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Yao qian: the international currency field is a perfect application scenario of block chain technology

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Original title: "reform of international payment system and block chain technology of contemporary financier | securities regulatory commission technology bureau yao qian"
Source: contemporary financier

▲ yao previously served on the China securities regulatory commission (CSRC)

The decentralized design and equal rights concept of block chain technology, such as distributed accounting and joint verification, are naturally consistent with the spontaneous characteristics of the international monetary system. Therefore, the international monetary field is a perfect application scenario of block chain technology, which can be improved and optimized on the stock level, or a new exploration on the increment level. The key lies in how to coordinate all parties and build consensus.

Source: | contemporary financier, issue 1, 2020, originally titled "reform of international payment system and block chain technology"

Facebook's Libra white paper, a cryptocurrency, has attracted worldwide attention. There are three main reasons. One is that Facebook is big enough, with an active user base of nearly a third of the world's population, to allow Libra to expand rapidly to global scale through its ecology. Second, Libra is actively linked to the existing banking system and adopts a stable token model, targeting a basket of currencies and low-risk assets, which is expected to solve the problem of unstable value of virtual currencies. Third, in response to the current pain points of cross-border payments, Libra proposed a new international payment scheme, providing a new option for the reform of the international payment system.

This paper focuses on the third level, analyzes the pain points and improvement ideas of the existing international payment system, and puts forward Suggestions on further promoting global financial infrastructure connectivity.

I. current situation of international payment system and improvement ideas

The clearing and settlement of global cross-border payments and remittance funds mainly rely on the Society for Worldwide Interbank Financial Telecommunications. From the perspective of business logic, if a bank providing cross-border services wants to carry out business, it first needs to dock with the SWIFT system. If the bank is not qualified to dock with the SWIFT system, it needs to conduct cross-border business through the bank that can dock with the SWIFT system as the agent bank of the former. For example, when a Chinese parent sends money to a child studying in the United States, the parent's bank in China or its agent must connect with the SWIFT system so that the money can be transferred to a bank in the United States. At the same time, the child's bank in the United States also needs to connect with the SWIFT system. Otherwise, it will also have to rely on the agent bank in the United States to transfer the payment to the bank in the United States after the SWIFT system receives the payment.

The business process of the whole SWIFT system has been criticized for many links. There are four problems caused by it: first, low efficiency; Second, the "toll" is high; Third, once problems occur in the payment process, it is not easy to effectively carry out troubleshooting, there are hidden risks; Fourth, the transparency is low. The completion process and time of cross-border payment is like a "black box". True, SWIFT is making improvements to its entire Payment and settlement system, such as the launch of the Global Payment Innovation (GPI) programme in early 2017, which aims to improve the speed, transparency and predictability of SWIFT's cross-border payments by working with SWIFT's participating Banks to develop new cross-border Payment standards. However, the emergence and iterative evolution of new technologies leave room for greater improvements in the international payment system.

The first way to improve

This improved idea will transfer the clearing and settlement method centered on commercial Banks to the architecture of block chain, so as to minimize intermediate links and even achieve the effect of point-to-point payment. Libra, currently in hot debate, exemplifies this improved approach.

In fact, the industry has been exploring this idea for a long time, such as Ripple coin run by Ripple Labs. Ripple offers a cross-border payment solution based on blockchain technology, providing customers with interoperability across currency payment systems. The client first converts the local currency into Ripple currency and then Ripple currency into another country currency, and then completes the cross-border payment process through Ripple currency, the original asset based on the blockchain. Ripple prefers to call Ripple COINS "Digital Bridge assets" (dbas) rather than "tokens", rather than "tokens", as Libra loudly claims to create "a simple, borderless currency" and embrace regulation. Ripple's relatively low profile positioning, posture intriguing.

The second way to improve

According to this improved thinking, in a sense, the difficulty of cross-border payment is not technology. If the central Banks of every country in the world are united and their payment systems are connected, the problem can be easily solved. Shift in the United States federal reserve, for example, large Fedwire payments System, the clearing house interbank Payment System Chips, New York clearing house automated Payment System Chaps with the British, the eu's pan-european real-time full automatic clearing System Target, and China's large real-time Payment System HVPS (High Value Payment System) and docking, form the global financial infrastructure interconnectivity.

It can be said that this idea continues the existing account system and intends to realize the connectivity of the lower layer through the docking of the upper layer. But not only will this approach involve more complex issues of international jurisdiction and cross-border financial regulation, but whether it is more efficient than the current SWIFT model remains to be seen.

A third line of improvement is emerging

This improved thinking emphasizes the joint participation of commercial Banks in the construction of payment infrastructure, which means that a new cross-border payment alliance system can also be established among commercial Banks in various countries. The Pan European Payment System Initiative (Pepsi), for example, is being pushed by The eu and is now backed by about 20 of Europe's biggest Banks, including BNP Paribas and Deutsche Bank. The initiative aims to create a new type of cross-border digital payment system based on the payment infrastructure jointly built by Banks, providing participating Banks with cross-border and cross-bank payment capabilities similar to those of ApplePay of the us and Alipay of China, enabling instant cashless payments. It is easier and faster to co-ordinate within the system than it is to unite the superstructures of central Banks and wholesale payment systems. Obviously, this emerging new cross-border payment alliance system is naturally suitable for the application of block chain technology.

From the cryptocurrency shock to the central bank's digital currency

In recent years, the largest impact, the impact on the traditional account system is encrypted currency appeared and block the development of chain technology, make more and more people to the traditional account based on the system from one institution account layer upon layer transfer to another institution account of payment raises the following questions: whether can completely beyond the existing payment system, send money directly from the end to the other, a point-to-point transaction, rather than through multiple mediation or layers of transfer can be achieved.

This is the idea of "digital cash". The origin of this idea is actually very early. Cryptographers have long had the idea that if mail could be encrypted and signed, cash could be sent from one end to the other in a "digital envelope." The development of modern cryptography and computer communication technology has gradually made this idea a reality. Zuckerberg's oft-repeated statement at a congressional hearing that "anyone can send a Libra money transfer as easily as a text message" is one such goal, as is jpmorgan's upcoming cryptocurrency, JPMCoin.

It should be said that under the impact of cryptocurrencies, the idea of improving the global currency payment system is very clear. Currently, central bank digital currency experiments in various countries, such as the Jasper project of the bank of Canada, the Ubin project of the monetary authority of Singapore, the Stella project of the European central bank and the bank of Japan, are mostly cryptographic digital currency experiments based on block chain technology, but they are still limited to wholesale (institutional) application scenarios. The central bank has always been regarded as not good at retail business. Some people even worry that when digital currency is issued to the public, the central bank may face extremely high cost pressure and market demand, and the credit business of commercial Banks may also be impacted, leading to the emergence of "narrow banking". As a result, central Banks in many countries are taking a wait-and-see approach to central bank digital currency issuance, or are more inclined to use stable tokens. However, in a sense, the wholesale nature of central bank digital currency can completely replace the existing large payment system.

In addition, there is still a lot of debate in the industry on whether cryptocurrencies must be issued based on blockchain. Many people think the answer is yes, but I think not. According to the development history of cryptocurrencies in the past 40 years, there are cryptocurrencies based on blockchain and cryptocurrencies not based on blockchain. For example, cryptographer David Chaum's e-cash is a successful experiment from an academic perspective -- e-cash is not a cryptocurrency based on blockchain. Therefore, whether the centralized or decentralized mode is adopted, whether it is based on block chain or not, whether it is based on account or value /token, as long as it can reduce the cost of cross-border payment and improve the efficiency, it is worth studying and paying attention to.

However, the development direction of cryptocurrency and blockchain technology is still the most important frontier hotspot at present, so in-depth research must be done. For example, the connectivity of large-amount payment systems in various countries mentioned above can also be considered under the block chain architecture.

Three, the strategy proposal: public and private "joint venture", competition to choose the best

Criticism of the SWIFT system is not limited to technology. Although the SWIFT system has played an important and positive role in global cross-border payment, clearing and settlement, some people believe that SWIFT is a monopolistic institution in the international monetary payment system and often becomes a tool for sanctions and long-arm jurisdiction, especially for the us dollar account. Therefore, many people hope to improve or even de-swift. If full SWIFT removal is too extreme and not easy, it is possible to improve the existing international payment system. The criticism and dissatisfaction with the existing international payment system essentially reflects the trend that society does not want public infrastructure or areas of public character to be monopolized by one or more parties. The risks, high costs and damage to social welfare are increasingly alarming.

Some innovative technologies, such as cryptocurrency and blockchain, may provide solutions to support the goal of improving existing international payment systems. Note that the blockchain itself still needs to be differentiated. In theory, the public chain is decentralized and unmediated. No one party can control the whole system. The nature of private chain is not so different from traditional information system; The alliance chain is jointly controlled by recognized alliances.

At the specific operational level, the solution will not only face technical difficulties, but also need to balance the interests of all parties. A case in point is Facebook's announcement of Libra, which was intended to create a world currency with no borders and stable values, and a financial infrastructure that truly benefits all. The announcement was met with growing criticism of whether corporate interests dovetailed with national interests, whether the private sector had a public spirit, how the public could prevent Facebook from operating in the shadows, and how countries could impose cross-border financial regulation on Libra.

So, things are more complicated than you think. The public sector has a public spirit but lacks the capacity to innovate, and the private sector has the capacity to innovate but is also suspected of lacking the public spirit. The idea of "unlocking" is to "joint venture" between the public sector and the private sector, "official supervision" and "commercial management". Under the guidance of the public sector, some qualified and capable commercial institutions are allowed to explore the construction of such a system that benefits the public and is not controlled by one party. This sounds like a dream, and achieving it is not easy, but it should be encouraged.

In the field of international payments, we have two levels of expectations: one is the emergence of a credible global payment platform that is not controlled by one party; The other is the desire for a global digital currency. The second goal is harder to achieve than the first. As large-scale virtual currency experiments like bitcoin's ethereum take the world by storm, many institutions are clamoring to issue COINS. Of course, this is not serious.

The above two expectations, though not equally difficult, can be considered if the first goal is achieved. If we can connect national financial infrastructure to form a global financial infrastructure, then the next step could be to consider issuing e-sdr (electronic SDR based on account) on the basis of global financial infrastructure. Or d-sdr, a digital SDR based on value (tokens). The challenge is that converting the SDR into a global currency involves complex international political co-ordination and gaming, and the composition of the SDR basket will change with the game, not necessarily as it is now.

To achieve the first goal, building a globally unified payment platform that is not controlled by one party will also require healthy competition. Infrastructure connectivity can be planned in a unified way, but there must not be only one unified payment platform. Monopoly is not good after all. To give users a choice, competition is good for everyone. Only in this way, each country and each institution can compete effectively on different tracks.

Iv. Conclusion: the enlightenment of the "self-service" system in the international community

The current international monetary system is a dollar standard system constituted by the bretton woods system-jamaica agreement. However, from the perspective of international politics, the essence of the international order is a system of no government, and the essence of the international society is a system of self-service, with no doomed "authority".

Xi jinping, general secretary of the five principles of peaceful coexistence, published in 2014, the 60th anniversary of the speech event, points out that "we should jointly promote democracy in international relations. The fate of the world must be mastered jointly by the people all over the world, things in the world should consult together by governments and people to do. The idea of monopoly in the international affairs is behind The Times, the monopoly of international affairs in action is not successful.

In essence, the decentralized design and equal rights concept of block chain technology, such as distributed accounting and joint verification, are naturally consistent with the spontaneous characteristics of the international monetary system. Therefore, the international monetary field is a perfect application scenario of block chain technology, which can be improved and optimized on the stock level, or a new exploration on the increment level. The key lies in how to coordinate all parties and build consensus.

Source:weixin.qq.com