Mu Changchun, director of the Central Bank’s Digital Currency Research Institute, said that the digital RMB adheres to the central bank’s centralized supervision and market-oriented approach, and will coexist with banknotes for a long time.
Original title: “Central Bank Mu Changchun: In the foreseeable future, digital renminbi and paper banknotes will coexist for a long time (with full text of speech)”
Written by: Mu Changchun, Director of the Central Bank Digital Currency Research Institute Editor: Ye Yinghe Source: The Paper
Today (October 25), at the 2nd Bund Finance Summit, Mu Changchun, director of the Central Bank’s Digital Currency Research Institute, spoke to “Shenzhen second-hand housing traders at a sub-forum with the theme of “Digital Currency, Financial Technology and Inclusive Finance”. The news of being forced to charge digital renminbi” refuted the rumors.
“We issued digital RMB red envelopes in Luohu District to promote consumption, and did not pilot the second-hand housing scenario . In addition, digital RMB is equivalent to banknotes and coins . You can buy things with banknotes, digital RMB can be bought, and banknotes can be exchanged. Of course, the digital renminbi can also be exchanged for foreign currencies, so don’t worry.” Mu Changchun said.
He gave the authoritative definition of digital renminbi : digital renminbi is a digital form of legal tender issued by the People’s Bank of China. It is operated by designated operating institutions and exchanged with the public. Based on the broad account system, it supports the loose coupling function of bank accounts and is compatible with paper. Banknotes and coins are equivalent, have value characteristics and legal compensation, and support controllable anonymity.
Mu Changchun said that the digital renminbi should adhere to central bank supervision. Centralized supervision is beneficial to resist the erosion of encrypted assets and global stablecoins, and prevent the right to issue currency from being sidelined. In addition, the centralized management of digital renminbi can realize payment and settlement, which can increase the turnover rate of merchants’ funds. It can help solve the liquidity problems of small and medium-sized enterprises, financing difficulties, and financing costs, improve the efficiency of monetary policy implementation, and also help break retail Payment barriers and market segmentation to avoid market distortions. Under the centralized management system, the People’s Bank of China can prevent and combat illegal and criminal activities such as money laundering and terrorist financing, and effectively maintain financial stability.
He pointed out that in the process of insisting on centralized management by the central bank, several aspects must be achieved:
The first is to coordinate the management of the digital renminbi issuance quota to ensure 100% preparation and prevent over-issuance.
The second is to formulate unified business standards, technical specifications, safety standards, and application standards to achieve interconnection between designated operating agencies and avoid payment barriers.
The third is to coordinate the management of digital RMB information. Coordinate the management of digital renminbi wallets, unify the digital renminbi cognition system, and effectively reduce the cost of anti-counterfeiting. According to the principle of two-tier operation, the central bank and designated operating agencies will jointly develop a wallet ecological platform by adopting a joint construction and sharing method. At the same time, their own visual recognition and characteristic functions must be realized.
Fourth, it is necessary to coordinate the construction of digital renminbi issuance infrastructure, realize interoperability across operating institutions, and ensure that there will be no payment barriers.
” We have found that counterfeit digital renminbi wallets have appeared in the market. So just like the paper money era, the People’s Bank of China is still facing the problem of anti-counterfeiting and anti-counterfeiting. In the paper money era, the cost of anti-counterfeiting and anti-counterfeiting is high. In the digital renminbi era, we To reduce the cost of anti-counterfeiting, we need to coordinate the construction of a digital renminbi wallet ecosystem so that the people can identify it. At the same time, on the other hand, the operating agency must also develop its own special functions to provide more abundant payment and financial products.” Changchun said.
In addition, he also emphasized “to ensure the wide availability of digital renminbi.” In the process of digital renminbi issuance, on the one hand, all commercial banks should also participate in circulation services, and on the other hand, it should also ensure that the All ordinary people, including vulnerable groups, provide inclusive and easy-to-use digital central bank currency to avoid digital divide and financial exclusion.
“We have also been developing digital renminbi products suitable for the elderly and those who exclude the use of smart terminals.” Mu Changchun said.
Mu Changchun believes that the issuance of digital renminbi is not achieved by administrative enforcement, but should be done in a market-oriented way.
He said: “We will issue as many currency as the people need to exchange. As long as the people need to use paper money, the People’s Bank of China will not stop the supply of paper money. I personally think that in the foreseeable future, digital renminbi and paper money will Long-term coexistence. “
The full text of Mu Changchun’s speech is as follows:
Dear Chairman Shang, Dear Chairman Xiao, President Zhang, and friends:
good afternoon everyone! Thank you very much for the invitation to the conference. I have the honor to share some of our research results here.
In September of this year, pilot Fan Yi published an analysis article on “Policy Implications for the Positioning of Digital RMB M0”. This article contains a lot of information. Here today, I will share my understanding of the main points in the article with leaders and friends.
The first is to sort out the concept of digital renminbi mentioned in the article. Digital renminbi is a digital legal currency issued by the People’s Bank of China. It is operated by designated operating agencies and exchanged to the public. Based on the broad account system, it supports the loose coupling function of bank accounts. It is equivalent to banknotes and coins and has value characteristics. And legal compensation, support controllable anonymity.
This concept is quite technical. It will take some time to make these concepts clear. Today’s time is limited, so I will pick out two of them and say:
One is that digital renminbi is legal tender in digital form; the other is that it is equivalent to banknotes and coins. In other words, digital renminbi is mainly positioned at M0, that is, cash and coins in circulation.
1. Digital RMB is legal tender issued by the People’s Bank of China in digital form.
In the early development of human history, payment relied on barter. Later, some rare and precious items that were easy to store and carry, such as shells, became equivalent. Later, with the advancement of smelting technology, metal currencies such as copper, iron, gold, and silver began to appear. After the printing technology matured, paper-based bank notes appeared. Later, supported by national credit, the legal tender issued by the central bank gradually replaced bank notes, completing the evolution from metal currency to paper money and legal tender. Therefore, our current digital renminbi is not a new currency. In essence, it is legal tender in digital form, which means that it is a digital form of renminbi.
Recently, everyone has heard a rumor that some traders are forced to accept digital renminbi in the transaction of second-hand housing in Shenzhen, and they are not allowed to exchange for gold or foreign currency. First of all, let’s talk about our pilot project in Shenzhen. What everyone heard is that we are issuing digital RMB red envelopes in Luohu District to promote consumption, and there is no pilot second-hand housing scenario. In addition, digital renminbi is equivalent to banknotes and coins. Anything you can buy with paper money can be bought with digital renminbi. Foreign currencies that can be exchanged with paper money can also be exchanged for digital renminbi, so don’t worry.
2. The positioning of the digital RMB M0 is determined by the currency development situation and laws.
With the advancement of technology and the promotion of demand, the form of legal tender has gradually evolved from a physical form to a digital form. At the same time, in history, every technological advancement has spawned a game between private casting and official currency. The issuer of the folk currency decides the weight, fineness and standard of the coin, which increases the social cost. In recent years, global stablecoins such as Bitcoin and Libra are also trying to play the role of currency, but whether it can play the role of currency is controversial. This has begun a new round of private casting and legal currency game. These encrypted assets are used to process payment transactions in a decentralized manner, which will erode the country’s monetary sovereignty. For us, the pressure on the digitalization of cash is increasing.
At the same time, mobile payment has now become a systemically important financial infrastructure. Any risk, such as financial risk or operational risk, will have a huge impact on people’s lives and threaten financial stability. In addition, although the current use of cash is declining, the absolute amount is still growing. This shows that the digital supply of legal currency in the retail sector has not kept up with changes in demand, especially in remote mountainous areas and poor areas, where financial services are insufficient and the public is highly dependent on cash. For some digitally disadvantaged groups, such as the elderly who do not use smart phones and those who exclude the use of smart terminals, for these people, the development of electronic payment has not only failed to improve financial tolerance, but financial exclusion has emerged. Currency is originally a public product that serves all groups in society. It should provide inclusive, easy-to-use, and digital central bank currency for all people, including poor areas and disadvantaged groups. Therefore, the historical trend of currency development and changes in demand require us to make a fuss on the supply side, use new technologies to digitize M0, and provide a universal base currency for the development of digital economy.
In this process, the digital renminbi should adhere to the central bank’s centralized supervision. The central bank is the national bank, the issuing bank, and the bank’s bank. It can be seen from this definition that the emergence of the central bank is not imposed by the government on the market, but a product driven by the market. Historically, with the development of the financial industry, all parties in the market have discovered that only centralized management of the coin reserves of the commercial banking system and the realization of centralized clearing and settlement arrangements can reduce clearing and settlement costs and avoid periodic financial risks. This demand promotes The birth of the modern central bank. The centralized monopoly of currency issuance by the central bank is also the result of the market’s requirements to reduce transaction costs.
Therefore, the centralized management of digital renminbi is beneficial to resist the erosion of encrypted assets and global stable currencies, and prevent the right to issue currency from falling. In addition, the centralized management of digital renminbi can realize payment and settlement, which can increase the turnover rate of merchant funds. It can solve the liquidity problems of small and medium-sized enterprises, including the financing difficulties and expensive financing problems mentioned by Chairman Shang just now, and improve the implementation of monetary policy. effectiveness. At the same time, it is also conducive to breaking retail payment barriers and market segmentation, and avoiding market distortions. Under the centralized management system, the People’s Bank of China can prevent and combat illegal and criminal activities such as money laundering and terrorist financing, and effectively maintain financial stability.
In the process of insisting on centralized management by the central bank, the following aspects should be achieved:
The first is to coordinate the management of the digital renminbi issuance quota to ensure 100% preparation and prevent over-issuance.
The second is to formulate unified business standards, technical specifications, safety standards, and application standards to achieve interconnection between designated operating agencies and avoid payment barriers.
The third is to coordinate the management of digital RMB information. Coordinate the management of digital renminbi wallets, unify the digital renminbi cognition system, and effectively reduce the cost of anti-counterfeiting. According to the principle of two-tier operation, the central bank and designated operating agencies will jointly develop a wallet ecological platform by adopting a joint construction and sharing method. At the same time, their own visual recognition and characteristic functions must be realized. We have found that fake digital RMB wallets have appeared on the market. Therefore, just like the paper money era, the People’s Bank of China is still facing the problem of anti-counterfeiting and anti-counterfeiting. In the paper money era, the cost of anti-counterfeiting and anti-counterfeiting is high. In the era of digital RMB, we need to reduce the cost of anti-counterfeiting, which requires us to coordinate the construction of digital RMB The wallet ecology is easy to recognize by the common people. At the same time, on the other hand, operating agencies must develop their own special functions to provide richer payment and financial products.
Fourth, it is necessary to coordinate the construction of digital renminbi issuance infrastructure, realize interoperability across operating institutions, and ensure that there will be no payment barriers.
This is the key point for several centralized management.
As I mentioned earlier, the digital renminbi is a public product. In this process, we insist on the positioning of M0 and public products. On the one hand, the meaning is that the digital renminbi does not count interest, because it is M0, paper money does not count interest, so digital renminbi does not count interest. On the other hand, the digital renminbi is non-profit, and it pursues the maximization of social efficiency and welfare. Therefore, the People’s Bank of China has established a free digital renminbi value transfer system and financial infrastructure, and does not charge circulation fees to the issuing layer, nor does commercial banks Collecting service fees for redemption and redemption of digital renminbi from customers will help implement the decision and deployment of the Party Central Committee and the State Council to reduce taxes and fees, reduce the burden on the real economy, optimize the business environment, and further stimulate market vitality. At the same time, in order to mobilize the enthusiasm of all participants and sustainably operate, we should refer to the current cash arrangements, allocate a certain amount of expenses, and establish a corresponding reasonable and effective incentive mechanism.
Everyone will also ask, you said that the central bank does not charge issuance layer fees, and commercial banks do not charge customers’ redemption and redemption fees. How can this problem be solved for the fees between operating agencies and service agencies and merchants? Is the fee charged or not? How much is it if you want? We said that this issue should be decided through a market-oriented mechanism by both parties in a market-oriented way.
M0 positioning also has a policy implication-it should be the function of commercial banks to exchange digital renminbi. It is a requirement of laws and regulations that commercial banks provide services to exchange digital renminbi. The “Renminbi Management Regulations” grants financial institutions that handle RMB deposits and withdrawals the right to cooperate with the People’s Bank of China to manage the circulation of RMB, so commercial banks have the legal basis to provide exchange and circulation services for digital RMB. At the same time, for non-bank payment institutions, Article 9 of the “Online Payment Management Measures” also stipulates that non-bank payment institutions shall not operate and disguisely operate currency exchange and cash deposit and withdrawal services, and do not have the ability to provide exchange services for the digital RMB positioned by M0 The basis of the system. Therefore, in accordance with the requirements of the current legal system, commercial banks can only provide the people with the service of exchanging digital renminbi. It should be noted that what I emphasize here is the exchange service, and the circulation service can still be undertaken by third-party payment institutions and other commercial banks.
In addition, cash issuance in various countries generally adopts the binary model of central banks and commercial banks. The central bank is the supplier of base currency and the regulator of currency. Commercial banks carry out currency circulation and withdrawal, and provide the public with cash deposit and withdrawal services. So this is the best practice internationally. In this process, we must choose a commercial bank with strong capital and technology as the designated institution to take the lead in providing digital renminbi exchange services. Such commercial banks have mature infrastructure, complete systems and sufficient talents. Reserves and exchange services provided by them can make full use of market forces to realize the survival of the fittest. These commercial banks are also experienced in retail business and risk control systems, which can effectively prevent operational risks and enhance the public’s confidence in holding and using digital renminbi. Commercial banks provide digital renminbi exchange, which can also give full play to the intermediary role of commercial banks and provide a more direct and efficient channel for digital currency transmission.
To build a digital renminbi ecosystem, it is necessary to explore cooperation models between designated operating agencies and other commercial banks and other commercial institutions. It needs to be emphasized to ensure that the digital renminbi is widely available. With regard to the requirement of wide availability, in the circulation of physical cash, all commercial banks can provide RMB services to the public, and all the public can easily obtain and use cash. In the process of digital RMB issuance, on the one hand, all commercial banks should also participate in circulation services, and on the other hand, they should also ensure that all people, including poverty-stricken areas and digitally disadvantaged groups, provide inclusive and accessible services. Conveniently digitize central bank currency to avoid digital divide and financial exclusion. We have also been developing digital renminbi products suitable for the elderly and those who exclude the use of smart terminals.
In addition, the issuance of digital renminbi is not achieved by administrative compulsion, but should be conducted in a market-oriented manner. That is to say, we will issue as much as the people need to exchange. In addition, as long as the people have the need to use banknotes, the People’s Bank of China will not stop the supply of banknotes. I personally feel that in the foreseeable future, digital renminbi and banknotes will coexist for a long time.
On the basis of clarifying the relationship between responsibilities and rights, commercial banks and other commercial banks as designated operating institutions, as well as other commercial institutions such as third-party payment institutions, jointly provide the public with digital renminbi circulation services. The exchange service is provided by the designated commercial bank, and the circulation service is completed by everyone. Specifically, the designated commercial bank will open different types of digital RMB wallets for exchange services based on the identification strength of customer information. At the same time, these banks provide circulation services with other commercial institutions and are responsible for the management of retail links, including payment product design and innovation, scenario expansion, market promotion, system development, business processing and operation and maintenance services.
We are now discussing the specific business model with all parties. In this process, we must ensure that the interests of small banks and small institutions cannot be harmed by this cooperation, so we need to find a win-win business model or business Pattern comes. It also requires everyone to work with us to achieve this goal.
I want to talk about it here. Many people have this question: What is the relationship between WeChat and Alipay and digital RMB, and what are the differences? We say that WeChat and Alipay and digital renminbi are not in the same dimension. WeChat and Alipay are financial infrastructures and wallets, while digital renminbi is a payment tool and the content of the wallet. In the electronic payment scenario, the wallets of WeChat and Alipay contain commercial bank deposit currencies. After the digital renminbi is issued, everyone can still use WeChat Alipay to pay, but the contents of the wallet increase the currency of the central bank; at the same time, Tencent, Ant’s respective commercial banks are also operating institutions, so there is no competition with digital RMB.
It needs to be emphasized here that throughout the entire digital RMB ecological construction process, we must maintain fair competition to ensure that the market plays a decisive role in resource allocation and fully mobilize the enthusiasm and creativity of all parties in the market. The issuance and circulation of digital renminbi involves all aspects of society. It has never been the responsibility of the People’s Bank of China, nor is it something that an institution can accomplish on its own. It requires the joint efforts of the whole society, so we have been conducting research and development together with all sectors of society in accordance with the principle of two-tier operation, and have achieved some results.
Today, I am here again to welcome all sectors of society to jointly contribute to the digital renminbi research and development pilot and build a digital renminbi ecosystem.
thank you all!
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