What exactly is the digital RMB that has been connected to Alipay and can be used anonymously?

Source: Vernacular Blockchain

According to Cailianshe, Alipay has launched the digital RMB module for some users and supports user transfer, collection and other services. Among them, the transfer method can support "wallet number transfer" and "mobile phone number or email transfer".

Test users who have entered the Alipay whitelist can see the 'Digital RMB' module in the 'My' column in the Alipay App, alongside Huabei, bank cards, etc. Click on the 'Digital RMB' module and follow the instructions to enter your name and other information to register for the MyBank digital RMB wallet. You can choose to use it with your real name or anonymously, but one Alipay account can only open one wallet.

You may be confused when you see this news. What exactly is the digital RMB? Will it compete with WeChat and Alipay? What is its relationship with blockchain? Let’s find out today.

01 What is digital RMB?

Digital RMB is a digital RMB currency directly issued by the central bank. It is the same as paper money, but in electronic form. If you have a wallet, you can go directly to the location designated by the central bank to exchange digital RMB without binding any bank card account.

As mentioned in the news above, the digital RMB wallet is embedded in Alipay and can also be embedded in various bank accounts. In the future, a dedicated wallet APP for the digital RMB may also appear. With the wallet address, digital RMB can be transferred in and out.

Of course, at present, we have seen that most of the digital RMB tests are directly sent by the government to everyone’s wallet address in the form of welfare. For example, the digital RMB red envelope welfare distribution in Shenzhen and Suzhou some time ago, you can spend it based on the balance in the wallet address, and there is no designated location to exchange digital RMB.

In addition, the digital RMB has two features, just like paper money. One is that it can transfer money directly without a network connection. As long as both mobile phones have power, the transfer will not be affected even if the network is disconnected. The other is that it can realize the function of anonymous payment.

02 Are digital RMB and WeChat and Alipay in competition?

In fact, there is no competition. The digital RMB is money directly issued by the central bank. WeChat and Alipay are just payment tools. The money in WeChat and Alipay comes from commercial banks, and the money of commercial banks comes from paper money issued by the central bank.

So the difference is that WeChat and Alipay are pipelines, and the "water" in them is the cash banknotes issued by the central bank. The other "water" issued by the central bank is called digital RMB, but digital RMB does not go directly through the WeChat Alipay pipeline. So digital RMB and WeChat Alipay are not things in the same dimension, and there is no competitive relationship.

On the contrary, there will be a lot of cooperative relationships between the two in the future. After all, if the digital RMB is to be promoted on a large scale, it will need assistance from channels such as WeChat and Alipay. For example, as mentioned in the news above, the digital RMB module was launched on the Alipay APP, allowing the digital RMB to quickly have nearly 1 billion Alipay users.

03 What is the relationship between digital RMB and blockchain?

From the current situation, the issuance of digital RMB is centralized and issued uniformly by the central bank, but the underlying technology borrows some principles of blockchain technology, such as small anonymous transfers of digital RMB, which makes it easier to break away from the existing bank account system. However, not much has been disclosed about the specific implementation methods.

At the same time, the central bank proposed that the digital RMB adopts a "two-tier operating system", that is, the upper layer is the People's Bank of China to commercial institutions, and the lower layer is commercial institutions to the general public. The central bank does not preset a centralized or decentralized technical route. Regardless of whether commercial institutions use blockchain or centralized technical methods to provide digital RMB exchange, the central bank can adapt to relevant technologies and means.

04 What is the value of digital RMB?

Digital RMB is a digital currency issued by my country's central bank. Currently, central banks around the world are actively exploring the issuance of digital currencies. Our research and development of digital RMB is at the forefront of the world and has begun testing in many pilot cities.

The issuance of digital RMB is a good supplement to the current financial system. Among the world's more than 7 billion people, as of 2017, there are still 1.7 billion people who have not been exposed to the financial system and cannot enjoy the financial services provided by traditional banks.

The widespread use of central bank digital currency will bring people outside the financial system in to enjoy the benefits of financial development without the need to deploy high-cost banking and other infrastructure.

Especially in cross-border payments, once the global central bank digital currencies achieve unified standards, it will greatly improve the efficiency of cross-border payments and significantly reduce costs. This is also one of the reasons why Facebook's Libra white paper attracted great attention from central banks around the world as soon as it was released.

Of course, strengthening macro-control is also an important indicator for central banks around the world to issue digital currencies. After all, the issuance of digital currencies is more transparent than traditional currencies, with fewer intermediate process links, making it easier for central banks to better control capital flows and carry out macroeconomic regulation.