Yao qian: blockchain and central bank digital currency

Original title: "yao qian: blockchain and central bank digital currency"

Source: China business news

Blockchain is a trusted technology that originated from bitcoin but surpasses it. The innovation of blockchain technology not only gave birth to various private digital currencies, but also aroused extensive interest and exploration from central Banks. It is safe to say that most current Central Bank Digital Currency (CBDC) experiments are based on blockchain technology. However, whether CBDC adopts blockchain technology is still controversial up to now. A typical view is that the decentralization of blockchain conflicts with the centralized management of central Banks, so CBDC is not recommended to adopt this technology. In the author's opinion, blockchain technology is developing at an unprecedented speed and is deeply integrated with various mainstream technologies. Therefore, whether from the perspective of technology or business, blockchain in real application is different from the understanding of "fundamentalism". How to use blockchain technology to better serve distributed operations under centralized management may be the direction that CBDC needs to focus on at present. In this paper, three typical scenario as an example, discusses the possible application in CBDC block chain and solutions, pointed out that although the technical characteristics of the block chain is not dependent on central organization, but does not mean it can't into the existing central agency system, as long as through reasonable design, the central bank just can make use of chain blocks will be distributed to operate effectively together, better realize the centralized control of CBDC, both inevitable conflict does not exist.

Scenario 1: CBDC currency check

The author has proposed the digital currency system of central bank with "one currency, two libraries and three centers". The "one coin", or central bank digital currency, is an encrypted string of Numbers that is guaranteed and signed by the central bank to represent a specific amount of money. "Two base" currency issue Treasury and shall establish subsidiary issue treasuries index word library digital currency commercial bank, the former is the central bank on CBDC private cloud storage CBDC issue fund database, according to the operation management system for the central bank's cash management, which is the commercial bank deposit CBDC database, can be in the data center of commercial Banks in CBDC private cloud, follow the commercial bank cash operation management specification. The "three centers" include the certification center, the registration center and the big data analysis center.

Among them, the registration center records the CBDC and the corresponding user's identity, completes the ownership registration, records the flowing water, and completes the registration of the whole process of CBDC's birth, circulation, checking and dying. Its main functional components are divided into distribution and registration, the right to publish, the right to query web applications, distributed ledger services. Issue registration, release, circulation, return process and ownership record of CBDC; Right confirmation release release the ownership information of issue registration asynchronously to CBDC right confirmation distributed ledger after desensitization. The right confirmation inquiry website provides online right inquiry service to the public based on distributed ledger. The distributed ledger service ensures the alignment of CBDC ownership information between the central bank and the commercial bank.

Generally speaking, it can be understood that in the registration center, we built an "online money detector", namely CBDC right confirmation ledger, by taking advantage of the non-tampering and non-forgery features of distributed ledger to provide external inquiry service through the Internet. This kind of design for the current distributed books, in the central bank and commercial Banks both centralized and decentralized dual mode, the application provides a clever idea, on the one hand, the core issue registration books to isolation and protection of the outside world, take advantage of distributed books at the same time, improve equaling query data and system security and reliability; On the other hand, due to the distributed books is only used to provide query access, transaction processing is still done by issuance of registration system, to refine the atomic transaction granularity approach to distributed computing, which trade, so that we can through the way of business design effectively circumvent existing distributed books on transaction processing technology performance bottlenecks. Obviously, such a design gives full play to the technological advantages of blockchain and guarantees the credibility of CBDC's banknote verification, but it does not affect the central bank's overall control over CBDC.

In particular, this double-ledger inclusive design not only continues the mature stability of traditional technologies, but also leaves room for new distributed ledger technologies, making the two distributed technologies compatible, parallel, complementary, and competitive in the evolution process.

Scenario 2: wholesale payment and settlement

Currently, CBDC experiments are being carried out in various countries, mainly for wholesale scenarios, and mostly based on blockchain technology. For example, the Jasper project in Canada experimented with a large payment system based on block chain technology. The Ubin project in Singapore to assess the effect of payment and settlement in the form of digital Singapore dollar tokens on distributed ledgers; The Stella project of the European central bank and the bank of Japan aims to study the application of distributed ledger technology (DLT) in the infrastructure of financial markets to assess whether specific functions of existing payment systems can operate safely and efficiently in a DLT environment. Besides, LionRock project in Hong Kong, China and Inthanon project in Thailand are all testing CBDC based on blockchain technology. These blockchain applications are under the centralized management and strict control of the central bank.

Take Ubin project in Singapore as an example, which adopts the same Digital Deposit Receipt (DDR) mode as Jasper project in Canada. Issued to support distributed DDR in the books, the existing electronic payment system (MEPS +) in Singapore, Singapore is the RTGS system, set up a DDR account money mortgages, the daily at the beginning, to participate in the bank requests the central bank cut its RTGS account for capital transfer to the DDR mortgage accounts, as collateral, distributed book to create the corresponding equivalent DDR, sent to the Banks of the DDR purse, which can be carried out based on the distributed between participating Banks' books of transfer and payment. At the end of the day, the distributed ledger system will send a network settlement file to MEPS+, which will adjust the DDR mortgage account balance to match the DDR balance of the participant in the DLT network.

It can be seen that the decentralized distributed ledger and the existing mature centralized financial infrastructure are not exclusive, but can be integrated and complementary. On the one hand, the blockchain-based DDR payment system provides a new payment method independent of traditional accounts for the existing RTGS system and effectively complements the existing payment and clearing system. DDR, on the other hand, as the legal tender in the RTGS in electronic digital form, the end can be converted back to the RTGS account value, and through the foreign settlement RTGS system, that is to say, the RTGS system solved the block chain DDR to traditional accounts settlement sexual problems, finally this side also illustrates the settlement of block chain eventually sex can organic integration into the existing settlement system. In addition, since DDR is generated by 100% capital collateral and does not affect the money supply, the distributed ledger does not affect the total amount of money controlled by the central bank.

Obviously, in terms of technical logic, the new payment system based on blockchain led by the central bank is completely feasible. In a sense, referring to the digital depository receipt model of the Ubin project, payment institutions and commercial Banks can carry out payment and settlement by building a peer-to-peer network in the financial private network and connecting with a unified blockchain network without resorting to such intermediate channels as online payment platform. Considering that the transaction performance of blockchain technology is still in the process of evolution, the above clearing business should be carried out at the wholesale level.

It should be said that the decentralization of blockchain refers to the removal of intermediary, but not supervision. In the context of the alliance chain, the central bank and other regulatory authorities can not only centralize the control of the business and its risks carried by the block chain, but also realize penetrating off-site supervision.

Scenario 3: digitizing cash

Seems to be the digital cash and reserve digital (i.e., the number of the depositary receipts) there is no essential difference, is only the former geared to the needs of the public, while the latter is only limited to the circulation between the bank, but caused a problem facing the social public, if allow the public to open an account at the central bank, the central bank will face great pressure of service, and potentially lead to deposit move, led to the narrow Banks.

One solution is the 100% provisioning model. The agency operating institution pays 100% reserve to the central bank and then issues the corresponding amount of digital currency on its books, which can be regarded as the digital currency of the central bank. IMF economists call it the synthetic central bank digital currency (sCBDC). Therefore, after China's third-party payment institutions deposit 100% reserve funds with the central bank, the funds in their virtual accounts are the digital currency of the central bank. If so, China is already the first country in the world to digitise its legal currency.

But ponder, this approach has its drawbacks: one is technically, 100% reserve deposit payment means that the issue of digital currency, circulation and drained all should depend on traditional account system in whole life cycle, especially the interagency CBDC circulation, in addition to CBDC zhang to update, but also to deal with the corresponding between reserve accounts settlement, only at the expense of system flexibility, try to limit control way to deal with, but also need to establish a clearing house to provide connectivity services. This not only increases the pressure and complexity of the central bank's central system, that is, it still does not solve the service pressure of the central bank, but also makes it difficult to achieve the requirement of "loose account coupling". Second, in terms of management, in this way, the central bank and the operating institutions are tightly bound in the issuance and circulation process, and the central bank still bears the pressure of centralization. How to ensure that the payment network operated by the agent operating institutions is not subject to centralized control, it is more difficult for the central bank to control the amount of money issued by the operating agent layer. This, to some extent, also constitutes some reasons against the application of block chain technology in CBDC.

Perspective determines thinking. If you look at it from another Angle, you will get a completely different and better solution. Now when it comes to CBDC, many people understand the technical logic of CBDC from the top down, from the perspective of central bank issuance to commercial Banks, and then from the perspective of commercial Banks issuance to individuals, so there is always a worry about the issue of promissory notes. Physical money is constrained by the printing process, but digital money can be created instantly without this restriction, which is its advantage. If you look at it from a bottom-up perspective, it is surprising to see that digital currency end users do not have the concept of "issue", but the concept of "exchange", which is how much cash they have in hand, how much deposit they have, to exchange for CBDC. Therefore, from this perspective, the issue of promissory notes is not so prominent. The CBDC exchanged by the agent operation institutions is not the amount of money issued by the central bank, but the result of users' exchange of real money and silver in equal amount. The central bank only calculates relevant information and supervises it from a global perspective. In fact, it is a crucial point that both private stable tokens and country-developed CBDCS are now convertibility on demand, rather than spreadsheets. This is significant for monetary policy, suggesting no fundamental change; As for the technical route, it means that the issuing process of physical currency can not be restricted to, and the design of the system can be more concise, so the situation is greatly improved.

Based on the bottom-up convertibility perspective, a simplified implementation of CBDC can be proposed. The specific idea is: the business is initiated by the underlying customer, and the customer applies to exchange the CBDC and manage it to the agent operation institution. The agent operator records the detailed account book of CBDC for client custody, and sets up a separate ledger for each client custody. After receiving the customer exchange and custody of CBDC, the agency operating institution records the equivalent amount of CBDC in the customer's subsidiary account while collecting cash or deducting the customer's deposit, and then pays back the cash or deducting the deposit reserve to the central bank and transfers the same amount of custody to the central bank in batch. The central bank records the total account book of the agency operating institution, which is a concept of total amount, and the detailed account book of the agency operating institution constitute the double-account structure of upper and lower levels. When a CBDC payment occurs between customers of the same agency operating institution, only the ownership is changed in the detailed account book of the institution, without changing the central bank's general account book. When CBDC payment across agency operating institutions occurs, the relevant agency operating institutions shall first interact with each other to complete the ownership change of CBDC in their respective detailed accounts, and then the central bank shall periodically change the general ledger of each institution in batches in the general account. To improve efficiency and reduce risk, consider introducing mechanisms such as continuous net position adjustment and liquidity saving (LSM).

This approach has the following advantages: first, it makes it clear that the holder has full control over the CBDC. No other principal can invoke the CBDC without the signature or consent of the holder. This makes CBDC truly cash like a deposit currency. Second, the central bank does not set up separate files for the bottom customers, that is to say, the general public does not "open an account" in the central bank, which reduces the service pressure of the central bank, and at the same time truly realizes the requirement of "loose account coupling". Due to the batch adjustment of reserve account, the CBDC system is relatively independent of the RTGS system. Third, each agency operation institution can build its own digital currency agency operation system according to their own understanding and on the basis of meeting the unified standards, giving play to their respective specialties, which is conducive to competition and convenient for customers to choose. Because it is convertible on demand, rather than an extended list issue, there is no concern about overissuing currency at the operating agent level. In addition, although the transaction information of the underlying customers is only stored in the middle layer and not in the central bank's account book, the central bank has the right to extract information details from the agent operating institutions at the next level for policy or regulatory needs, thus realizing centralized control under distributed operation conditions.

conclusion

As an emerging technology that may become the future financial infrastructure, blockchain is conducive to the realization of distributed operations for the dual model of central bank and commercial bank without affecting the centralized management. Through three typical scenarios, this paper further demonstrates that the decentralized characteristics of blockchain technology can be incorporated into the distributed operation of CBDC and the centralized management system of central bank. The block chain technology can be applied to the register books of CBDC to verify banknotes of CBDC and guarantee its credibility. In the wholesale scenario, experiments in various countries also show that CBDC and payment system based on block chain technology are feasible. Digital retail scene in cash, this paper argues that the current CBDC development scheme has been unable to play the central bank center under the control of the advantages of distributed operation should be the problem is that the top-down perspective "issue", to this, this article is based on the bottom-up perspective "change", put forward the new CBDC implementation scheme, this scheme also implements the "centralized control, operating distributed" goal.

"Of something and not content to content", "XingErShangZhe as way, XingErXiaZhe as editor, as the royal", this is our country ancient philosophers thought. Centralized management and distributed management always need to be viewed in a dialectical and unified way, and it is not proper to simply oppose the centralized management at the institutional level and the distributed management at the technical level. At present, the digital currency experiment of central Banks based on block chain technology in various countries is progressing rapidly, and the content has covered a wide range of topics such as privacy protection, data security, transaction performance, identity authentication, dealing with coupons and dealing with payments. As a new technology, blockchain of course has some shortcomings and shortcomings, but this is not the reason for us to give up speaking out of turn. Facebook's Libra project, which is already developing a new generation of financial infrastructure based on secure, scalable and reliable blockchain, is a new track with both opportunities and challenges. (the author is director of science and technology supervision bureau of China securities regulatory commission) & NBSP;

Original link:https://mp.weixin.qq.com/s/2YOuL_NlIQwNFKAVmiFVnw

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