The central bank officially released the full picture of the digital RMB, you should know these features

On July 16, the People's Bank of China officially released a white paper on the development progress of China's digital RMB (hereinafter referred to as the "white paper"), which is the first official release of the full picture of the digital RMB in the seven years since the introduction of the concept to the implementation of the test.

The People's Bank of China has set up a legal digital currency research group since 2014. In 2016, the Digital Currency Research Institute was established to build the prototype of the digital currency. In recent multi-place and multi-scene tests, the research and development experiment of the digital RMB has basically completed the top-level design, functional research and development, system debugging and other work, and is following the principle of steady, safe, controllable, innovative and practical. As of June 30, 2021, the digital RMB pilot scenarios have exceeded 1.32 million, covering areas such as living payment, catering service, transportation, shopping and consumption, and government services. More than 20.87 million personal wallets and 3.51 million public wallets were opened, and the total number of transactions was over 70.75 million, with an amount of about 34.5 billion yuan.

China is well ahead of the rest of the world when it comes to central bank digital money.

Domestic users have long been accustomed to electronic payment, so when the digital RMB appears, the biggest question is, "What is the difference between digital RMB and Alipay and WeChat payment?" "Or" How is the digital yuan different from the current one?"

In fact, the digitization of the RMB has completely expanded the imagination space of the RMB. In order to give you a more comprehensive understanding of the digital RMB, Rhythm Blockbeats summarizes the key points in the White Paper:

Digital Renminbi is the digital form of legal tender and does not pay interest

As a legal tender issued by the People's Bank of China, the digital RMB is mainly targeted at cash payment certificates (M0) and will coexist with the physical RMB for a long time.

Previously, Randal K. Quarles, the Fed's vice chairman of supervision, said in a speech titled "Parachute Pants and Central Bank Digital Money" that the Fed's CBDC could pose considerable challenges to the structure of the U.S. banking system, with the Fed replacing commercial banks as the primary source of funding to the public. The digital yuan does not have this problem.

Digital RMB is different from bank deposits,Since digital RMB is positioned as a cash payment document, it does not pay interest.At the same time, digital RMB is the debt of the central bank to the public, supported by national credit, with legal compensation. Commercial bank deposits and the ceiling of bankruptcy compensation for 500, 000 yuan.The non-interest-bearing method of digital RMB is beneficial to reduce competition with commercial bank deposits and other low-risk financial assets, and reduce the potential impact on monetary policy.

Digital RMB is a retail central bank digital currency, mainly used to meet domestic retail payment needs. And, unlike cryptocurrencies, the digital yuan is not decentralized,Instead, it adopts centralized management and two-tier operation.Dual operation refers to the People's Bank to commercial banks, commercial banks or commercial institutions to the people.

The general public without bank accounts can also enjoy basic financial services through digital RMB wallets. Overseas residents who come to China for a short time can open digital RMB wallets without opening a bank account in the Chinese mainland to meet their daily payment needs in China.

Digital RMB has the characteristics of controllable anonymity, low cost and programmable

Controllable anonymity:

The anonymity of the digital RMB has attracted much attention before, and the central bank has also explained it in the white paper.Digital RMB follows the controllable anonymity principle of "small amount anonymous, large amount traceable according to law".The digital RMB system collects less transaction information than traditional electronic payment models, and does not provide it to third parties or other government departments unless it is explicitly stipulated in laws and regulations.

Digital wallets can be divided into different levels according to the strength of customer identification. Operators can grant different single transactions, one-day transactions and balance limits to all kinds of wallets according to the strength of their real names, and wallets with minimum authority are not required to provide identity information. Users open an anonymous wallet with the lowest permissions by default, and can upgrade to a real-name wallet with high permissions according to their needs.

Tools such as WeChat Pay and Alipay have been criticized by users for collecting too much information from users, which can be avoided by using digital yuan for payment.

Low cost:

Physical RMB is managed in the same way, and the People's Bank of China does not charge designated operating institutions for exchange and circulation services. This shows that there is no need to pay fees for digital RMB interbank transfers. The designated operating institutions do not charge individual customers the service fees for exchanging and returning digital RMB, which means that there is no need to pay the service fees for converting digital RMB to the operating institutions.

Programmability:

Digital RMB realizes programmability by loading smart contracts that do not affect the monetary function. Under the premise of ensuring security and compliance, digital RMB can conduct automatic payment transactions according to the agreed conditions and rules between the two parties of the transaction, thus promoting the innovation of business model.

For the foreseeable future, the programmability of the digital yuan may change some of the rules of business transactions and supply chains.

Digital RMB will choose technologies based on market demand

In the white paper, the central bank did not directly state that the digital yuan uses blockchain technology, but pointed out that the choice of the digital yuan technology route is a long-term evolution, continuous iteration, dynamic upgrade process, market-oriented regular evaluation, continuous optimization and improvement.

At present, the digital RMB system adopts distributed, platform-based design, integrated application of trusted computing, software and hardware integration special encryption and other technologies, integrated with the characteristics of centralized and distributed architecture, forming a hybrid technology architecture of steady state and sensitive dual-mode coexistence, centralized and distributed integrated development.

Digital RMB may be settled across borders through the multi-currency legal digital currency bridge in the future

During the digital people development and pilot period, the People's Bank of China actively participated in multilateral exchanges with international organizations such as the Financial Stability Board (FSB), the Bank for International Settlements (BIS), the International Monetary Fund (IMF), and the World Bank (WB). We will communicate and discuss the frontier issues of legal digital currency with monetary and financial regulatory authorities in various jurisdictions, multinational financial institutions and top universities in the world, and actively participate in the development of legal digital currency standards under the framework of international organizations, and jointly build an international standard system.

The People's Bank of China's Digital Currency Research Institute has signed a Memorandum of Understanding with the Hong Kong Monetary Authority.At the same time, we will join the MCBDC Bridge project led by BISIH, and explore the practice of fiat currencies with BIS innovation centers such as Hong Kong Special Administrative Region and Singapore as well as central banks.

Digital RMB is not the same as Alipay or WeChat

This is what everyone is most concerned about.

Digital RMB and general electronic payment tools such as Alipay and WeChat are in different dimensions, which are complementary and different. Generally, electronic payment is a means of third-party payment, which is settled by commercial banks in currency storage. There is a very small risk of bankruptcy and no legal compensation. Therefore, there may be users who do not support Alipay or WeChat payment. Digital RMB has legal compensation, users shall not refuse to accept digital RMB, and digital RMB can realize offline payment with higher security degree and quota than Alipay and WeChat payment.

The design of digital RMB combines the advantages of physical RMB and electronic payment tools, which not only have the characteristics of physical RMB payment as settlement, anonymity and so on, but also have the characteristics of electronic payment tools such as low cost, high portability, high efficiency and hard forgery.

While the US Federal Reserve is still talking about the need for digital dollars and Europe is still considering the feasibility of digital euros, China's digital yuan has accumulated more than 70.75 million transactions, worth about 34.5 billion yuan. China already leads the world in digital currency.

China's development and implementation of the digital RMB system is a natural selection process of currency internationalization. The international currency status is fundamentally determined by economic fundamentals and the depth, efficiency and openness of monetary and financial markets. At present, digital RMB already has the technical conditions for cross-border payment, but it is still mainly used to meet the needs of domestic retail payment. Perhaps in the near future, outside of China, the digital yuan will also be seen.

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