The central bank released the digital RMB white paper for the first time. These 3 details are worth paying attention to.

Original title: The central bank released the digital RMB white paper for the first time, these 3 details are worth paying attention to Source: The Paper

On July 16, the central bank's digital RMB research and development working group released the "White Paper on Digital RMB R&D Progress" (hereinafter referred to as the "White Paper"), which comprehensively explains the research and development background, target vision, design framework and related policy considerations of the digital RMB system.

"This is the first time that we have disclosed the development of digital RMB to the domestic and global systems," said Fan Yifei, deputy governor of the People's Bank of China, at a media briefing.

Compared with the information previously disclosed by the authorities, what noteworthy details about the digital RMB are disclosed in the White Paper?

Propose "Exploring Improvements in Cross-border Payments"

The white paper points out that one of the goals and visions of the digital RMB is to actively respond to initiatives from the international community and explore ways to improve cross-border payments.

"The White Paper responds positively to the issue of cross-border use of the digital RMB," said Hao Yi, a postdoctoral fellow at Renmin University of China. "Whether the digital RMB can and how to promote its internationalization has always been the focus of attention from all walks of life. This white paper details the future research and development of the digital RMB, based on domestic retail, and the direction of cross-border payment scenarios."

According to the White Paper, the digital RMB has the technical conditions for cross-border use, but it is currently mainly used to meet domestic retail payment needs. In the future, the People's Bank of China will actively respond to the initiatives of international organizations such as the Group of Twenty (G20) to improve cross-border payments and study the applicability of central bank digital currency in the cross-border field. Based on the domestic pilot situation and the needs of the international community, the People's Bank of China will explore cross-border payment pilot projects on the premise of fully respecting the monetary sovereignty of both parties and complying with laws and regulations, and follow the three requirements of "no loss", "compliance" and "interoperability" to establish legal digital currency exchange arrangements and regulatory cooperation mechanisms with relevant monetary authorities and central banks, adhere to the two-tier operation, risk-based management requirements and modular design principles to meet the regulatory and compliance requirements of various countries.

Sun Yang, a researcher at Suning Financial Research Institute, said: "This is a clear signal that the technical conditions are ready. We are just waiting to start, communicate with the corresponding external financial regulators, and select scenarios and regions to promote testing."

He told The Paper that cross-border payments are a very meaningful scenario, especially for overseas travel, life and consumption. It will help facilitate overseas consumption for Chinese people, and will also be beneficial in enhancing the image of the RMB in the hearts of the local people through cross-border payments of digital RMB.

Hao Yi believes that in the future, research on cross-border payment scenarios of digital RMB will likely be conducted under the coordination of international organizations. To a certain extent, the organization led by international organizations reduces the communication costs with counterparties in cross-border payment scenarios of digital RMB, and it is easier to form a unified institutional framework and technical standards to jointly promote the cross-border use of central bank digital currency globally. Digital RMB took the lead in piloting among major countries and has accumulated experience in dealing with technical issues such as high concurrency. At the same time, as a major trading country, China has huge demand for cross-border settlement, which provides a broad application scenario for using central bank digital currency under current items to improve settlement efficiency.

Emphasis on data security and privacy protection

"The White Paper clarifies the use rights of digital RMB transaction information and provides guarantees for data governance in the digital age," said Hao Yi.

He believes that as data becomes more abundant in the digital age, the importance of ensuring data security continues to increase. The white paper clarifies the institutional arrangements for the use of digital RMB data, implements information security and privacy protection management, emphasizes controllable anonymity, and ensures the security of private data while improving transaction convenience. It is also more conducive to foreign consumers who pay attention to privacy protection to use digital RMB with confidence, and solves the worries of foreign consumers using digital RMB in the Winter Olympics scenario.

The White Paper states that the digital RMB supports controllable anonymity, which is conducive to protecting personal privacy and user information security. The digital RMB follows the principle of "small amounts are anonymous, large amounts can be traced according to law", attaches great importance to the protection of personal information and privacy, fully considers the business risk characteristics and information processing logic under the existing electronic payment system, and meets the public's demand for small-amount anonymous payment services. The digital RMB system collects less transaction information than the traditional electronic payment model, and will not provide it to third parties or other government departments unless otherwise specified by laws and regulations. The People's Bank of China sets up a "firewall" for digital RMB-related information, and strictly implements information security and privacy protection management through institutional arrangements such as dedicated management, business isolation, hierarchical authorization, job checks and balances, and internal audits, prohibiting arbitrary inquiries and use.

Wang Zhicheng, associate professor at the Guanghua School of Management at Peking University, said that in terms of privacy, the White Paper emphasizes that information will not be provided to any third-party institution, which is "an improvement" compared to current third-party payments.

In addition, the words information protection and information security are mentioned many times in the White Paper. For example, in the work outlook, the White Paper proposes to establish and improve the full-process security management system of the digital RMB operation system, organize and carry out all-round system security testing and evaluation from the aspects of cryptographic application security, financial information security, data security, business continuity, etc., to ensure the safe and stable operation of the system.

Programmability

The white paper points out that the digital RMB achieves programmability by loading smart contracts that do not affect the currency functions, so that the digital RMB can conduct automatic payment transactions based on the conditions and rules agreed upon by both parties to the transaction, while ensuring security and compliance, thereby promoting business model innovation.

During the pilot period, the digital RMB uses smart contract technology to give the digital RMB programmable characteristics, enhance expansion capabilities, and promote deep integration with application scenarios.

In this regard, Hao Yi believes that the White Paper announces the principles and possibilities of loading smart contracts on digital RMB. In digital scenarios, the efficiency of the generation and reflux of digital currency has been greatly improved compared with traditional paper currency. Digital RMB loaded with smart contracts can be quickly recovered and new digital RMB issued after the transaction is completed. Smart contracts can improve transaction efficiency and are the future development direction of the digital society. Digital RMB that allows the loading of smart contracts will play a more important role in the future digital economy.

"Programmability and automatic payment transactions are very meaningful for e-commerce after-sales and merchant account settlement in the supply chain. They will help small and micro enterprises obtain settlement funds more conveniently and help improve the security of personal consumption." Sun Yang said.

In addition, regarding the contents such as "legal persons and non-legal persons can open public wallets, and determine transaction and balance limits based on whether they are opened at the counter or remotely, and the wallet functions can be customized according to user needs" and "enterprises and institutions can use sub-wallets to realize specific functions such as fund collection and distribution, financial management, etc.", Sun Yang believes that this means that the digital RMB has the prototype of B-end corporate online banking and can be used for B-end payments.

He said that in the future, B-end payments and B2C payments of the digital RMB are also innovative scenarios worth exploring, especially in the fields of supply chain finance and small and micro settlements. There are a lot of innovations to be explored, which is different from traditional electronic payments. Not only is the digital RMB programmable, but its circulation history can also be traced. Commercial banks have a large room for innovation.