What changes will digital currency bring to the economy and society?

Currency is an important medium for the exchange of goods and services, and paper money is the common choice of mankind after the vicissitudes of currency evolution. Digital technology accelerates innovation and is increasingly integrated into the entire process of economic and social development, which has a profound impact on financial infrastructure, including currency.

At present, network technology and the digital economy are booming, and people's demand for convenience, security, inclusiveness, and privacy in retail payments is increasing. Central banks or monetary authorities in many countries and regions are actively exploring the digital form of legal tender, and the global central bank digital currency research and development has entered an accelerated period. According to a survey report by the Bank for International Settlements, about 86% of central banks in 65 countries or economies have conducted digital currency research, and the number of central banks conducting experiments or proof of concept has increased from 42% in 2019 to 60% in 2020.

In 2014, my country began to conduct special research on the issuance framework, key technologies, issuance and circulation environment, and related international experience of legal digital currency, and the development of digital RMB has also entered the fast lane. As of December 31, 2021, the digital RMB pilot scenarios have exceeded 8.08 million, covering life payment, catering services, transportation, shopping, government services and other fields. A total of 261 million personal wallets have been opened, and the transaction amount has reached 87.565 billion yuan. This year, the digital RMB pilot areas have been expanded again, the number of users experiencing digital RMB has increased significantly, and the transaction scenarios are also continuously enriched.

What changes will digital currency bring to the economy and society?

From the payment experience, there is little difference between using digital currency for payment and the mobile payment that people are already familiar with. However, it should be noted that digital currency is a currency issued based on national credit and is a form of currency, while mobile payment is just a payment method. The two are essentially different. From the monetary level, third-party payment based on bank accounts belongs to the category of broad money M_2, while digital RMB belongs to the category of cash money M_0.

From the perspective of transaction costs, mobile payments based on third-party payments may face certain transaction fees, while the digital currency in the e-wallet itself belongs to the holder's cash and will not incur any additional transaction fees.

From the perspective of payment function, digital currency can realize dual offline payment, but mobile payment cannot be carried out without the network. In general, the use of digital currency can effectively reduce transaction costs and improve the efficiency of the payment system. Specifically for the digital RMB: the digital RMB is the national legal currency and the asset with the highest security level; the digital RMB has value characteristics, can transfer value without relying on bank accounts, and supports offline transactions, with the characteristics of "payment is settlement"; the digital RMB supports controllable anonymity, which is conducive to protecting personal privacy and user information security.

Theoretically, all scenarios that require cash payment can be paid with digital currency, which greatly facilitates trading activities. In reality, ordinary residents are the most directly affected by digital currency. Residents are the most microeconomic entities, and currency-related transactions occur almost every day. The payment method of digital currency will also affect all aspects of corporate production, circulation and sales. Retail companies need to open up application scenarios for digital currency to facilitate consumer consumption; the settlement system of the company may need to adapt to the receipts and payments of digital currency, and the company's cash management process, fund scheduling system, etc. also need to keep pace with the times.

From a more macro perspective, digital currency will also directly affect the formulation and implementation of monetary policy.

• First, digital currency can greatly save costs, mainly including the costs of design, printing, transportation, storage, identification, sorting, collection, destruction, anti-counterfeiting and other cash management links;

• Second, the design of digital currency, which is "anonymous for small amounts and traceable for large amounts according to law", provides the possibility for relevant departments to accurately identify the monetary policy transmission mechanism, especially digital currency can be precisely distributed to specific groups of people to achieve specific policy goals;

• Third, digital currency may bring new changes to the money creation of the banking system and will also have an impact on traditional monetary theory.

Digital currency also has a potential impact on the international payment system. With the rapid upgrading of financial infrastructure and the continuous improvement of information acquisition and processing capabilities, digital currency can simultaneously complete the exchange of different currencies during transaction payments in the future, which will bring great convenience to cross-border payments. This means that in the future, when people travel abroad, they can carry their mobile phones to smoothly realize local currency payments abroad, which will play an important role in promoting the internationalization of local currencies.

Of course, the development of digital currency also faces some new challenges. For my country, we must not only study and improve institutional rules, introduce relevant management measures for digital RMB, strengthen the protection of personal information of digital RMB, but also improve business rules and technical standards, establish and improve the full-process security management system of digital RMB operation system, and deepen the research and evaluation of the deep impact of digital RMB on monetary policy, financial system, financial stability and other aspects to better promote the development of digital RMB.