What Exactly Is The Central Bank’s Digital Currency? Do The Relevant Listed Companies Have Investment Value?

The relevant person in charge of the Digital Currency Research Institute of the People's Bank of China stated on the 16th: The research and development of digital renminbi is currently advancing steadily. Currently, internal closed pilot tests are being carried out in Shenzhen, Suzhou, Xiongan, Chengdu and the future Tokyo Olympics scenarios, and are being continuously optimized and improved. Function.

As soon as this news came out, it immediately triggered hot searches, but many people were also confused:

1. What exactly is the central bank’s DCEP? What does it have to do with blockchain?

DECP is the electronic form of RMB and is a digital currency. Blockchain technology is not used at the central bank level. But it allows other participants to participate in the system using qualified blockchain technology.

First of all, DCEP is the digital form of RMB cash, and it is also centralized. It adopts dual-layer operation of central bank + commercial bank and does not calculate interest for the time being.

Its most important difference from cash is that it is independent of our existing bank account system and uses a digital wallet.

DCEP has two characteristics in this technical background.

First, each money can have four properties. These four attributes are the subject matter, the pre-agreed interest rate, the term and the interest rate for subsequent repayments. Take the ex post repayment interest rate as an example. In principle, the central bank can set different interest rates based on different entities. For example, the interest rates for small and micro enterprises will be lower, and the repayment interest rates can also be lower.

This gives the central bank a lot of room for imagination in its monetary policy and can improve the effectiveness of the central bank's structural monetary policy control.

Another kind of controllable anonymity, on the one hand, it meets the normal anonymous consumption needs of ordinary people, and on the other hand, it allows the central bank to master first-hand data and conduct supervision through the big data system.

Therefore, DCEP is more than just the digitization of cash. It uses this hybrid architecture to give cash more functions after digitization.

2. If DCEP is just the digitization of cash, what is its use?

The biggest role of DCEP is to improve our monetary system and has little to do with ordinary investors. The current blockchain investment is more like a concept hype.

The first one is at the commercial bank level, which will have little impact for the time being. The original business of commercial banks is mainly interest spread business and intermediary business. The so-called interest rate spread business is the business of lending using deposits received. Intermediary business includes various service fees, financial management sales and management fees, etc. Since DCEP currently does not accrue interest, the impact will not be significant. The main impact is on custody and liquidation issues, which have little relevance to ordinary people.

The second is the payment system level, which puts commercial banks and WeChat Alipay on a relatively fair starting line.

First of all, traditional third-party payment can only support a limited number of single offline transactions, such as the Alipay we use. Sometimes if you are not connected to the Internet, although it can be used, the APP will quickly prompt you to connect to the Internet as soon as possible to update and use it. frequency. The so-called dual offline mode supports transactions in which both buyers and sellers are offline. This is also a convenience, but I think in the current 5G era, this function is better than nothing.

Secondly, its biggest impact on Alipay and WeChat is its privacy protection function. I don’t know if you still remember the two things before. One of them is a diary for white-collar workers, which requires only 700 Ant Points to leave messages. The plan was eventually canceled due to widespread criticism. There are also the first batch of eight credit reporting agencies that all failed to pass the central bank's acceptance due to violations.

Facts have proved that in the Internet era, data is wealth. Even the major giants, when they get your transaction data, their first reaction is not to protect your privacy, but to use it to push various advertisements to you. Under the new DCEP system, all data will be centralized up to the central bank level, and the so-called big data risk control of third-party payments will definitely be greatly affected. It can effectively reduce the problem of improper use of data that we mentioned before.

Finally, the moral hazard of third-party payment can be solved. In fact, third-party payment also has moral hazard and is not absolutely safe. Pioneer Group and its third-party payment platform Pay, which made headlines some time ago, misappropriated the T+0 funds of the payment platform due to a shortage of capital chains.

Generally speaking, the central bank has taken back many powers that originally belonged to lower levels. These are the competitive advantages of third-party payment platforms. Now commercial banks and third-party payment platforms have returned to a relatively fair starting line.

Let’s talk about something more theoretical, the impact of DCEP on monetary policy.

First of all, if DCEP starts accruing interest one day, it will open up a lot of room for imagination, including negative interest rate policies.

Secondly, do you remember what we just said about each currency having four properties? In recent times, everyone has often heard news of comprehensive and targeted RRR cuts. In fact, no one knows whether the actual effects of these two policies are good or not. Why? For example, a comprehensive reduction of the deposit reserve ratio is called a flood, but it is actually very vivid. Under this policy, those who are short of money or not are flooded, and the efficiency is very low.

As for the targeted RRR reduction, you can understand it as targeting groups who are short of money, but it is actually very difficult to achieve. Why? Because when the money reaches a commercial bank, you have no control over where it goes. It will only passively flow to places with the highest returns and lowest risks. The group that is short of money happens to be a group with high risks but not necessarily high returns.

Then DCEP will provide the central bank with more effective structural control policy tools. To put it more vividly, the central bank can accurately provide drip irrigation to groups who are short of money and improve the efficiency of monetary policy.

The last one is to improve our regulatory mechanism. For example, traditional currency circulation, from the central bank to commercial banks and then to people's hands, is traceable in accounts, but once it is converted into cash, it cannot be traced, which is why it is difficult for some scammers to trace it. Recover stolen items.

But this digital currency is different. From the central bank to the users, all processes are clearly traceable, which is very conducive to the central bank's supervision through big data.

Having said this, everyone can know that DCEP is of great help to the central bank's monetary policy and personal life, but it has nothing to do with personal investment.

3. The blockchain concept is so popular, are there any investment targets?

Although central bank digital currency has little to do with blockchain, I want to participate in digital currency investment. what should I do?

Before providing you with investment stocks and fund targets, I would like to remind you that this concept hype is the same as the tone of blockchain last year. In the end, it will definitely be a game of who can run faster. However, since the formulation and implementation of the central bank is gradual, this wave of market conditions will also be gradual, and everyone can choose the time independently.

Since there are too many stocks involved, only the concept stocks most related to digital currencies are listed, and these concept stocks are also the most popular in the market. Funds are determined based on their relevance to the digital currency concept. As we all know, funds are products with different liquidity than stocks. Even if the stock with a heavy position reaches its daily limit, investors can still indirectly buy the heavy position by buying this fund. But first, it is difficult to invest, and second, because digital currency is a niche concept, there are very few funds that specialize in investing in this direction. Most positions are only related to digital currencies, so everyone needs to be cautious when participating.

That’s it for today on the interpretation of digital currency.

The above content is excerpted from Sina University of Finance and Economics' new column "Internal Reference to Wealth: Essays on Market Hot Topics".

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