The central bank is planning to crack the digital currency issue. Experts: It is fundamentally different from Bitcoin

Advancing in a balance between technology and macroeconomic policies

The central bank is planning to crack the issue of digital currency

Experts emphasize that it is fundamentally different from Bitcoin, and blockchain is just one of the alternative technologies

Source: Economic Information Daily

In the era of digital payment, real digital currency is getting closer and closer to us. Recently, the People's Bank of China has released a strong signal to promote digital currency: on the one hand, the Central Bank Digital Currency Research Institute is expected to be officially listed soon; on the other hand, the blockchain-based digital bill trading platform promoted by the Central Bank has also been successfully tested recently. Industry insiders interviewed by the Economic Information Daily reporter said that compared with traditional currency, digital currency has obvious advantages. The promotion of digital currency will be a process of mutual interaction and balance between technology and macro policies, but due to the lack of precedents to learn from, it may face certain challenges. Industry experts also emphasized that digital currency is fundamentally different from virtual currencies such as Bitcoin.

What is "digital currency"? John Dwyer, senior analyst at Celent Securities and Investments, a subsidiary of Oliver Wyman Consulting Group, said that the so-called "digital currency" is a new carrier of current legal tender. In the era of digital currency, the government can directly inject liquidity into personal accounts without the help of commercial banks. Digital currency can be settled almost instantly, thereby optimizing liquidity, reducing capital and collateral that are trapped by complicated settlement processes, and greatly reducing counterparty risk. Because digital legal tender is in a completely digital form, regulators can more clearly understand and track the specific flow of funds in the economy, which is exactly what traditional currency does not have.

Pei Yigen, Vice President of Citibank (China) Co., Ltd., also said that the application of digital currency in payment and settlement (especially cross-border payment) can not only reduce the intermediate links, but also realize automatic settlement in transactions with built-in transaction rules, which are conducive to improving efficiency and reducing costs. For the government, digital currency is conducive to reducing counterfeit currency, reducing the cost of issuing banknotes, preventing money laundering and corruption, and providing better information and financial management methods.

Currently, the Bank of Canada, the Deutsche Bundesbank and the Monetary Authority of Singapore are also testing their digital currencies. Qin Yi, Deloitte Asia Pacific Investment Management Industry Leading Partner, said that from a global perspective, the promotion of digital currency is a trend, and from a cost-effectiveness perspective, digital currency has advantages. "When issuing digital currency, the central bank must first consider the applied technology and the effect to be achieved; secondly, it must consider the impact on overall supervision, the market, issuance channels and circulation channels under different technical options. This is a process of interaction and balance between technology and macro policies." She said.

"Nowadays, many people equate blockchain with digital currency, but in fact, these are two different concepts. To make an analogy, digital currency is like a means of transportation, and blockchain is the infrastructure that supports the operation of the means of transportation. If the road that supports the issuance of currency is a muddy road, only horse-drawn carriages can run on it. But if it is upgraded to an asphalt road, cars can run on it; if it is upgraded to a high-speed rail track, high-speed trains can run on it. Technology is the track, and the construction of the track determines the efficiency of the currency circulation link." Qin Yi said.

Li Wei, director of the Technology Department of the Central Bank, said in a recent media interview that digital currency involves distributed architecture, cryptography, security chips, mobile payments, trusted computing and other technologies, and blockchain technology is only one of the optional implementation technologies for digital currency. Whether it will be applied to digital currency in the future depends on whether the shortcomings of blockchain technology in network security, business processing performance, transaction consistency, etc. can be solved. This depends on the unremitting exploration and improvement of its technical system, application framework and other aspects by all parties in industry, academia and research. Qin Yi said that from the current situation, blockchain is only one of the alternatives for digital currency technology, that is, digital currency is not necessarily completely based on the basic architecture of blockchain. A key point is that as a new technology, blockchain has not yet experienced the test of large-scale commercial trial and error. She said that if blockchain is used as the basic architecture of digital currency in the future, a lot of analysis needs to be done and many implicit uncertainties need to be eliminated.

It is worth noting that digital currency is fundamentally different from Bitcoin, which has been extremely popular in recent years. Qin Yi emphasized that digital currency is not a virtual currency represented by Bitcoin, but a legal currency issued by the state, so it is clearer to define it as a digital legal currency issued by the state. In the past six months, many central bank leaders have stated on different occasions that virtual currency cannot replace or partially replace legal currency.

Pei Yigen also said that existing virtual currencies such as "Bitcoin" lack currency attributes and are therefore not real currencies. These virtual currency networks mainly serve the interests of network operators and currency holders. They are generally designed with a mechanism to promote long-term appreciation of currency values. People generally collect "currencies" that can appreciate in value and use other currencies for payment and circulation. At the same time, virtual currencies are exchanged with "currency value" rather than face value, so they have lost the functions of transaction medium and accounting unit.