The digital RMB pilot program is expanding again, and the battle for digital financial center cities is heating up

Original title: China expands CBDC pilot, and the battle for global digital financial center cities heats up
Written by: Goro Mori

China's digital RMB pilot triggers global digital currency sovereignty war

On April 27, Liandede learned that Hainan, as the only region to pilot the digital RMB in the entire province, began to pilot its application in the entire region and multiple scenarios. On the morning of the 26th, the use of digital RMB in the transportation scenario of Hainan Free Trade Port was officially launched.

The launch of the digital RMB in the transportation scenario of the Hainan Free Trade Port is supported and guided by the Haikou Branch of the People's Bank of China, the Hainan Provincial Department of Transportation, and Hainan Tourism Investment Development Co., Ltd., and jointly organized by the Hainan Branch of the Bank of China and Hainan Haiqi Transport Group.

A relevant person in charge of the Hainan Branch of the Bank of China said that the bank will continue to rely on its broad financial service platform and diversified product system to explore new models of bank-enterprise cooperation, integrate digital RMB into the retail payment scenarios of the Free Trade Port, and use "smart payment" and "mobile payment" to help our province optimize the financial business environment and enable the high-quality development of the Free Trade Port and Smart Hainan.

The pilot of the digital RMB can be said to be a global strategy. Hainan's status as an Asian financial and trade center is gradually becoming clear.

Hainan, as the largest special economic zone in mainland China, is institutionally regarded as a special region for China's comprehensive deepening of economic reforms and experimenting with the highest level of opening-up policies. On June 1, 2020, the State Council and the Central Committee of the Communist Party of China officially issued the "Overall Plan for the Construction of Hainan Free Trade Port". It is expected to be initially completed in 2025, a new highland of open economy in 2035, and an international free trade port in 2050.

In fact, as early as the end of 2020, the second batch of digital RMB pilot projects was officially launched in Hainan, making Hainan the only region in the country to pilot the digital RMB throughout the province.

Currently, digital RMB has pilot areas in Haikou, Qionghai and Sansha, and users can use it in specific scenarios of the pilot. For example, the pilot activity of the Hainan Branch of the Industrial and Commercial Bank of China in Yongxing Island, Sansha City on April 12, and the pilot activity of the Hainan Branch of the Agricultural Bank of China on April 17.

The digital RMB's momentum to break the three major world monetary systems of the United States, Europe and Japan is also gradually showing its advantages.

Jin Wu, deputy inspector of the Haikou Branch of the People's Bank of China, said that the digital RMB is a legal currency in digital form issued by the People's Bank of China. It is equivalent to paper money and coins. It is a legal currency backed by national credit and has legal repayment ability. No payee has the right to refuse to accept it.

The digital RMB is a legal currency in digital form issued by the People's Bank of China and guaranteed by national credit. It is an important symbol of the development of my country's digital economy and a major manifestation of new financial infrastructure.

At the 2021 Bank for International Settlements (BIS) Innovation Summit held on March 25, Mu Changchun, director of the Central Bank's Digital Currency Research Institute, said: CBDC can guarantee the independence of monetary sovereignty and financial policies.

The pilot work of the central bank's digital RMB has attracted worldwide attention since 2020. In addition to consumer pilot projects in Shanghai, Chengdu, Suzhou and other places, pilot projects for enterprise-level application scenarios were also disclosed at this summit.

JD.com pilots digital RMB salary and corporate payment

At the Digital RMB special exhibition of the 4th Digital China Summit on April 25, JD Technology demonstrated digital RMB salary payment and corporate payment for the first time.

The project was a strategic collaboration between the Digital Currency Research Institute of the People's Bank of China and JD Digits on September 21, 2020.

Based on the digital RMB project, we will jointly promote the research and development of mobile basic technology platforms, blockchain technology platforms, etc., and combine with JD Group's existing scenarios to jointly promote the innovation of digital RMB's mobile application functions and its implementation in online and offline scenarios, and promote the construction of the digital RMB wallet ecosystem.

The three scenarios implemented this time are enterprise-level payment, enterprise payroll, and offline payment.

Liande.com learned that the enterprise payment partners of this experiment are Ziguang Digital and Chongqing Xinri Rishun, and the experiment will be conducted in January 2021. This time, the enterprise procurement scenario solution "Yiqifu" provided by JD Technology was also disclosed, and the cross-bank settlement function was also verified.

In this disclosure, the second aspect of digital RMB salary payment is at the forefront. JD.com has issued the first batch of digital RMB salaries to some employees stationed in Shanghai, Shenzhen, Chengdu, Changsha and Xi'an.

Because as early as April 2020, the offline pilot project of the central bank's digital currency had been launched across the country, and employees can also pay directly offline with the digital RMB they receive.

The development of the digital RMB's enterprise-level user business plays an important role in promoting the development of digital currency. Currently, around the world, corporate payroll, enterprise-level settlement, and offline payments by individual users through the independent issuance of digital currency are also in full swing.

The world's central bank digital currency process is accelerating

In January 2021, the Bank for International Settlements conducted a survey of central banks in 65 countries around the world. The report showed that 86% of central banks were exploring the advantages and disadvantages of CBDC, an increase of nearly 53 percentage points from 33% four years ago.

60% of the central banks surveyed have already launched their own CBDC projects, and more and more central banks are preparing. 20% of central banks said they could issue CBDC within 6 years. At the same time, the report concluded that 20% of the world's population is expected to hold CBDC within 3 years.

In order to counter the hegemony of the US dollar, emerging countries are also actively making plans. ChainDD has learned that the central bank digital currency plans that have confirmed news mainly include:

• The Central Bank of the Bahamas began issuing the digital currency Sand Dollar on October 20, 2020, which is also the world's first recognized central bank digital currency.

• On October 28, 2020, Chia Serey, director of the Central Bank of Cambodia, announced that the Bakong Project had completed its trial run and had issued the digital currency "Bakong Coin".

• In November 2016, the Monetary Authority of Singapore (MAS) collaborated with R3 to introduce the Ubin project.

• The Bank of Japan launched the digital yen project on April 1, 2021, and the first round of pilot projects is expected to be completed in March 2022.

In the Eurozone, financially developed Switzerland has the USC project targeting bank transfer business, which is led by UBS Group. UBS Group (UBS) is committed to providing financial consulting services and solutions to wealthy individuals, institutions and corporate clients around the world and private clients in Switzerland.

UBS is well-known for its strict confidentiality policy for client information and its culture of banking secrecy. UBS has two headquarters, located in Zurich and Basel, Switzerland; and as the world's largest Swiss bank, UBS has offices in major financial centers around the world.

If UBS wants to take over the upstream banking market, it will be a very powerful player in the eurozone based on market share alone.

The Swedish Central Bank (Sveriges Riksbank), which launched the central bank digital currency project e-krona in 2018, has also received a lot of attention. Since 2019, the Swedish Central Bank has invested 50 million Swedish kronor in the technology research project every year.

On April 9, 2021, Mithra Sundberg, head of the digital business pilot department of Riksbank, said in an interview with Fortune magazine:

“We want to update our offer in terms of payment methods and we want to find our role in this new world.”

At the same time, the Swedish central bank is preparing to issue a central bank digital currency that is equivalent to the Swedish krona. However, Mithra Sundberg said that the e-krona plan has no intention of competing with Sweden's mobile payment system, nor will it have an impact on the existing financial system. It seems that an appeasement policy is being adopted.

Last week, the Riksbank published the results of the first phase of its research, testing blockchain applications among private companies.

In the next stage, Riksbank will expand the participants and select some commercial banks and other online payment companies to test the application of e-krona in retail and other scenarios.

The feasibility of the e-krona plan will be verified by the end of the pilot in November 2022. Riksbank is taking this opportunity to improve the construction of its digital currency system so that it can be smoothly introduced after the government makes a decision.

However, the historic significance of the Hainan Free Trade Port pilot lies in the competition for the next-generation financial center. The popularization of digital currency is a foregone conclusion, and the changes it brings will undoubtedly subvert the existing financial system. As the first pilot city of the free trade zone, Hainan will surely stand out in the international financial market.

The battle for financial center cities

At present, the three most recognized international financial centers in the world are New York, London and Shanghai, and the former Tokyo has fallen behind.

In the comprehensive economic measures summarized by the Japanese government in December 2020, the government proposed policies to realize an international financial center, promote the relaxation of regulations and attract overseas talent.

Newly appointed Prime Minister Naoto Kan also expressed his intention to strive to create another financial sub-center in Japan. He will also set up a Digital Industry Agency under the Ministry of Economy, Trade and Industry in September this year, and Cabinet Minister Takuya Hirai will soon serve as Minister of Digital Reform.

Since January, the Japanese Cabinet has been recruiting talents to prepare for the construction of the Digital Industry Agency, attracting 1,500 people to submit resumes.

The latest preparations show that the new Digital Industries Agency will be the headquarters guiding Japan's Bureau of Land, Infrastructure, Transport, and Tourism, Bureau of Economy, Trade, Industry, Ministry of Culture, Sports Bureau, Human Resources and Social Security Bureau, etc., to ensure that Japan does not fall off the "2025 cliff."

Because a report recently submitted by the Bureau of Economy, Trade and Industry shows that Japan's digital transformation has not been smooth. If this continues, Japan's annual economic losses will reach 12 trillion yen in 2025.

At a symposium for experts on the "International Financial City Tokyo" concept held at the end of November 2020, Tokyo Governor Yuriko Koike emphasized that "now is undoubtedly the last chance to establish the status of an international financial city."

Osaka, Japan’s second largest city, is also actively striving for it. As mentioned in the previous article of Liande.com, Japan’s “International Financial City Concept”: Osaka may ride on the wave of digital economy to become a financial sub-center, Osaka has been applying for the title of super city.

Last November, Osaka Governor Yoshimura Hirofumi announced that a government-private partnership promotion department would be established within the year to prepare for the application for "International Financial City". The main goal is to leverage Osaka's strengths and strive to become a secondary financial center after Tokyo in the financial field.

With the steady advancement of Japan's comprehensive medical casino entertainment super service area - IR business, the first strong candidate is Osaka Yumeshima Island, which is very similar to Hainan Island.

Because the 2025 World Expo is located here, Osaka has very favorable conditions. Although the new crown may cause the event to be postponed, the full opening of Osaka Comprehensive Leisure and Entertainment City is still scheduled to be around 2028.

The G20 summit held in Osaka brought international glory to Osaka, and the Ethereum 2019 conference was also held in Osaka, bringing vitality to Osaka.

However, as the epidemic worsens, Osaka's economic development has suffered a huge impact, and the hotel that previously hosted the G20 summit has closed down due to poor business.

Although Japan has been shining on the world stage from 1960 to 1990, and Tokyo was the undisputed financial center of Asia at that time, Japan has gradually withdrawn from the historical stage as information technology lags behind. Before 2017, it was also the undisputed leader in the digital currency trading market.

However, due to the Coincheck case that reversed the digital currency trading industry, Japan has also been timid in this area.

In addition, the Bank of Japan itself is a commercial bank, and the government's plan to issue digital yen has been disappointing. Several major cities in Japan, including Tokyo, have no way to win this digital war.