The central bank's digital currency application will be implemented in Suzhou Xiangcheng District | Everynet

Reporter Xiao Le, Pan Ting, Leng Hui, Intern Editor Duan Lian

According to news on April 16, the first application scenario of the central bank's digital currency will be implemented in Suzhou's Xiangcheng District. In this regard, a person from the Suzhou Xiangcheng District government department told the reporter of the "Daily Economic News" that the news is true, the central bank's digital currency application has indeed been implemented, and the documents have been received before, and the Financial Regulatory Bureau is specifically responsible.

Experts: In the short term, the conditions for nationwide promotion are not yet met

According to the Science and Technology Innovation Board Daily, Suzhou Xiangcheng District is an important pilot area for the central bank's digital currency ( DC/EP ). Staff members of district-level agencies, enterprises and institutions in Suzhou Xiangcheng District whose salaries are paid by the four major state-owned banks, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, will complete the installation of the central bank's digital currency (DC/EP) digital wallet in April. In May, 50% of the transportation subsidy in their salary will be issued in the form of digital currency.

Financial analyst Xiao Lei pointed out to the reporter of "Daily Economic News" that first of all, the central bank's digital currency (DC/EP) is a substitute for M0 (cash in circulation), but the form of issuance must be considered. At present, banks issue cash withdrawn by customers in the form of electronic wallets, which involves a complex management and operation system, and the conditions for promoting this form nationwide are not yet in place. In areas such as Suzhou and Hangzhou where mobile payments are relatively developed, it is first implemented in the form of transportation subsidies within the bank employee system, and the coverage is not so wide, so it is easier to promote. In the future, there may be similar subsidies to be promoted in the poverty alleviation system, education system, and charity system.

In addition, although DC/EP is anonymous, the flow of users' funds is traceable and the records are transparent, which is a feature that cash payment does not have. Promotion in the form of transportation subsidies can easily stimulate everyone's use. In the context of the epidemic, the traceability of DC/EP can provide great help in epidemic prevention.

Finally, the mission of DC/EP to replace M0 will be gradually realized. In two to three years, 30% to 50% of M0 will be replaced by the central bank's digital currency, and the central bank's digital currency will be basically promoted nationwide, and most of the usual cash use will be replaced. This time, the Agricultural Bank of China promoted it first, which actually has a strong practical significance. This is also because the most cash-using areas in China are agriculture and rural areas, and the amount of Agricultural Bank of China's M0 is larger. Therefore, at present, it is first tested in Suzhou, Chengdu and other places with more application scenarios and more developed mobile payments, but it will soon be implemented nationwide in the future.

"Of course, I personally believe that it will also contribute to the internationalization of the RMB. This is a spillover effect and is worth looking forward to in the future," said Xiao Lei.

The implementation of central bank digital currency is accelerating

The central bank's digital currency project is called DC/EP, which stands for Digital Currency Electronic Payment. Its functional attributes are exactly the same as paper currency, but in digital form.

The central bank has been researching digital currency since 2014. In August 2019, Mu Changchun, director of the Digital Currency Research Institute of the central bank, publicly stated that the research on the central bank's digital currency (DC/EP) has been going on for five years from 2014 to now, and it is now "about to be released."

In 2020, the implementation of legal digital currency has accelerated. In January, the central bank issued a document stating that under the premise of adhering to two-tier operation, M0 substitution, and anonymity, the top-level design, standard setting, function development, joint debugging and testing of legal digital currency have been basically completed. It will carry out solid research on digital currency and track and study international cutting-edge information on digital currency.

Since April, there has been constant news about the central bank's digital currency. On April 3, the People's Bank of China held a video and telephone conference on national currency, gold, silver and security protection in 2020 in Beijing. The meeting called for strengthening top-level design and unswervingly advancing the research and development of legal digital currency. On April 10, the People's Bank of China held a press conference on financial statistics for the first quarter. When asked about the current progress of the central bank's digital currency, Zhou Xuedong, director of the General Office of the Central Bank, said that the central bank's digital currency is currently being promoted in an orderly manner according to the original plan. On April 16, it was reported that the central bank's legal digital currency DC/EP wallet has been tested in the Agricultural Bank of China. People familiar with the matter told the reporter of "Daily Economic News" that the digital currency is being carried out in an orderly manner under the unified arrangement of the central bank, and specific information will be released by the central bank.

Guosheng Securities Research Report pointed out that service providers with payment experience and licenses are expected to become DC/EP wallet operators. According to the central bank's patent, we found that the "wallet" that stores DC/EP may not directly rely on bank accounts to realize functions such as transfer and payment. We believe that service providers with payment experience and licenses are expected to intervene in the DC/EP industry chain and are expected to charge payment service fees. In addition, Guosheng Securities also believes that DC/EP may load smart contract functions to achieve targeted issuance and monitoring; the carrier of DC/EP may include chip smart cards; DC/EP's opportunities in transaction security, application development, etc. cannot be ignored.

On the morning of April 16, the digital currency sector strengthened again. Jinguan Holdings, Zhongying Internet, and Huijin Holdings hit their daily limit, while Kedak Holdings, GRG UnionPay, and Meisheng Culture Holdings rose by more than 6%.

Cover image source: Photo Network