How far are we from central bank digital currency?

With the upgrade of payment methods, we can now eat, take a taxi, and go to the supermarket without cash when we go out. The amount of cash needed in circulation is getting smaller and smaller. Can a virtual digital currency replace paper money? This is not a sudden whim. The central bank recently stated that the research on digital currency has achieved phased results and strives to issue digital currency as soon as possible. If digital currency is successfully issued, in addition to making people's daily life more convenient, it will also have multiple benefits for the country, such as improving the transparency of economic transaction activities. So, how far are we from digital currency?

Digital currency is under development

Not long ago, the central bank revealed that it had established a special research team in 2014 to conduct in-depth research on the digital currency issuance and business operation framework, key technologies of digital currency, issuance and circulation environment, etc. It has achieved phased results and strives to issue digital currency as soon as possible.

What is digital currency? Many people may still be unfamiliar with it, and there is no official definition of digital currency. The industry believes that the digital currency referred to by the central bank should be the electronic version of the RMB. Currently, bank transfers, Yu'ebao and other third-party payment behaviors used by people in daily life are all related to digital currency. In a broad sense, digital currency also includes virtual currencies issued by non-officially, such as Bitcoin, which has been popular before.

Here we also need to mention a new term, "blockchain technology", which is a new Internet technology. Digital currency is supported by blockchain technology, and its characteristic is "decentralization", that is, removing the centralized control of currency issuance by an institution. Financial commentator Yu Fenghui said that blockchain technology can solve the trust problem in the virtual economic system. Take Bitcoin as an example. It is not issued by a specific monetary institution, but is generated by the transaction volume of network nodes. After being put into circulation, it is single, traceable and traceable. All funds are very transparent, no matter where they come from or where they go.

A form of digital currency that people are more familiar with should be the electronic RMB that has penetrated into various consumption scenarios. The impact and subversion of electronic payment on our lives need not be elaborated. Card payment and QR code payment have greatly reduced the space for the use of paper money. It can be seen that technological progress has gradually forced paper money to withdraw.

The new darling of the financial system

The attitudes of various countries towards digital currencies are changing. It is reported that DNB, the largest bank in Norway, recently called on the government to completely stop using cash. In fact, several banks in Norway have closed cash business in some branches. Only three branches of DNB still have cash business at the counter. Other Norwegian banks are also gradually stopping cash transactions. According to statistics, only 6% of Norwegians still use cash every day, most of whom are elderly people.

Not only Norway, but almost the whole world is moving towards the era of digital currency. According to Xiao Lei, chief researcher of Golden Wallet, as digital currencies represented by Bitcoin continue to impact the world's financial system, many institutions including Nasdaq Stock Exchange, Goldman Sachs, and Modern have begun to invest in research. Research has found that the blockchain technology used by digital currencies can bring convenience and reduce costs to many institutions, and there are cases that can be applied to the real economy. This has given more countries and institutions the motivation to invest in blockchain technology and digital currencies.

In China, some institutions have shown great interest in this and have invested in research. It is understood that Ali Finance has announced that it may provide a cloud service platform based on blockchain technology.

Digital currency is sought after and favored because there is no real "world currency" in the current global market. It is understood that although the US dollar is currently the most widely used currency in the world, not every country is happy to accept the US dollar as the world currency. Xiao Lei said that the world currency should be like gold, with the characteristics of "de-nationalization". Digital currency can even be regarded as gold in the gold standard era, and is expected to become the "general equivalent" in the Internet era in the future.

Broad application space

It is not difficult to see that digital currency is highly anticipated. Industry insiders said that once digital currency comes out, it will be applied to multiple fields.

From a national perspective, the "traceability" and "trackability" of digital currency can improve the convenience and transparency of economic transactions. Yu Fenghui said that illegal and criminal activities such as money laundering and tax evasion are expected to decrease. At the same time, with the application of blockchain technology, a unified national and even global account book will be established, so that every money can be traced, every transaction can be traced, tax evasion and money laundering will be within the scope of supervision, and it may even be possible to achieve automatic tax deduction on the credit card machine.

For the central bank, digital currency can reduce the high cost of issuing and circulating traditional paper currency, and can solve the problem of over-issuance of currency and the resulting inflation caused by the central bank's centralized control of currency issuance. Bai Chengyu, secretary general of the China Microfinance Alliance, said that digital currency can derive a certain transaction volume based on the real economic transaction needs generated by the public during the transaction process. "This form of digital currency may be automatically generated by the blockchain system and issued according to the transaction volume, which can avoid inflation caused by over-issuance."

In addition, digital currency will help build a new financial infrastructure. For example, digital currency will make everyone's credit accumulation and files traceable and accessible, which is of great significance to promoting the construction of a credit system. Yu Fenghui said that after the promotion of digital currency, from the perspective of social credit accumulation, enterprises and consumers will tend to use digital currency and swipe cards for consumption, because electronic transactions have data traces, which can be used to accumulate the credit of enterprises and individuals, which will become the basis for obtaining financial services such as banks.

Difficult to forge, easy to pay

In addition to helping the country regulate and improve the financial system, digital currency is closely related to people's lives. It is not only the convenience of payment that people have already felt, but also reflected in many aspects.

First of all, it is very difficult to have counterfeit currency in the market. Bai Chengyu said that one of the characteristics of blockchain is transparency. The issuance of digital currency needs to be certified, which makes it difficult to forge.

As hated as counterfeit money is the problem of local governments plundering the wealth of the people and enterprises, which digital currency will fundamentally solve. Bai Chengyu said that, for example, when the state previously delegated poverty alleviation funds to local governments, some governments had "leakages", resulting in some poverty alleviation targets not being able to get the funds. "Initially, it was cash distribution, and later it was changed to bank transfers, but there were not many bank branches in some remote areas, and people had to walk a long way to get the money. If there is digital currency, consumption and payment do not require cash withdrawal operations, and it will become easier to monitor the flow of funds."

Moreover, the use of digital currency will reduce the cost of financial transactions. Bai Chengyu said that previously, banks charged handling fees for interbank settlements, because the settlement center required each bank to keep a portion of funds to balance positions. This portion of funds occupied the bank's funds, and the resulting costs would be passed on to the people, that is, charges for interbank settlement services. The "decentralized" payment and clearing system under blockchain technology will facilitate interbank settlements and further reduce the transaction costs paid by the people.

The next step of "decentralization" is "removing intermediaries", which will simplify the procedures of many current financial businesses, such as foreign exchange. Bai Chengyu introduced that previously foreign exchange settlement had to go through banks and other clearing institutions, which increased the cost and time interval of exchange. Now the world has tried to use blockchain technology to develop a new international currency exchange system, which can realize the "decentralized" exchange of currencies and "remove intermediaries" in the future.

Resistance to implementation

Although many countries and institutions are actively developing digital currencies and blockchain technologies, and people are full of expectations for them, even if digital currencies are actually issued, they will still face some resistance to their implementation.

From a technical point of view, because blockchain is an Internet technology, the risk of "hackers" is taken into account. However, the bigger problem lies in control. Many industry insiders said that there is an essential difference between Bitcoin and the digital currency that the central bank wants to launch. Bitcoin is not issued by a specific monetary institution, and relevant financial supervision has not followed up, so there is a greater financial risk. However, the digital currency that the central bank is considering launching this time is an official currency and is protected by the central bank. It is precisely because Bitcoin is not issued uniformly by the central bank that it has not been recognized by many countries. The central bank attaches importance to whether the digital currency is controlled.

In addition, as mentioned above, even though Norway is a leading country in the promotion of digital currency, 6% of its elderly population still finds it difficult to get rid of paper money, which is undoubtedly a problem that all countries cannot ignore. Xiao Lei said that digital currency will first target young people and be promoted in some areas, and will not turn all the money in cash flow into digital currency at once. This requires consideration of the coordination between digital currency and paper currency and people's willingness to use it.

There must be an adaptation process from paper money to digital currency, and the road to change will be long, but it can be seen that digital currency will inevitably form a development trend. Bai Chengyu said that technological innovation will overcome the problems that arise in reality, just like going to a bank to do business now, if it does not involve cash, the lobby manager will recommend customers to ATM and other self-service equipment, which is a good proof of the replacement of manual labor by technological innovation in the past period of time. Now mobile phone applications are also very simple, it can be foreseen that technology will continue to be updated in the future, and the use of electronic channels and digital currency and other products of the new era will become a trend.

Beijing Business Daily reporter Liu Zexian Cheng Weimiao