Financial Times: Multi-country exploration of digital currency

Experts said that in the context of the rapid development of the digital economy, digital currency will be one of the most important financial infrastructures in the future. Financial technology has promoted the endogenous development of digital currency and payment and settlement systems. The central bank will not be absent in the future digital economy, and the accelerated research and development of central bank digital currency (CBDC) will be an important way for the central bank to understand and adapt to the development of the digital economy. However, although many countries around the world have carried out digital currency research and practice, digital currency still has a long way to go.

Against the backdrop of ever-changing science and technology, the influence and changes brought about by digitalization are extending from the economic society to the financial field. Among them, the research on digital currency has attracted much attention in recent years.

Zhou Liping, an associate researcher at the Institute of Finance and Economics of the Chinese Academy of Social Sciences and a senior researcher at the National Finance and Development Laboratory, who accepted an exclusive interview with a reporter from the Financial Times, said that in the context of the rapid development of the digital economy, digital currency will be one of the most important financial infrastructures in the future . Financial technology has promoted the endogenous development of digital currency and payment and settlement systems. It is expected that the central banks of various countries will not be absent in the future digital economy, and the accelerated research and development of central bank digital currency (CBDC) will be an important way for central banks to understand and adapt to the development of the digital economy. The Shanghai Securities Research Report pointed out that although many countries around the world have carried out digital currency research and practice, digital currency still has a long way to go.

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Globally, the central banks of many economies have actively explored, researched, and even practiced digital currencies. Under the trend of global digital currencies, financial technology (FinTech) is also receiving more and more attention.

On October 29, the Bank of Japan stated that it will conduct a feasibility study on digital currencies in fiscal year 2021 (starting from April 2021). The bank will work with fintech companies and central banks in other countries to carry out related experiments. The Bank of Japan said in a statement that it "will conduct experiments to explore the general use of central bank digital currencies in a more concrete and practical way, rather than being limited to conceptual studies as in the past." But the Bank of Japan currently has no plans to issue a digital currency.

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A report published by the European Central Bank in October said the bank plans to make a decision on whether to launch a digital euro project in mid-2021. The report states that a digital euro could provide citizens of the euro zone with a secure form of currency. The issuance of the digital euro is conducive to supporting the digitalization of the European economy and the strategic independence of the European Union to deal with the significant decline in the role of cash as a means of payment. It can also be used as a new monetary policy transmission channel to reduce the risk of conventional payment services, enhance the international status of the euro, and improve the currency. and the total cost of the payment system, etc. In November, European Central Bank President Christine Lagarde said that if the digital euro plan goes ahead, it will take up to four years to achieve results. She also noted that the digital euro would be a complement and not a replacement for cash.

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Federal Reserve Chairman Jerome Powell said the U.S. was "committed to a thoughtful assessment of the potential costs and benefits of a central bank digital currency," but had yet to make a final decision on the matter. The Federal Reserve is studying the merits and possible technical solutions of a digital dollar, although it seems unlikely that it will be launched in the next few years. Bank of England Governor Bailey said that privately-issued stablecoins may have privacy issues and that digital currencies could be "the answer to that."

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The Reserve Bank of Australia announced in November that it will cooperate with the Commonwealth Bank and the National Australia Bank to use distributed ledger technology (DLT) to explore the possible uses and impacts of large-scale issuance of central bank digital currency. The RBA said the project, which will involve developing a proof of concept (POC), is expected to be completed around the end of 2020, with a report on the project to be released in the first half of next year. In November, Iran amended its laws to bring cryptocurrencies back into the central bank’s import financing mechanism. Iran has thus become the first country in the world to use cryptocurrencies for value exchange at the national level. However, countries are still mainly in the research and development state of digital currency, and in practice, digital currency is not much implemented. At present, more than ten countries are carrying out relevant pilot projects or tests.

In fact, the issuance of digital currency by the central bank is not a new initiative in recent years. As early as 1987, the economist James Tobin proposed this idea in his book "The Case for Sustaining Regulatory Differences".

"In the context of the rapid development of the digital economy, digital currency is one of the most important financial infrastructures in the future. Fintech has promoted the endogenous development of digital currency and payment and settlement systems." Zhou Liping said that under external pressure and endogenous payment and settlement systems Under the dual pressure of development, global central banks have accelerated the development of CBDC research projects in recent years, conducting in-depth research on the development motivation, basic nature, and operational points of central bank digital currency.

Zhou Liping also said that the main motivations for central banks to carry out research and development related to CBDC include: maintaining financial stability, assisting the implementation of monetary policy, improving domestic and cross-border payment efficiency and payment security, promoting the development of inclusive finance, and responding to the gradual reduction of physical cash and payment platforms. Operational risks that may be caused by high-level development, etc.

Although the central banks of various countries have strengthened their research on digital currencies, on the whole, there are still many differences and different practices among central banks in the field of digital currencies, such as how to define digital currencies, what classifications digital currencies exist, and the existence of digital currencies. What impact will it bring, whether digital currency should have interest, etc. In addition, there are different views on the benefits and risks of digital currencies in the world.

"Since 2019, about 80% of central banks are conducting research or practical work on central bank digital currency, and about 17 central banks around the world have carried out research and pilot work on retail digital currency. The depth has been significantly improved.” Zhou Liping said that the CBDC work in most countries is still in the stage of experimentation and proof of concept, and although a small number of countries and regions have conducted pilot research, they have no clear plan to launch CBDC in the short term.

The Shanghai Securities report stated that currency is essentially a credit system arrangement for the whole society. Judging from the current practice of digital currency pilots and launches in various countries, digital currency still has a long way to go. The current research on digital currency in various countries is mainly based on the technical level, and the consideration of institutional arrangements has not yet been considered comprehensively-the existing practice mainly focuses on payment arrangements. In addition to payment and settlement arrangements, the monetary system is more important and fundamental in the creation and management of currency and credit. In addition, it is also necessary to be alert to the hype of the digital currency concept in the capital market.

"The central bank will not be absent in the future digital economy. The accelerated research and development of CBDC will be an important way for the central bank to understand and adapt to the development of the digital economy. Its main purpose is to improve and perfect the country's financial system and enhance the level of financial services." Zhou Liping said so.

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