China may become the first country to issue legal digital currency

Original title: What will the future digital RMB look like?

Image courtesy of Visual China

A number or a string of computer code may be the "money" of the future.

Yangcheng Evening News reporters learned that the People's Bank of China has formed an expert team to study a series of issues related to legal digital currency since 2014, and has recently achieved a series of results. The successful testing of the digital bill trading platform based on blockchain technology also means that digital currency technology has been put into practical use for the first time.

In the future, China is likely to become the first country in the world to issue and use legal digital currency.

A History

Defining Bitcoin as a virtual commodity

As early as 2009, the advent of Bitcoin gave humans a glimpse into the door to the digital currency era. However, Bitcoin and a series of digital currencies that followed it can only be popular among a niche group due to its decentralization and other characteristics.

In 2013, the "Notice on Preventing Bitcoin Risks" jointly issued by the People's Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission , the China Securities Regulatory Commission, and the China Insurance Regulatory Commission emphasized that Bitcoin is not a real currency, but a specific virtual commodity that does not have the same legal status as currency and cannot and should not be circulated and used as currency in the market.

Compared with privately issued digital currencies, is it feasible to issue digital currencies from an official level? Obviously, the People's Bank of China has realized the advantages of digital currencies themselves, and also realized that humans will eventually enter the era of digital currencies in the future.

Forming a team for three years of research and development

Since 2014, the People's Bank of China has formed a team to study the issue of issuing digital currency.

On January 20, 2016, the People's Bank of China held a seminar on digital currency and announced that it was developing and striving to launch the digital RMB as soon as possible. At the meeting, many experts discussed topics such as the overall framework for the issuance of digital currency, the national digital currency in the evolution of currency, and the state-issued cryptocurrency.

Fan Yifei, deputy governor of the People's Bank of China, said that the central bank further strengthened its forces in early 2015 and conducted in-depth research on the digital currency issuance and operation framework, key digital currency technologies, the digital currency issuance and circulation environment, legal issues facing digital currency, the impact of digital currency on the economic and financial system, the relationship between legal digital currency and private digital currency, and foreign digital currency issuance experience.

A number or a code?

So, how will the digital currency issued by the People's Bank of China in the future be different from the electronic currency people use today?

In this regard, Fan Yifei wrote an article pointing out that the specific form of digital currency can be a number from a physical account, or a string of numbers recorded under a name and verified by specific cryptography and consensus algorithms. If it is just an ordinary number with a digital wallet, it is still just electronic currency; if it is an encrypted number stored in a digital wallet and running in a specific digital currency network, it is pure digital currency.

Sheng Songcheng, counselor of the People's Bank of China, believes that the future central bank digital currency may be a standard currency involving technologies such as blockchain, mobile payment, trusted and controllable cloud computing, cryptographic algorithms, and security chips, and the central bank digital currency may eventually form a big data system.

B Design

Physical cash and digital currency coexist

According to the research results of the central bank team, it can be determined that decentralized creation methods such as Bitcoin are obviously not suitable for future legal digital currencies.

In an exclusive interview with the media, Zhou Xiaochuan, governor of the People's Bank of China, once gave a detailed introduction to the central bank's research on digital currency. He emphasized that the future digital RMB must be issued by the central bank as legal tender.

According to Yao Qian, deputy director of the Science and Technology Department of the People's Bank of China and head of the preparatory group of the Digital Currency Research Institute, the initial consideration in the design of China's digital currency is: led by the central bank, while maintaining the issuance of physical cash, issuing digital currency based on encryption algorithms. Part of M0 is composed of digital currency. In order to fully ensure the security of digital currency, issuers can use security chips as a carrier to protect the security of keys and algorithm calculation processes.

The issuance and withdrawal is carried out according to the dual system

Yao Qian said that the overall framework for the issuance of China's legal digital currency will be based on the current RMB management principles, and the issuance and withdrawal will be completed based on the dual system of "central bank-commercial bank". The central bank will be responsible for the issuance and verification monitoring of digital currency. After commercial banks apply for digital currency from the central bank, they will directly face the society and be responsible for providing digital currency circulation services and application ecosystem construction services.

The future central bank digital currency system will include several main components: central bank digital currency private cloud, digital currency, digital currency issuance library, digital currency commercial bank library, digital currency digital wallet, certification center, completed ownership registration, and big data analysis center.

The central bank's digital currency system consists of the central bank's digital currency issuance library, the commercial bank's digital currency bank library and the user's digital wallet.

From physical to electronic delivery

According to the introduction of the central bank's digital currency research project team, the transportation and storage methods of digital currency in the future will be very different from those of paper currency: the transportation method has changed from physical transportation to electronic transportation, and the storage method has changed from the central bank's issuance warehouse and the banking institution's business warehouse to the cloud computing space for storing digital currency. Therefore, the security and efficiency of the issuance and recovery of legal digital currency will be greatly improved.

According to the preliminary idea of ​​the central bank's research team, the circulation and application scenarios of legal digital currency should not only cover the application scenarios of paper currency (that is, on-site offline transactions), but also be larger than the application scenarios of traditional paper currency, with a focus on promoting its use on the Internet.

C Usage

Deposit and withdrawal at ATM

How to use digital currency? Xie Zhong, director of the Payment and Settlement Department of the People’s Bank of China, gave the answer that it can be withdrawn or deposited at an ATM.

Xie Zhong said that when the public deposits and withdraws digital currency, they can do so at the bank counter or the modified self-service terminal, or they can use a mobile client or computer to log in to the bank's website to complete the deposit and withdrawal of digital currency by themselves.

“When the public uses digital currency to pay for purchase scenarios, merchants are required to accept the use of digital currency and facilitate the transfer of digital currency between buyers and sellers. When digital currency is transferred between units and individuals for non-purchase scenario expenditures, the practice in the purchase scenario can be followed. For payments between individuals in non-purchase scenarios, the actual situation of the scenario’s wide application points must be fully considered, and a variety of business implementation conditions must be created, such as adopting a model such as ‘docking equipment (exclusive mobile phones of both individuals, bank branch counters, self-service terminals) + digital currency movement of both individuals’.”

Link

Legal issues still need to be resolved

However, in order to officially issue digital currency, in addition to technical issues, there are also many legal issues that need to be resolved.

In August 2016, Liu Xiangmin, then deputy director of the Legal Department of the People's Bank of China, wrote an article pointing out that the current "Regulations on the Management of Renminbi of the People's Republic of China" defines renminbi as "currency issued by the People's Bank of China in accordance with the law, including banknotes and coins." "For 'intangible' digital currency, there is neither the possibility of 'printing' nor the carrier of 'banknotes and coins.'" Therefore, he believes that legislation should be made clear that digital currency is a form of renminbi, and its issuance right is exercised by the People's Bank of China, and appropriate adjustments should be made to relevant definitions.

He proposed four ways to solve these problems. The first is to partially revise the existing "Regulations on the Management of Renminbi"; the second is for the National People's Congress to issue a special decision to announce the issuance of digital currency and make provisions for related issues in the issuance and use of digital currency; the third is to revise the "People's Bank of China Law", "Property Law", "Anti-Money Laundering Law" and other laws involved in the issuance and use of digital currency one by one; the fourth is to formulate a special "Digital Currency Law".

What is the significance of developing digital currency?

The industry generally holds a positive view on the significance of the central bank's research and development of digital currency.

Huang Zhen, a professor at the School of Law of the Central University of Finance and Economics, believes that the issuance of digital currency is conducive to the "going out" of the RMB. Along with the transformation of the global financial infrastructure, financial digitalization will be realized under the promotion of information space technology.

"The issuance of digital currency will make my country's economy programmable to a certain extent, making economic and financial regulation have a clearer direction, and the distributed accounting model implemented by digital currency will effectively enhance the credit of my country's economy." However, Yao Qian also told the media that there is no timetable for the issuance of legal digital currency. (Reporter Li Gang)