalization to be more convenient, such as cross-border payment, cross-border trade, cross-border investment settlement, and these costs can be reduced.

DC/EP has advantages in cross-border payment, which can not only increase the speed of cross-border transfers, but also reduce the cost of remittance; in addition, the current central bank digital currency adopts a loosely coupled account design, which means that users do not need to use the central bank digital currency. Transfer payments can be made by binding a bank account, which is highly attractive to those overseas people who are in poor and remote areas and lack traditional financial infrastructure (banks). In the future, as DC/EP gradually liberalizes restrictions on payment time and amount, it will promote the internationalization of RMB in the settlement and valuation of trade and financial transactions.

In order to meet the challenges facing my country's financial security, it is necessary to accelerate the construction and upgrading of digital financial infrastructure, and promote the establishment of a new digital RMB cross-border payment and settlement system. Use new technologies such as blockchain to fully realize the cross-border payment function of RMB, solve the pricing problem through the digital currency issued by the People's Bank of China, temporarily put aside the reserve function of RMB, and improve the direct exchange rate inquiry between RMB and other currencies under the framework of DC/EP mechanism. On this basis, a "new digital renminbi cross-border payment and settlement system" will be established.

3. Digital currency may be the ultimate place for future financial competition

At present, most countries have realized the importance of central bank digital currency, but they are cautious about issuing central bank digital currency. According to Christian’s survey of 63 central banks around the world, all central banks have begun theoretical and conceptual research on digital currency, with 49% of central banks entering the trial/concept phase and only 10% entering the development/pilot phase. In the short term (within 3 years), more than 85% of central banks are unlikely or very unlikely to issue any central bank digital currency, and only 3% of central banks will issue retail central bank digital currency in the short term.

Judging from the current practice, the People's Bank of China has a clear and comprehensive understanding of the necessity and urgency of legal digital currency, and its practice is undoubtedly at the forefront of the world.

Encrypted assets and other payment transactions processed through decentralized technology will erode national currency sovereignty, and the pressure to digitize cash is actually increasing. The historical trend and demand of this currency development require us to make a fuss on the 'supply side' and use new technologies to digitize M0. As a provider of national credit, in order to ensure the stability of the monetary and financial system, the central bank should respond to the needs of the retail sector and provide digital cash supply.

In the future financial competition, in the field of digital finance, the most important thing is digital currency. Why have countries suddenly become interested in central bank digital currencies recently? A digital currency issued by the central bank is likely to be the dominant one and the winner takes all. Of course, it is not ruled out that there will be many central bank digital currencies in the market at the same time. But in short, if you fall behind others, if you can’t compete with others, you may lose your chance, so it is very likely that the central bank’s digital currency will be the ultimate place for our future financial competition.”

"In the end, maybe the winner takes all. The reason is that in the future, once a platform with a long-tail effect is established for this kind of digital technology, its marginal cost will be very low. In the process of currency evolution, it may also be more To compete with other digital currencies, but in short, we cannot be absent, whether to form a new international currency that will dominate the international financial system in the future, or among the current currencies, the sovereign currency is open to the euro, the US dollar, the yen, including the renminbi and It is really unpredictable that other currencies will tilt, or a new currency will be triggered in the middle. From a technical point of view, it is unlikely that so many currencies will coexist for a long time.

At present, the central bank digital currency research and development routes of various countries are very different. For example, China's digital currency is directly led and developed by the People's Bank of China, while France's central bank digital currency experiment invited several private companies to submit technical proposals. Digital currency will replace cash, which is a historical inevitability. The convenience brought by digital currency will also greatly affect the liquidity and development of the financial market. In particular, new technologies represented by smart contracts are generating new innovations in financial service models at an unprecedented speed. For the central bank's digital currency, how to adapt to new changes and challenges such as supervision and network security will become the top priority of central banks. Behind the central bank's digital currency, there are competitions in various aspects such as technology, monetary policy, and supervision, and it will be a must for future big countries.

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