Qian yao: digital currency and bank accounts

Author: yao qian (academic member of the institute of financial science and technology of renmin university of China, director of the science and technology supervision bureau of China securities regulatory commission)

Source: central Banks and money

This paper discusses the relationship between digital currency and bank account, proposes a design idea based on the layering of bank account and digital currency wallet, and presents the application scenarios with the help of the case of special subsidy payment, at the same time, proposes the focus areas for further research. & have spent

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Account-based and unaccount-based

Whether digital currency can play its effect or not, technical route, risk prevention and control means and security measures are the foundation, but application is the key. Only by the public and the market accepted, easy to use legal digital currency can have vitality, can truly realize the traditional currency supplement or even replace. Although pure digital currency system could not associated with a bank account, but as a result of China's currency to follow the central bank to the binary system of commercial Banks, and the current social economic activity is based on commercial bank account system to carry out, if can use bank account system, making full use of existing mature bank IT infrastructure, application and service system, will greatly reduce the digital currency promotion threshold, improve the use convenience and flexibility, help the masses of customers to use digital currency. On the basis of integrating digital currency into the existing application, it will develop more rich and diversified scenarios, and the service ability and competitiveness of digital currency will be further enhanced.

The most straightforward way to use the account system is to expand access to central Banks' balance-sheets. In fact, central bank claims held by commercial Banks and some other financial institutions in the form of central bank deposits have been digitized. But should central Banks offer such services to a wider range of counterparties? Can non-financial sectors, including households, hold accounts at the central bank? This question has given rise to a wide discussion. The bank of England, the European central bank and Sweden's riksbank have studied the issue. Ben broadbent, deputy governor of the bank of England, voiced commercial Banks' concerns: "that would trigger a transfer of deposits from commercial Banks to the central bank, leading to a narrowing of the banking system into 'narrow banking'." Indeed, such concerns are now somewhat representative of regulation.

Zhou xiaochuan, governor of the people's bank of China, has long expressed his view that "the technical route of digital currency can be divided into account-based and non-account-based, and it can be layered and managed to coexist." This is a very principled and incisible statement, and the idea of layering is clearly deeper than the idea of opening an account directly at a central bank. However, on how to achieve the specific means, this paragraph seems to have different interpretations, this article tries to talk about a personal understanding. & have spent & have spent

The commercial bank account system supports digital currency

Commercial bank traditional account system + digital currency wallet attributes

To buffer for buffered separate digital currency system to the impact of the existing banking system, but also to maximize the protection of the existing system of commercial bank investment, on the specific design, can consider on commercial bank account of the traditional system, the introduction of digital currency wallet properties, implement a account can manage the existing electronic money, also can manage digital currency. Electronic money and digital money management have their similarities, such as account use, identity authentication, fund transfer, but there are also differences. Digital currency management should be in conformity with the relevant wallet design standard of the central bank, similar to the safekeeping of the concept, the bank will apply according to the provisions of the rights management with customers (such as customers and Banks must have two keys to open the contract), retain all attributes as an encrypted digital currencies, flexible use of these properties can be custom-made applications in the future.

The advantage of this is that it follows the dual system of currency issuance, where digital currency is M0, the liabilities of the issuing bank, off the balance sheet of the account bank. Since account Banks still manage customers and accounts in a substantive manner, commercial Banks will not be channelized or marginalized. Unlike cash deposits in the past, digital currency does not rely entirely on bank accounts, but can be directly confirmed by the issuing bank, and peer-to-peer cash transactions can be realized by using the client's digital currency wallet.

The central bank issues and authorizes the issuance

Note issuing bank can be the central bank or the bank authorized issuing institution (for example, the Hong Kong dollar issue model). The specific choice of distribution method is decided according to the actual situation, this paper is only for academic discussion. In the context of centralized and unified issuance of digital currency by the central bank, the digital currency in the bank repositories of commercial Banks belongs to the assets of commercial Banks and the liabilities of the central bank. The digital currency in a commercial bank's customer account is the customer's asset and the central bank's liability. Peer-to-peer transactions of digital currency between customers shall be confirmed and managed by the digital currency issuance system of the central bank, which shall assume the transaction responsibilities; The transaction of electronic currency is consistent with the existing process and completed through the inter-bank payment system of the central bank and the core business system of commercial Banks.

Different types of currency different transaction channels & NBSP; & have spent

Digital money wallet and basic bank account system & NBSP; & have spent

& have spent In the environment where the central bank authorizes the issuance of legal digital currency, the digital currency in the bank's database belongs to the assets of commercial Banks and the liabilities of note-issuing Banks. The digital currency in a commercial bank's customer account is an asset of the customer and a liability of the note-issuing bank. Peer-to-peer transactions of digital currency between customers shall be confirmed and managed by the note-issuing bank of legal digital currency (who issues and who manages), and the central bank shall assume regulatory responsibilities; The transaction of electronic currency is consistent with the existing process and completed through the inter-bank payment system of the central bank and the core business system of commercial Banks. It should be noted that the connectivity between note-issuing Banks, central Banks and note-issuing Banks will be designed at the top level by the central Banks, and whether this top level can be migrated to a distributed ledger architecture will be a major issue for the industry.

The design idea of digital money wallet

In terms of the specific means of implementing the application of layering, the paper continues the customer-centered thinking of commercial Banks and adds the ID field of digital currency wallet to the basic bank account. The wallet plays the function of safe deposit box, does not participate in the business such as day final calculation and withdrawal, minimizes the impact on the existing core business system of the bank. The confirmation right of digital currency relies on note-issuing Banks, and the combination of traditional accounts and digital currency can greatly enhance the capability of digital currency wallet and basic bank account system. In the wallet design, all digital money wallets need to conform to the specifications provided by the central bank. The digital currency wallet on the bank side is relatively light, which only provides security control and necessary attributes related to the account layer, and focuses on the management of digital currency. Application service providers offer heavy client wallets, which extend to the presentation and application layers. On the client side, the application of smart contract can be fully displayed, which is also one of the core competitiveness of application service providers.

Example of application scenario: special subsidy payment

A ministry issues special subsidies, level by level to obtain subsidies to enterprises or individuals. If the actual delivery of subsidies is to be tracked, it is difficult to realize under the traditional mode, and it is often necessary to summarize and submit the subsidies step by step. The information flow and capital flow cannot be fully matched. Relying on the traceable feature of digital currency and the assistance of certain intelligent contract authority management, the ministry will be able to grasp the situation of subsidies at all levels directly without relying on other business participants, so as to avoid the risk of misappropriation of subsidies by lower-level institutions and realize the special fund. If the digital money wallet attribute is not implanted in the bank account system, it is bound to require all levels of institutions and subsidies.

Precise tracking & dispensing of special subsidy funds;& have spent

The beneficiary opening and using digital wallet, not only need to consider the choice of physical carrier of digital wallet, but also involve many participants, the central bank will directly face the end users, promotion is difficult. Based on the commercial bank account system, the application part can be reformed in the background of commercial bank. For the end users at all levels, the service can be completed through the existing channels such as bank counter, online banking and mobile banking by using the existing account, consistent with the previous daily habits in operation.

conclusion

In a fully digital world, the economic and financial connotations behind Numbers should not be confused just because they are Numbers on the surface and in the form. Although both Numbers are Numbers, they may represent different types of assets, which is something to keep in mind when considering the design of digital currency. When real money is converted into M1 or M2, there is a natural separation between real money and Numbers, but the number M0 is easy to ignore. The common view is that the speed of conversion between digital assets has accelerated, but does this mean that the differences between different types of digital assets have disappeared? A deputy governor of the people's bank of fan flew once wrote: "the legal existing payment systems, digital currency will inevitably suffer the influence of information technology, but also need to appropriate to distinguish with the existing pay system, to focus on its services, the function of the alternatives to traditional monetary. In theory, the main processing payment system is a demand deposit part of broad money, while digital currency mainly belong to the category of cash (M0)." Through the account in the commercial bank system in the new digital currency attribute, the method of legal digital currency can not only organic "the central bank, commercial bank" binary system, the reuse of existing mature financial infrastructure, and, more importantly, this process, because of the special consideration digital M0 "living" in the commercial banking system problems, can be separated, and can be layered and, FaChaoXing only responsible for the digital currency itself, account to assume the actual business line, application developers to carry out the specific implementation, if changed the boundary is clear, supplemented by other means (such as can take into consideration the charge fee, Essentially equivalent to negative interest rates), or could reduce the likelihood of narrow banking.

The addition of digital currency attributes is also an innovation to the account system of commercial Banks. Commercial Banks can not only continue to provide digital currency services for their own customers by using the existing account system, but also actively expand new businesses by taking advantage of the new characteristics of digital currency, so as to further enhance their service capacity and competitiveness. The discussion in this paper is just the beginning, and further research can focus on the design specifications of wallets, and further explore the following issues: 1. How to design differentiated monetary use cost and asset price policies to ensure the dynamic balance between notes, legal digital currency and commercial bank deposits in the transition period. 2. How to build a benign application ecosystem among central Banks, (note issuing Banks), commercial Banks, wallet service providers, payment service providers and digital currency users on this design. & have spent & have spent

The original address: https://mp.weixin.qq.com/s/-zhyQcXTX31FyWnuPrFCLw

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