The Latest News On The People’s Bank Of China’s Digital Currency: It’s About To Come Out

In a two-level operating system, the People's Bank of China first exchanges digital currency to banks or other operating institutions, which then exchange it to the public.

The topic of commercial digital currencies initiated by technology giants continues. At the same time, global central banks’ research on legal digital currencies is also advancing steadily. In this process, China is undoubtedly at the forefront. Mu Changchun, a special member of CF40 and deputy director of the Payment and Settlement Department of the People's Bank of China, revealed at the recently held third "China Financial Forty Yichun Forum" that the People's Bank of China's digital currency is ready for development.

The People’s Bank of China’s digital currency is here

() The issuance of the virtual currency project Libra is one of the hot topics in the market recently.

At the Yichun Forum, Sun Tianqi, a special member of CF40 and chief accountant of the State Administration of Foreign Exchange, said when talking about Libra that in our country, funds cannot be transferred across borders without reason. Based on the process of capital account opening and exchange rate marketization, a basic requirement of foreign exchange management is to emphasize that foreign exchange transactions must have a real transaction background. At present, my country's banks review the authenticity of transactions. Libra may challenge this basic requirement.

“Judging from the technical characteristics announced by Libra, Libra is C2C (person-to-person). Who will review the authenticity of cross-border transactions, and how to technically distinguish whether a transaction is a domestic transaction or a cross-border transaction in a digital environment? No matter Whether it happens between domestic subjects, or between domestic subjects and overseas subjects, these are all new topics," Sun Tianqi said.

Sun Tianqi suggested that Libra be regarded as a foreign currency and included in the overall framework of my country’s foreign exchange management. First, the exchange between Libra and RMB must comply with the regulations on foreign exchange settlement and sales; second, cross-border receipts and payments transactions using Libra as a medium must have a real transaction background; third, it can be fully convertible under the current account promised by our country. Transactions such as trade in goods and services, as well as transactions opened under the capital account, must also comply with existing foreign exchange management regulations.

While the commercial digital currencies initiated by technology giants have triggered global discussions, central banks around the world are also steadily advancing research on legal digital currencies. Relevant media quoted a report released by the Bank for International Settlements in January this year saying that 70% of global central banks participating in the survey are involved in or will be involved in the work or research of issuing legal digital currencies.

Currently, China is at the global forefront in digital currency research. Not long ago, the People's Bank of China held a work video conference for the second half of 2019 and proposed to accelerate the research and development of my country's legal digital currency (DC/EP). “The People’s Bank of China’s digital currency can now be said to be ready to emerge.” Mu Changchun revealed at the above forum.

According to him, in terms of operating system, the People’s Bank of China’s digital currency adopts a two-layer operating system. The single-layer operating system means that the People's Bank of China directly issues digital currency to society; while the two-layer operating system means that the People's Bank of China first exchanges the digital currency to banks or other operating institutions, and then these institutions exchange it to the public.

There is a logic behind choosing a two-tier operating system. Mu Changchun explained that under a single-layer investment framework, the People’s Bank of China directly issues digital currency to society. Compared with commercial bank deposit currencies, digital currencies have the credit endorsement of the People's Bank of China and are more competitive than commercial bank deposit currencies. Commercial bank deposits produce a crowding-out effect, affecting commercial banks' lending capabilities and increasing their reliance on the interbank market. In this case, the price of funds will be raised, social financing costs will be increased, and the real economy will be harmed.

The development of online platforms cannot simply rely on the "burning money" model

Digital currencies have actually been around for a long time. Why has the advent of Libra attracted so much attention? This goes hand in hand with its sponsors. As a monopolistic technology company in the digital economy, it has a huge network effect with the number of users covering a quarter of the world's population.

Therefore, the development of financial technology is also another hot topic at the Yichun Forum. "We may live in a distorted market situation in the future." said Zhou Xiaochuan, president of the China Society for Finance and Banking and former governor of the People's Bank of China. In his view, the emergence of market distortions is related to the development of financial technology.

Zhou Xiaochuan pointed out that in the process of the development of IT technology and networking, network effects have begun to appear in many aspects of economic life, which may bring about a "winner takes all" effect and trigger changes in competition methods. In the past, traditional market competition was mainly based on diminishing economies of scale; but now, more and more industries are showing a trend of increasing economies of scale. This is not scale growth in the traditional sense, but is brought about by network effects.

"Related to this, during the competition process, there have been some practices of 'burning money' to occupy market share and expand traffic." Zhou Xiaochuan believes that there is nothing to criticize about these practices, but they will affect economics and economic analysis. . pose an important challenge.

In this regard, Huang Qifan, CF40 academic consultant and vice chairman of the China International Economic Exchange Center, believes that the most reasonable and effective development path for technology finance should be the combination of network data platforms and various industrial chain finance. He pointed out that in the consumer Internet era, the profit models of some online platform companies often rely on "burning money" to achieve scale advantages, or rely on advertising charges to achieve certain monopoly interests. But in the era of industrial Internet, this road may no longer be feasible.

Huang Qifan said that in the era of industrial Internet, if a promising network data company wants to "distract" the financial industry, it must first have sufficient capital required by financial companies; second, it must have standardized sources of market lending funds. ; The third is to have professional financial management personnel and accept the strict supervision of regulatory authorities.

"A reasonable online digital platform should obtain benefits and dividends through five channels." Huang Qifan said. The first is to improve financial business efficiency through the application of big data, cloud computing, and artificial intelligence; the second is to realize the optimal allocation of resources for digital network platform companies and financial businesses to generate optimized dividends; the third is to use the Internet of Things, big data, and artificial intelligence to carry out Operation planning, statistics, and scheduling reduce logistics costs in the industrial chain and supply chain; fourth, due to the information transmission function of the entire industry chain, the entire process, and the entire scenario, financial operating costs and risks are reduced. Fifth, these visible and tangible dividends will reasonably return to the upstream and downstream of the industrial chain, supply chain, financial parties, and data platform operators, thereby generating underlying benefits for thousands of households and agglomeration benefits of the industrial chain. Businessmen pursue profits. (Jones Zhang)

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