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Japan: Empirical experiment starts in spring
The Bank of Japan plans to start empirical experiments on digital currency in the spring of 2021. The plan is divided into three phases. The main work of the first phase is to establish basic functions. The second phase is to carry out functional testing under more complex conditions. The third phase is to find problems in actual operations, make up for loopholes, and continuously improve.
According to the research and experimental progress of the Bank of Japan, Japan will begin to experiment with digital currency in 2021. In October 2020, seven central banks including Japan, the United States, and Europe and the Bank for International Settlements published a feasibility report on digital currency, which is an important sign that the central banks of Western countries have officially started empirical research on electronic currency, and is also the basic principle for Japan to develop digital currency.
The central bank's digital currency is legal tender. The digital currency proposed in the Japanese research report is a common electronic currency that can be widely used by individuals and enterprises. It is issued by the central bank and popularized to consumers through private bank channels, which is an indirect issuance method.
Legal digital currency will be equally applicable to all merchants and consumers as cash, thus avoiding the risk of electronic cards being unusable due to store closures. At the same time, the recipient will receive the payment in real time, without delayed settlement like credit cards. This will not only reduce the management costs of cash storage, transportation, etc., but also achieve interchangeability based on the agreements of central banks of various countries, facilitate international remittances, and thus enhance the international competitiveness of the banking industry.
The Bank of Japan plans to start empirical experiments on digital currency in the spring of 2021. The idea is to divide it into three phases. The main task of the first phase is to create a complete digital currency payment and settlement system, and verify the basic functions of currency issuance and circulation on this system. The main work of the second phase includes functional testing under more complex conditions such as adding interest to digital currency and setting a maximum limit, and we will strive to start it within this year. After that, the third phase of the experiment will be carried out at an appropriate time, that is, to select a certain area to issue and circulate digital currency, so as to find problems in actual operations, make up for loopholes, and continuously improve.
Compared with the central bank, Japanese private financial institutions and the business community are more interested in digital currency. In June last year, Japan's three major commercial banks, Mitsubishi, Mitsui, and Mizuho, together with more than 30 companies including Nippon Telegraph and Telephone Corporation, East Japan Railway Company, Kansai Electric Power Company, and All Nippon Airways, jointly established a digital currency research group to discuss the operating mechanism of digital currency, possible problems, and solutions. The research group was divided into more than 10 groups according to the field to carry out separate verifications. For example, in the empirical test, retail companies will use digital currency to pay related fees to wholesalers and transportation companies. According to Japan's traditional business model, month-end settlement is the mainstream, and the time difference of capital repatriation will cause great pressure on wholesalers. The use of digital currency can realize cash on delivery, effectively reduce cash management costs, and shorten bank procedures.
According to local media reports, the digital currency used for private trials was developed by IT companies, and banks were responsible for issuing and managing it. Multiple digital currencies were verified by different groups, and a unified technical framework would ensure that different electronic currencies would be exchanged at equal value.
Japanese media analysis believes that the development of digital currency still faces many difficulties. The first is how to ensure the personal privacy of consumers, because some people do not want to expose their capital flows and consumption records, but if it is completely anonymous, it will not be conducive to the prevention and control of financial crimes, and may even aggravate international money laundering and other issues. The second is how to protect the stability of the financial system and prevent individual banks from being run by depositors when they are in financial difficulties. Third, after the popularization of digital currency, bank counters and ATMs are bound to decrease, which may affect the convenience of cash users. Some experts suggest setting personal holding limits and withdrawal limits for digital currency, but some commentators worry that this will affect financial convenience. (Reporter Su Haihe)
South Africa: A trial run and cautious exploration
South Africa has great potential for digital currency applications. In June 2018, the South African central bank released a trial report on the "Khokha" digital currency payment project based on distributed ledger technology. The successful trial of this project laid a technical foundation for the efficient collaboration of financial institutions in the future.
The 2019 Global Digital Yearbook shows that 10.7% of South African Internet users own some form of digital cryptocurrency . As one of Africa's financial centers, South Africa has great potential for the application of digital currency.
In recent years, the South African Reserve Bank (Central Bank) has carefully tested the central bank digital currency to improve the efficiency of the financial system, enhance security and stability, and incorporate more customers into the financial system. In 2016, the South African Intergovernmental Fintech Working Group was established to study the feasibility of issuing central bank digital currency. Currently, the working group is in discussion with potential solution providers.
The development of central bank digital currency is a good thing for South Africans. Due to the low penetration rate of local bank accounts, low bank efficiency and high service fees, ordinary South African consumers use a lot of cash. A research report by Mastercard and South African economic research institution Genesis Analysis shows that 52% of transactions in South Africa are completed in cash.
In fact, South Africa has made good progress in related financial technology. In June 2018, the South African central bank released a test report on a digital currency payment project called "Khokha". Khokha means "payment" in the South African Zulu language. This project is based on distributed ledger technology and uses the Ethereum blockchain platform to batch process interbank payments and settlements. The research and development was completed in just three months. The test results show that in a completely confidential transaction environment, each "digital rand" payment can be completed within one or two seconds, and the full-day transaction volume of all financial institutions in South Africa can be processed within two hours, greatly improving the efficiency of the financial system. The South African central bank can view the details of all transactions for supervision.
According to relevant officials of the South African Central Bank, the successful trial of this project has laid a technical foundation for the efficient collaboration of financial institutions in the future. The Global Central Bank Forum also awarded the Khokha project the "Best Distributed Ledger Project Award" in the Financial Regulatory Technology Awards, and said that the success of this project shows that financial regulators in various countries need to use innovative technologies to improve transaction processing methods and solve security and privacy issues in the banking industry.
In the face of the adverse effects of the COVID-19 pandemic, the development of digital currency by the South African central bank has gained new impetus. Singh, the head of a blockchain technology company, suggested that the South African central bank should work with commercial banks to accelerate innovation so that social security funds can be directly distributed to people's electronic wallets, and people will not have to risk being infected by the epidemic to queue up to receive cash.
Although the South African central bank has realized the convenience of blockchain technology in simplifying financial transactions, it still maintains a cautious attitude. The South African central bank emphasized that before officially issuing digital currency, it will promote the integration test of the existing settlement system with the above-mentioned distributed ledger system. In addition, the actual preparation of each financial institution and the improvement of the law also need to be considered. (Reporter Tian Shida)
EU: Digital Euro is on the way
The president of the European Central Bank recently expressed his hope to make the digital euro a reality within five years. This statement is equivalent to the ECB's "policy declaration". The launch of the digital euro is already on the verge of being launched. For many years, Europe has been hesitant in using and promoting electronic payments, and has been even more cautious about digital currencies. In 2018, the European Union promulgated the "Fifth Anti-Money Laundering Directive", recognizing that the development of digital currencies is an inevitable trend.
Recently, European Central Bank President Christine Lagarde said in a speech that she hopes to make the digital euro a reality within five years. For a time, the digital euro became a hot topic. This statement is equivalent to the ECB's "policy declaration". The launch of the digital euro is already on the verge of being launched.
However, even the implementation of the digital euro in the euro area is not an easy task. It has gone through frequent consultations and debates and has been "bumping" for many years.
For many years, Europe has been hesitant in using and promoting electronic payments, and has been even more cautious about digital currencies. The EU has long had no plans to launch sovereign cryptocurrencies, mainly out of considerations of protecting financial security and maintaining the stability of the euro. Of course, the issue of personal privacy, which Europeans value very much, is also a hurdle that digital currencies cannot bypass. EU finance ministers previously agreed that private digital currencies would not be allowed within the EU, nor would any member state be allowed to write the introduction of cryptocurrencies into laws and regulations before the risks of digital currencies could be resolved and a legal and supervisory framework could be established.
However, in 2018, the European Union promulgated the Fifth Anti-Money Laundering Directive, recognizing that the development of digital currency is an inevitable trend, and began to regulate and supervise the use of private digital currency. Today, global companies conduct digital transactions worth trillions of dollars every day. Against this background, the European Central Bank has to keep up with the trend of the times and announced its plan to develop a digital euro for the first time in October last year. It can be said that the European Central Bank's plan to launch a digital euro is to take advantage of the trend and follow the trend, which is in line with the strategic requirements of EU countries to vigorously develop the digital economy.
In recent years, the EU has attached great importance to the impact of digitalization. The European Commission has put the digital economy and the Green New Deal on a par and made them the top priority of its governance. From February to July last year, the EU intensively issued policy documents such as the "White Paper on Artificial Intelligence", "European Data Strategy", and "European New Industrial Strategy". With the Green New Deal and digital infrastructure construction as specific channels, it focused on supporting research and development in the fields of artificial intelligence, quantum communications, robot manufacturing, 5G communication networks, digital information service platforms, green transportation and energy integration, and building an advanced digital information platform and high-end manufacturing system independently controlled by the EU. At the end of last year, the European Commission further proposed the draft "Digital Markets Act" and "Digital Services Act" to promote the establishment of a more resilient, greener and more digitalized EU and promote economic recovery.
The New Industrial Strategy for Europe clearly states that EU countries should adapt to the industrial economy of the future digital age, be committed to maintaining EU technology and digital sovereignty, and strive to become a leader in the global digital industry. To this end, the EU plans to invest 7.5 billion euros in the medium- and long-term budget from 2021 to 2027 to strengthen supercomputers, artificial intelligence, cybersecurity, and digital promotion, in order to ensure Europe's digital economic competitiveness and leading edge.
Concerned about the loss of "digital sovereignty" caused by lagging behind in digital technology, the EU is determined to accelerate the transformation and development of the digital economy. Local European commentators believe that at a time when China and the United States are leading global technology, Europe finds it difficult to find a position on the battlefield. To this end, the EU will strive to redefine and expand its digital sovereignty and establish a digital space based on rules and standards. On the one hand, it is necessary to regulate the digital market order by strengthening antitrust supervision in areas such as digital payments; on the other hand, it is necessary to accelerate the construction of a "digital economy single market" that promotes privacy protection and technological innovation, and create European cloud and data solutions. The key factor is to launch the digital euro as soon as possible.
At present, Europeans' consumption, savings and investment behaviors are becoming more and more digital, and European citizens and businesses are full of expectations for the vision of creating a digital euro. The ECB said that the digital euro will be an electronic central bank currency that can be used by all citizens and businesses, which will improve people's payment experience. The ECB will ensure that people trust the euro and adapt it to the digital age. It is reported that the ECB plans to release a comprehensive analysis report this spring, when the ECB Governing Council will also formally decide whether to launch the digital euro. (Reporter Weng Donghui)
South Korea: Actively test and use with caution
South Korea officially began to promote substantive preparations for digital currency in early 2020. Once the preparations were launched, South Korea immediately entered the "acceleration" mode. At present, most of the preparatory work has been completed. However, active preparations do not mean that South Korea is eager to put digital currency into use. The Bank of Korea's attitude towards digital currency is more inclined to "negotiate whether to use it or not, but we must have it ourselves."
Lee Ju-yeol, the governor of the Bank of Korea (central bank), said in his 2021 New Year's speech that regarding the central bank's digital currency, a test system in a virtual environment will be built according to the established plan, and relevant testing work will be carried out. Recently, Lee Ju-yeol reiterated a similar position at a briefing on the direction of monetary policy. At present, preparations for the issuance of digital currency in South Korea are in full swing, and all tests are expected to be completed by the end of this year.
Previously, South Korea did not show much interest in digital currency. Until recent years, news of the development of digital currency in China and other countries has been heard from time to time in South Korea, attracting the attention of the industry. Last year, when the epidemic broke out, the production and lifestyle of Koreans have undergone tremendous changes. The sales of Internet companies such as online shopping platforms and food delivery platforms have risen against the current, and online payment amounts have repeatedly set new highs. Against this background, South Korea officially began to promote substantive preparations for digital currency in early 2020.
Once the preparations were launched, South Korea immediately entered the "acceleration" mode. Generally speaking, the preparations are divided into three parts: organizational preparation, legal preparation, and technical preparation.
In February last year, the Bank of Korea released information about China's rapid promotion of digital currency issuance and the United States' promotion of digital currency. In the same month, the Financial Settlement Bureau of the Bank of Korea established new departments such as research groups and technical teams to specifically handle research related to digital currency. After that, the Bank of Korea convened some insiders and external experts to jointly form a technical and legal advisory group to study the technical and legal issues involved in digital currency. With this, the preparations at the organizational structure level have been largely completed.
At the same time, the many legal issues involved in digital currency also need to be fully studied. For example, when issuing digital currency in the future, legal issues such as the right of issuance, the nature of legal tender, and the legal relationship between the central bank and ordinary financial institutions and private institutions need to be fully discussed and clarified in advance.
Since the beginning of last year, the technical preparations have been progressing in an orderly manner. According to the plan released by the Bank of Korea, the technical preparations are divided into four stages, which started in March last year and took 22 months to complete.
The first phase is the design and element definition, which is to discuss the operation mode, functions and necessary technical conditions of the digital currency system while fully considering the domestic payment environment and technical level of South Korea. This phase was completed between March and July last year.
The second part is to explore the required technology. This part mainly discusses what technical means are sufficient to support the operation of digital currency and investigates the operability of blockchain technology in the field of digital currency. The relevant work was completed between April and August last year.
The third link is business analysis and consultation, which is to analyze and judge the proposed digital currency business projects on the basis of determining the digital currency operation plan and necessary technical conditions, communicate with external institutions, and finally complete the business project design. This link was completed between September and December last year.
Recently, Lee Ju-yeol said at a monetary policy direction briefing that this year a test system will be built in a virtual environment to test the performance and security of digital currency. This speech is both a summary of the various preparatory work last year and a preview of the fourth stage of technical preparations this year.
As of now, the Bank of Korea's preparations for the implementation of digital currency are entering the final stage, and most of the preparatory work has been completed. The fourth stage is to "build a test system in a virtual environment and conduct relevant tests", which will be carried out in the following steps: formulating a test plan, analyzing and designing, promoting operability, testing, and fully launching.
It is worth noting that although South Korea has been more active in digital currency in the past year, this only means that its preparations are very active, and it does not mean that South Korea is eager to put digital currency into use. The Bank of Korea's attitude towards digital currency is more inclined to "negotiate whether to use it or not, but we must have it ourselves."
Lee Ju-yeol said that since payment services are very active, there is no need to issue digital currency in the short term. However, given the rapid changes in the payment environment, the necessity of issuing digital currency is increasing. In order to cope with such situations, research on digital currency should be substantially promoted. (Economic Daily) |
