Central Bank Digital Currency Research Report

Source: Xiaomi Financial Technology Research Center

The progress of central bank digital currency (CBDC) is accelerating. Since my country officially launched the central bank digital currency test, the United States, Japan, Europe and other countries have changed their past negative attitude towards CBDC and started to seize the time to promote the development and testing of central bank digital currency. In July, the Group of Seven (G7, namely the United States, Britain, Germany, France, Japan, Italy, and Canada) has basically decided to cooperate on central bank digital currency. As more and more countries join the ranks of CBDC research and development, the competition for the sovereignty of future currency issuance and currency security is intensifying. Based on this, we have conducted in-depth research on CBDC, analyzed the progress of CBDC in various countries around the world, the main types, technical architecture, application scenarios of CBDC, etc., and explored the characteristics and possible development trends of my country's DC/EP.

Judging from the current competition among central bank digital currencies: China, Singapore, Sweden, Lithuania and other countries are already in the leading position.

The global central bank digital currency is mainly divided into two types: retail and wholesale. The retail type is mainly used for cash digitization. Currently, there are two solutions: centralized architecture (China) and distributed architecture (Sweden), both of which are under testing. Wholesale digital currency (Singapore, Canada) is mainly used for settlement between financial institutions. The use of distributed databases can significantly reduce costs and increase efficiency.

my country's DC/EP is currently undergoing multi-scenario testing, but it is expected to take a long time before it is released. Currently, the participating operating institutions are mainly large state-owned commercial banks, and in the future, they may also include leading third-party payment institutions. DC/EP is speculated to appear in the future as a carrier of the central bank's digital wallet (embedded in a bank account or an independent APP), giving different wallet levels and quota controls based on the information submitted by the user. DC/EP supports multiple methods such as electronic payment, QR code payment, and offline payment.

Looking ahead, we believe that DC/EP will bring about the following changes:

• DC/EP will accelerate innovation in payment scenarios and enhance payment diversity

• DC/EP helps operators break the existing payment market structure

• DC/EP may increase the money multiplier, but it is unlikely to lead to bank disintermediation in the short term

• DC/EP will help the internationalization of the RMB and reduce transaction costs for cross-border payment service providers

• DC/EP can drive the integrated development of the Greater Bay Area and promote the orderly flow of financial capital

• DC/EP can be circulated in a targeted manner to provide support for specific groups, industries, and scenarios

The report is shared here via a 32-page PPT.