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Wang Yongli, former vice president of the Bank of China: digital renminbi can only replace cash as the first step

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For the first time, the digital renminbi has undergone a certain range of social public testing or actual use, marking that the digital renminbi is truly "ready to come out".

Original title: "Wang Yongli: Digital Renminbi to replace cash is only the first step"

Original author: Wang Yongli

2020 On the evening of October 8, the Shenzhen Municipal People's Government issued a notice that it will cooperate with the People's Bank of China to carry out a pilot activity of digital RMB red envelopes to promote consumption in Luohu District. Mobile phone number and second-generation resident ID card, make an appointment and register through the "i Shenzhen" platform), take the form of "number lottery draw" after the appointment, and issue 10 million yuan "Lixiang Luohu Digital RMB Red Packet", each red packet is 200 yuan , the total number of red envelopes is 50,000.

The winner downloads the "Digital RMB APP" according to the SMS guide of the winner, and activates it at the selected bank (industry, agriculture, China, and construction) After the "digital renminbi wallet", you can receive 200 yuan digital renminbi. The received red envelopes can be consumed in 3,389 merchants that have completed the transformation of the digital renminbi system within the jurisdiction of Luohu District. They can be used in batches according to the actual transaction situation, but they cannot be transferred to others or redeemed back to my bank account. The red envelope is valid from 18:00 on October 12 to 24:00 on October 18. Unused red envelopes beyond the validity period will be collected by the digital RMB system.

This is the first time that the digital renminbi has undergone a certain range of social public testing or actual use, marking that the digital renminbi is truly "ready to come out".

This also makes the central bank's digital currency, which has been dubbed "DCEP" before, has various speculations and is full of mystery, basically reveals its true face, and many problems can be clarified change. Of course, there are still many issues that need to be further explored and clarified.

Basic positioning and operating characteristics of digital RMB

In September 2020, Fan Yifei, deputy governor of the People's Bank of China, published the "Analysis of Policy Implications on the Positioning of Digital RMB M0", which gave an authoritative explanation of the positioning and operating characteristics of digital RMB, mainly including:

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1. Digital renminbi is a digital form of legal tender

The above directly replaces the previous "DCEP" with "digital renminbi", It is to prevent people from mistakenly thinking that the digital currency to be launched by the central bank is a new currency system other than the RMB.

According to the legal repayment regulations of RMB, all public and private debts in my country shall be paid in digital RMB, and no unit or individual may refuse to accept it if it meets the acceptance conditions. At the same time, the digital renminbi will naturally be included in the total amount of renminbi currency for unified management.

Since the digital renminbi is still centralized rather than decentralized, it does not necessarily require the use of a blockchain like Bitcoin or Ethereum technology.

2. The digital renminbi is mainly positioned at M0

Need to comply with the "People's Bank of China Law" , "RMB Management Regulations" and other laws and regulations related to cash management, and abide by laws and regulations such as large amount cash management and anti-money laundering and anti-terrorism financing.

The digital renminbi still implements the "dual operating model" of "central bank-commercial bank".

The central bank chooses commercial banks with relatively strong capital and technology as the designated operating agency, and opens different types of digital renminbi for them according to the strength of customer information identification Wallets (generally divided into 4 categories, with different wallet balance limits, single transaction limits, daily transaction limits, annual transaction limits, etc.), for digital RMB redemption and redemption services; designated operating agencies and other commercial banks and related Institutions cooperate to jointly provide digital renminbi circulation services; digital renminbi can only be used for receipts and payments, and cannot be used for issuing loans, so no interest will be calculated; Exchange and circulation service fees are charged, and commercial banks do not charge personal customers for digital renminbi redemption and redemption service fees; refer to the current arrangements for banknote issuance, allocate issuance fees to designated exchange operators, and establish a reasonable and effective incentive mechanism.

3. Maintain the centralized management position of the central bank in the issuance of digital renminbi

Mainly include : The first is to coordinate the management of the digital renminbi quota, and formulate unified business standards, technical specifications, security standards, and application standards. The second is to coordinate the management of digital renminbi information. By mastering the full amount of transaction information, record, monitor and analyze the exchange and circulation of digital renminbi, and improve the central bank issuance system in the digital age. The third is to coordinate the management of the digital renminbi wallet. On the premise of adhering to the unified cognitive system and anti-counterfeiting function of the digital renminbi, and in line with the principle of two-tier operation, the central bank and designated operating agencies jointly develop the wallet ecological platform in a co-construction and sharing manner. At the same time realize their own visual identity and characteristic functions. The fourth is to coordinate the construction of digital renminbi issuance infrastructure, realize cross-operating agency interconnection, and ensure the stable and orderly circulation of digital renminbi.

The trial run of Shenzhen Luohu digital RMB red envelope has further revealed some technical details and possible innovations of digital RMB’s landing operation:

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1. The basic context of the binary operating mode of digital renminbi

Winners need to download the central bank's unified "digital renminbi APP", Then open a "digital renminbi wallet" at the selected bank (industry, agriculture, China, and construction) to obtain and use digital renminbi. The mobile phone becomes an important carrier of the digital wallet, and scanning code confirmation becomes the main payment method. It can be judged from this:

A. The central bank can obtain the name, ID number, mobile phone number and other information of the digital renminbi holder through the "Digital RMB APP", And establish a reference account for each holder (it can also be extended to units, financial institutions, etc.) on the digital renminbi platform to form a "digital currency account" of the whole society in the central bank, and fully grasp the full amount of digital renminbi exchange and circulation transaction information, and can conduct necessary monitoring and analysis;

B. Designated operating agencies also need to download the central bank’s digital RMB APP and open an account, so that the central bank can become a digital currency The clearing center of RMB realizes the interoperability of cross-operating institutions;

C. For every payment of digital RMB, relevant information must be sent to the central bank at the same time, and the central bank can Comprehensively grasp all transaction information, while digital RMB wallet operators can only learn information related to their own wallets. If the digital RMB wallets of the payee and payer do not belong to the same operating agency, each operating agency cannot grasp the information of both parties to the transaction. All information, so that the "limited anonymity" of the digital renminbi can be realized.

2. The digital renminbi is positioned at M0, but it is not completely equivalent to physical cash

Judging from the screens displayed by the "digital RMB wallets" of various banks after the transfer of Luohu digital RMB red envelopes and actual use (as shown in the figure below), it can be seen from the initial "¥200.00" to "¥0.01" after use. It is envisaged that the digital renminbi has different face values, face numbers and other factors, and the central bank will also track the whereabouts of each currency.

In fact, digital currency can only be a number (up to the smallest currency unit), and there should be no different face value settings, otherwise, when the actual payment , There will also be the problem of exchanging the difference, which is completely superfluous. The central bank can track every digital renminbi receipt and payment, and there is no problem of tracking the whereabouts of each currency.

At the same time, this also shows that although the digital renminbi is positioned as cash, its operation is based on accounts-the "digital renminbi wallet" is not a physical wallet , In essence, it is a special deposit account opened at the operating institution, otherwise, it is impossible for the wallet to display its balance in real time along with digital renminbi receipts and payments, and to control the relevant limit.

This also further shows that the so-called dual-offline "touch payment" (NFC) is not the most important feature of digital renminbi that is different from ordinary renminbi. In fact, the dual-offline "PinkPay" can only be used for small-amount emergencies, and cannot be widely used unconditionally. When the communication conditions are available, the information of "PinkPay" still needs to be transmitted to the operating organization as soon as possible. and the central bank to adjust the records of the relevant wallets and reference accounts accordingly. Without the support of a third-party account system, relying solely on mobile phones and other hardware for "touch payment" is very risky. This is also an important reason why NFC technology has long existed, but it is difficult to be widely used. Therefore, there is no need to over-exaggerate the "touch payment" function of the digital renminbi.

3. It may have a major impact on the existing payment and settlement system

Although the central bank does not Do not directly handle the digital renminbi exchange and payment settlement business for the public, although the central bank has particularly emphasized that "in order to ensure that the digital renminbi is widely available and does not have a major impact on the existing financial market, it is necessary to give full play to the role of all commercial banks and non-bank payment institutions." The positive role in the digital renminbi system, maintaining a fair competition environment, ensuring that the market plays a decisive role in resource allocation, fully mobilizing the enthusiasm and creativity of all parties in the market, and maintaining the stability of the financial system.” However, after careful consideration, it is not difficult to find that the digital The introduction of RMB may have a major impact on the existing payment and settlement system.

This is because the most important operating node of the digital renminbi is the unified APP of the central bank, which means that the central bank is the real payment and clearing center of the digital renminbi. Its widespread operation will not only have an impact on the market position and profit model of professional payment institutions such as Alipay and Tenpay, but also bring more benefits to bank cards and related industries because they do not need to be bound with bank accounts such as bank cards. Big hit. This may be the biggest change brought about by the digital yuan.

One problem here is that the central bank currently declares to establish a free digital renminbi value transfer system and financial infrastructure. During the Shenzhen pilot process, the payment and settlement of digital renminbi are also free. However, the receipt and payment of digital renminbi is not like physical cash after all. It is mainly operated independently by the two parties. The receipt and payment of digital renminbi requires the participation of relevant operating agencies and the central bank. The operating cost will inevitably be very high. Sustainability deserves careful consideration.

It should be pointed out that when the central bank’s digital renminbi system is not open to foreign countries, it is impossible to have an impact on the internationalization of the renminbi and the international payment and settlement system .

Digital RMB should never be limited to replacing M0

Digital currency is an important change in the form and operation of currency. It is a new thing with a huge impact. It is easy to have a huge impact on currency, finance, and even economic and social stability. Therefore, the international community is generally very active and cautious about it.

The People's Bank of China first started to promote the digital renminbi by replacing M0, and adhered to the dual operation mode, which can greatly reduce the printing, delivery, receipt and payment, and storage of RMB cash , return, and destroy the cost of the whole process, greatly enhance the compliance monitoring of currency receipt and payment circulation, etc., and can minimize the risks that may be brought about by the change, make it easier to launch digital currency, and accumulate experience for more profound and comprehensive changes. It can be said to be a very reasonable and wise choice, and thus has achieved a global leading position in the field of digital currency.

But what needs to be seen is that with the development of information technology, the proportion of M0 in the total currency has been reduced to less than 4%, and it is still decreasing , and cash will be difficult to completely eliminate for a long time. In this way, if the introduction of digital renminbi is only limited to replacing M0, the actual value of its input and output may be greatly reduced.

Therefore, the digital renminbi should never be limited to replacing M0, but should further promote reform on this basis. Possible considerations are:

1. Further consolidate and improve the central bank's "digital currency one ledger" system. The system is open (open source) to all users (including overseas users). All social entities (including financial institutions) can download the system and open a unique digital currency "basic account" at the central bank to register each digital currency receipt one by one. The central bank can control the receipt and payment of all digital currencies one by one and the specific distribution of digital currencies in real time, realize all-round and full-process monitoring of digital currencies, and greatly improve the accuracy and accuracy of the central bank's monetary policy. effectiveness. Of course, the basic account is only for verification, no business, no interest calculation.

2. Digital currency can be used in various financial businesses (including issuing loans) and replace all currencies as much as possible. Financial services are still handled by various financial institutions. Social entities can open digital currency "business accounts" in commercial banks and other financial institutions to record changes in creditor's rights and debts and their results when they start their business, and calculate interest according to the agreement . Among them, commercial banks also need to open a loan account and a deposit account at the central bank (the deposit account can also be merged with the basic account), and calculate interest separately according to the agreement.

3. The business account of each social subject must be linked to its basic account in the central bank, and it can be properly distinguished and managed in different files in terms of the real-name system of the account .

When a social entity receives and pays digital currency, its digital currency wallet carrier must mutually confirm and generate a business encryption link code. The hook-up code is sent to the central bank and the business account opening bank at the same time; the business account opening bank performs accounting processing according to the received information, adjusts the balance of the customer's digital currency account, and sends the relevant information to the central bank to adjust the balance of its digital currency account deposited in the central bank accordingly; The central bank adjusts the account balances of the payer and payer after matching the information sent by the payer and payer through the business link code. In addition, after matching the information sent by the account-opening banks of both the payee and the payer through the business link code, the account balances of the two banks will be adjusted accordingly. The digital currency payment and settlement process can be seen in the figure below:

In this way, a "digital currency account" of the whole society in the central bank is formed, and the digital currency in the central bank The coexistence of "basic accounts" and "business accounts" in financial institutions connected to the West Lake will promote profound changes in the currency operating system and operating mechanism, but will not cause a major impact on the existing monetary and financial system.

Of course, the specific payment and settlement process of digital currency can still be optimized and adjusted.

Under certain conditions, the central bank’s digital renminbi system should also actively open up to the outside world and lead the global digital Currency development, and promote the development of RMB internationalization, as well as the reform of the international payment and settlement system.