The technical route of the central bank's digital currency may have been confirmed, and ICBC will take on the technical responsibility

Text: Interchain Pulse·YuanShang

Source: Interchain Pulse

Two months later, the central bank's important officials have changed their stance on the technical route of DC/EP.

I remember that on September 24, People's Bank of China Governor Yi Gang said that digital currency research has made positive progress and is combined with electronic payments; digital currency research and development does not have a preset technical route and considers blockchain or electronic payments, etc.

On November 28, Fan Yifei, Deputy Governor of the People's Bank of China, attended the "8th China Payment and Clearing Forum" and stated that the central bank's legal digital currency DC/EP has basically completed top-level design, standard setting, function development, joint debugging and testing. The next step will be to reasonably select pilot verification areas, scenarios and service scopes, and steadily promote the introduction and application of digital legal currency.

——From a technical perspective, Fan Yifei's remarks can be understood as the central bank has determined the technical route for the digital currency DC/EP. According to Interchain Pulse, ICBC has undertaken some important tasks in supporting core technologies.

ICBC IT System

The central bank's digital currency is getting closer. The latest information is that on December 9, Caijing magazine reported that the central bank's legal digital currency pilot project, led by the People's Bank of China and jointly participated by the four major state-owned commercial banks, Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China and China Construction Bank, and the three major telecom operators, China Mobile, China Telecom and China Unicom, is expected to be implemented in Shenzhen, Suzhou and other places. The pilot project is led by the Central Bank's Monetary Gold and Silver Bureau and implemented by the Digital Currency Research Institute.

According to an insider who revealed to "Interchain Pulse", ICBC is responsible for the main work in the basic technical architecture of the central bank's digital currency.

If you were to ask banking professionals which bank has the strongest IT system in the universe, the answers would probably be very consistent - Industrial and Commercial Bank of China.

As early as 2010, in the "Core Competitiveness Ranking of National Commercial Banks" published by The Banker magazine, ICBC ranked first with a score of 0.914 in the "Information Technology" category, and it was also the only commercial bank with a score above 0.9 in this category. Among the major banks in China, ICBC was the first to use computer information technology, with the largest investment and the most advanced research.

According to the data, ICBC's software center was established in 1997, and its predecessor was the ICBC Software Development Center in Tangjia ICBC Software Park, Zhuhai. It was originally managed by people sent directly by the head office, but now it is fully taken over by the Guangdong ICBC Technology Department.

The establishment of software centers of other banks was much later than that of ICBC. For example, China Merchants Bank established a similar institution in 2002, China Construction Bank established a related institution in 2003, and the People's Bank of China established the Beijing South Branch Software Development Base in early 2004.

Today, ICBC is almost a legend in the industry. Zhihu has a special question about this: "From a technical perspective, is ICBC's IT system really the best?" Almost all respondents gave an affirmative answer.

Especially in recent years, ICBC's IT system is moving from centralization to decentralization, which provides important technical support for the central bank's digital currency.

In November, Yao Qian, general manager of China Securities Depository and Clearing Corporation and former director of the Central Bank Digital Currency Research Institute, proposed the technical features of the central bank’s digital currency in a signed article:

"Our digital currency prototype system explores the application of blockchain, but does not rely entirely on this technology. In terms of design, it uses the characteristics of distributed ledgers that cannot be tampered with or forged to build a blockchain-based CBCC title confirmation ledger, which provides query services to the outside world through the Internet, equivalent to a network 'currency detector'. On the one hand, this design isolates and protects the core issuance registration ledger from the outside world, while taking advantage of the distributed ledger to improve the security and credibility of the title confirmation query system and data. On the other hand, transaction processing is still completed by the issuance registration system using a traditional distributed architecture, and the distributed ledger is only used to provide query access to the outside world. The separation of the transaction processing subsystem and the title confirmation query subsystem and the use of different technical routes can effectively avoid the performance bottleneck of the existing distributed ledger in transaction processing."

Simply put, the central bank's digital currency borrows from the distributed ledger technology of blockchain to be used for property rights query, etc.

According to the ICBC's 2019 semi-annual report, the bank is promoting the construction of the smart banking information system (ECOS) project. This project includes: building a secure and controllable big data service cloud system, becoming the world's first large commercial bank to successfully transform its big data system from a traditional hardware and software integrated machine to a distributed architecture.

ICBC has long had reserves for digital currency

It is not difficult to understand why, at the end of October, a screenshot of the Industrial and Commercial Bank of China’s digital currency wallet was leaked.

ICBC already has a lot of technical reserves in digital wallets. According to the financial report for the first half of 2019, ICBC disclosed that the bank continued to optimize the product functions of ICBC e-wallet, promoted the construction of online scenarios such as the Internet industry, government livelihood, membership services, real estate earnest money, salary management, consumer credit, etc., and carried out in-depth cooperation with more than 100 online platforms such as JD.com, Tencent, and Xiaomi; put into production the functions of opening, recharging, withdrawing, querying and wealth management of Class II accounts of Rong e-link; built a consumer finance ecosystem that connects banks, customers and merchants with ICBC e-life as the core, covering the full scenarios of clothing, food, housing, transportation, entertainment, learning and medical care. In terms of the functions and scenarios of bank wallets, ICBC is also at the forefront.

It is worth noting that Tencent's Tenpay system and Alibaba's Alipay system, which were originally very popular in the wallet payment field, did not join the pilot of the central bank's digital currency.

According to Caijing’s report on December 9, “On the Eve of the Birth of China’s Digital Currency”,

"This pilot project of the central bank's legal digital currency will go beyond the central bank system and enter real service scenarios such as transportation, education, and medical care, reaching C-end users and generating frequent applications. Pilot banks can choose scenarios based on their own advantages."

It can be seen that in terms of application scenarios, it still revolves around the four major banks.

ICBC is well prepared for digital currency. As early as September 2017, ICBC released its own research report: "Financial Technology Series Research 1: Definition of Digital Currency Concept and Development Prospects", which proposed that commercial banks should pay attention to digital currency:

“For commercial banks, it is necessary to objectively understand the possible impact of the issuance of digital currency: on the one hand, digital currency based on distributed accounting rules and smart contracts can simplify the settlement and clearing process of the banking industry and reduce the operating and management costs of institutions; on the other hand, the traditional credit currency issuance mechanism of ‘central bank-commercial bank’ will be impacted, and the possible disintermediation of bank deposits and accelerated conversion of financial assets are worthy of our attention.”

In this report, ICBC proposed to join the ranks of researching digital currency-related technologies as soon as possible.

“We should pay close attention to the latest innovation trends of the central bank and domestic and foreign peers, and join the ranks of digital currency technology research as soon as possible. We can set up a research and development laboratory or cooperate with financial technology companies to study different digital currency application scenarios and seize the development opportunities.”

Two years later, it is about to sprout.