The global digital currency development momentum is strong. Governments of many countries, including the United Kingdom, Japan, and Sweden, are continuing to promote the development of central bank digital currencies (CBDC). At the same time, the digital renminbi, which is undergoing closed pilot testing, has also attracted worldwide attention. At present, various countries have different paths and methods to promote CBDC, and the factors considered behind them are also different. Industry insiders said that as a new thing in the existing financial operation system, it still needs to be observed how digital currency will affect the existing financial system.
Many countries are deploying digital currencies
Many major economies have studied the possibility of launching digital currencies at the central bank level. In July, the Bank of Japan established a new “digital currency group” in the settlement agency bureau, which will focus on the digital currency issued by the central bank and explore how to build the best settlement system for the digital society. In March of this year, the Bank of England released a discussion report on digital currencies-“Opportunities, Challenges and Designs of Central Bank Digital Currency”. The report stated, “If the UK is to introduce CBDC, it will be priced in British pounds. But the Bank of England has not yet decided. Whether to introduce CBDC, and intends to widely consider the benefits, risks and practicality of doing so.” Bank of England Governor Bailey also said in July, “Is studying whether we should create a Bank of England digital currency.”
According to foreign news reports, the Group of Seven (G7) has basically decided to cooperate on the issuance of central bank digital currencies, and plans to discuss it at the G7 summit in the United States from the end of August to early September.
The focus on the digital renminbi has risen again recently. The Ministry of Commerce of China recently issued the “Comprehensive Deepening of Service Trade Innovation and Development Pilot Program”, which mentioned that “digital renminbi pilot projects will be carried out in the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and the pilot regions with conditions in the central and western regions.” The digital renminbi pilot is “4+1”, that is, internal closed pilot tests will be conducted in Shenzhen, Suzhou, Xiongan New District, Chengdu and the future Winter Olympics scenes. Zhou Sha, founder and CEO of Jingtong Technology and founder of MOAC, said that the currency flowing out of the central bank can be divided into two categories, one is cash, and the other is reserves provided to major banks. CBDC is actually a third type of form, in theory, it can gradually replace the role of cash in the future.
Talking about the similarities and differences between the digital renminbi and the digital currencies of other central banks, Zhou Sha said, “From the current point of view, China’s central bank digital currency (DC/EP) is an M0 (cash) alternative, and its future applications are basically based on small, retail The scenario does not involve large-amount clearing and settlement systems, such as the clearing and settlement between the central bank and commercial banks, and the cargo and banking settlement systems in the stock market and futures market.” In contrast, countries such as Canada and Singapore have not done so. Less digital currency research and development and implementation work related to large-value settlement systems. For example, Singapore has been exploring a wholesale central bank digital currency, hoping to improve the efficiency of cross-border payments through the Ubin project.
Judging from the current public information, only Sweden’s proposed digital currency e-krona and China’s DC/EP are similar in attributes. They are both used as a replacement for M0, but the difference is that the digital currency of China’s central bank is Two-tier operating system, while e-krona is a single-tier operating system, that is, the central bank directly issues digital currencies to the public.
Chen Wen, director of the Digital Economy Research Center of the School of Finance, Southwestern University of Finance and Economics, said that in addition to the staged differences in cooperative research and development, pilot projects, and review of legislation, in comparison, for advanced economies, considering the low interest environment, currency Policy is an important consideration; but for developing countries, the consideration of inclusive finance and convenient retail payment is an important dimension.Many major economies have studied the possibility of launching digital currencies at the central bank level. In July, the Bank of Japan established a new “digital currency group” in the settlement agency bureau, which will focus on the digital currency issued by the central bank and explore how to build the best settlement system for the digital society. In March of this year, the Bank of England released a discussion report on digital currencies-“Opportunities, Challenges and Designs of Central Bank Digital Currency”. The report stated, “If the UK is to introduce CBDC, it will be priced in British pounds. But the Bank of England has not yet decided. Whether to introduce CBDC, and intends to widely consider the benefits, risks and practicality of doing so.” Bank of England Governor Bailey also said in July, “Is studying whether we should create a Bank of England digital currency.”
According to foreign news reports, the Group of Seven (G7) has basically decided to cooperate on the issuance of central bank digital currencies, and plans to discuss it at the G7 summit in the United States from the end of August to early September.
The focus on the digital renminbi has risen again recently. The Ministry of Commerce of China recently issued the “Comprehensive Deepening of Service Trade Innovation and Development Pilot Program”, which mentioned that “digital renminbi pilot projects will be carried out in the Beijing-Tianjin-Hebei, Yangtze River Delta, Guangdong-Hong Kong-Macao Greater Bay Area, and the pilot regions with conditions in the central and western regions.” The digital renminbi pilot is “4+1”, that is, internal closed pilot tests will be conducted in Shenzhen, Suzhou, Xiongan New District, Chengdu and the future Winter Olympics scenes. Zhou Sha, founder and CEO of Jingtong Technology and founder of MOAC, said that the currency flowing out of the central bank can be divided into two categories, one is cash, and the other is reserves provided to major banks. CBDC is actually a third type of form, in theory, it can gradually replace the role of cash in the future.
Talking about the similarities and differences between the digital renminbi and the digital currencies of other central banks, Zhou Sha said, “From the current point of view, China’s central bank digital currency (DC/EP) is an M0 (cash) alternative, and its future applications are basically based on small, retail The scenario does not involve large-amount clearing and settlement systems, such as the clearing and settlement between the central bank and commercial banks, and the cargo and banking settlement systems in the stock market and futures market.” In contrast, countries such as Canada and Singapore have not done so. Less digital currency research and development and implementation work related to large-value settlement systems. For example, Singapore has been exploring a wholesale central bank digital currency, hoping to improve the efficiency of cross-border payments through the Ubin project.
Judging from the current public information, only Sweden’s proposed digital currency e-krona and China’s DC/EP are similar in attributes. They are both used as a replacement for M0, but the difference is that the digital currency of China’s central bank is Two-tier operating system, while e-krona is a single-tier operating system, that is, the central bank directly issues digital currencies to the public.
Chen Wen, director of the Digital Economy Research Center of the School of Finance, Southwestern University of Finance and Economics, said that in addition to the staged differences in cooperative research and development, pilot projects, and review of legislation, in comparison, for advanced economies, considering the low interest environment, currency Policy is an important consideration; but for developing countries, the consideration of inclusive finance and convenient retail payment is an important dimension.
The US dollar is under challenging
According to foreign media reports, Fed Governor Lael Brainard recently stated that in order to improve the Fed’s understanding of digital currencies, the Boston Federal Reserve Bank is conducting a multi-year collaboration with MIT researchers to establish and test hypothetical numbers used by the central bank. currency. However, he also said that the Fed is not prepared to issue digital dollars.
However, industry analysts claim that based on the trend of change in payment, settlement and other fields and the importance of the U.S. dollar in the global monetary system, the U.S. government and the Federal Reserve “will do something” in the field of digital currency.
On March 27 this year, U.S. President Trump formally signed the US$2.2 trillion stimulus plan bill. The first draft of the bill mentions “direct distribution of cash subsidies to relevant households through digital dollar wallets.” “Although the final draft has deleted this content , But it does not prevent us from gaining insights into the strategic intent of the US digital dollar.” Yao Qian, director of the Science and Technology Regulatory Bureau of the China Securities Regulatory Commission, said in an earlier article.
Zhou Sha said that after the outbreak, the Fed has more demands to regulate the liquidity of the financial system, but it is now facing the current situation of exhaustion of tools. “The U.S. financial market is very developed, with bonds, stocks, and various financial derivatives markets. There is greater pressure to maintain reasonable and sufficient liquidity in the pool, especially when the real economy is stagnant and the demand for physical loans is decreasing. But at the same time, the Fed’s current monetary policy tools mainly cover the existing banking system, but it is difficult to cover a considerable part of the population who do not have bank accounts.” He said that if the central bank’s digital currency can achieve a breakthrough, the Fed’s monetary policy can It is better to “reach directly” people who are outside the traditional financial system who cannot get banking services.
Zhou Sha also said that advancing the central bank’s digital currency is also a manifestation of the United States’ further maintaining the status of the US dollar as a reserve currency. He said that at present, it seems that Bitcoin, which first appeared, does not have the ability to challenge sovereign currencies. The Libra project, which is a cryptocurrency led by Facebook, has also “compromised” to the supervision and retreated from the cross-sovereign digital currency of commercial institutions. Digital dollars issued by mortgage. “However, the legal digital currency of some other countries has been continuously advancing, and the hegemony of the dollar may be facing challenges. The Fed must consider this.” He said.
Accelerated integration of digital cryptocurrency and traditional finance
In addition to the advancement of central bank digital currencies, some large traditional financial institutions are also promoting cooperation with cryptocurrency platforms. According to foreign media reports, PayPal has chosen to cooperate with Paxos crypto brokerage company and will also launch its own cryptocurrency service. Mastercard recently announced that Wirex, a digital payment agency, has become the first native cryptocurrency platform to obtain its core membership.
In this regard, Chen Shenghua, a senior researcher at Huobi Research Institute, said that traditional financial technology companies have a huge user base, which will further increase the penetration rate of cryptocurrencies on a global scale. “Using debit cards and traditional financial payment APPs as carriers, the cryptocurrency field may gradually integrate with the traditional economy through the payment scenario, and the boundary between the two will become increasingly blurred.”
Talking about the future of digital currency, Zhou Sha said that as a new thing in the existing financial operation system, what impact digital currency will have on the existing financial system still needs to be observed. “The financial system must grasp a yardstick between innovation and maintaining stability.” Zhou Sha believes that for the advancement and development of digital currencies, an unavoidable problem is to strike a balance between necessary supervision and privacy protection: If privacy and anonymity are completely pursued, the breeding of illegal activities will undoubtedly cause damage; but if a system seriously affects individual privacy, it will lose its attractiveness and vitality. “From a certain perspective, we need to find a common divisor, or a point of intersection, between the two,” he said frankly.