The progress of the digital RMB pilot program is highly anticipated. It has been six years since the People’s Bank of China established a dedicated research team, and the digital renminbi has first revealed itself. It is currently being tested in Shenzhen, Suzhou, Xiongan, Chengdu and other places. The digital renminbi red envelope tests recently launched in Shenzhen and Suzhou have allowed tens of thousands of people to participate, and the digital renminbi footsteps are getting closer. There is no timetable for the official issuance of the digital renminbi, but before it actually comes, we need to understand or even read it through.
The digital renminbi is approaching, the butterfly flaps its wings, and a “storm” is brewing.
When the digital renminbi comes into reality and brings convenience to people’s lives, as a new form of currency, the digital renminbi is bound to bring a series of changes to the domestic economic system:
Will the monetary policy framework change? Will the “dominant” payment systems of WeChat Pay and Alipay face challenges, and will commercial banks face opportunities…
What are the possible effects on monetary policy
Mu Changchun, director of the Central Bank’s Digital Currency Research Institute, said in a speech in August 2019 that the two-tier operating system of the digital RMB will not change the relationship between the debts and creditors of currencies in circulation. In order to ensure that the central bank’s digital currency does not exceed the issuance of Reserves are paid in full and 100%. The central bank’s digital currency is still a central bank’s liability, guaranteed by the central bank’s credit, and has unlimited legal repayment.
In addition, he also pointed out that the two-tier operating system will not change the existing currency delivery system and dual account structure, and will not compete with commercial bank deposit currencies. Since it does not affect the existing monetary policy transmission mechanism, nor will it strengthen the procyclical effect under a stressful environment, it will not have a negative impact on the real economy.
Fan Yifei, deputy governor of the central bank, pointed out that the provision of digital renminbi exchange by commercial banks can accelerate the speed and efficiency of the return of funds to commercial banks, promote their role as financial intermediaries, and provide a more direct and efficient channel for monetary policy transmission.
“DC/EP (central bank digital currency) issuance and withdrawal have a neutral impact on the monetary system. In addition, if some deposits become DC/EP, there will be some monetary tightening effects, but the effect will not be very large. The central bank’s monetary policy is easy to hedge.” Zou Chuanwei, chief economist of Wanxiang Blockchain, told The Paper.
Wang Yongli, former vice president of the Bank of China and chief economist of Shenzhen Neptunus Group, wrote an article that using new technologies to promote the construction of a new digital currency system may solve the problem of how to scientifically and reasonably control the supply of credit currency and total control.
He proposed the idea of ”digital currency one account”: the central bank’s digital currency platform is open to the society (open source), all social entities (including financial institutions) directly open the “only basic account” on the central bank’s digital currency platform, and the real name system is required. , Register each payment amount one by one and keep the balance of the account in time, but the account balance is only for reference data and no interest is accrued; social entities can simultaneously open a “business special account” in commercial banks and other financial institutions to record the owner Changes in rights and obligations triggered by specific businesses and their results. The account remains linked to the basic account of the central bank, and the real-name system can be relaxed; when social entities receive and pay digital currency, relevant information needs to be transmitted to the central bank and business-related banks and other financial institutions for accounting processing, and the results of related account processing It is necessary to give feedback to the head of the household to protect the interests of the head of household; the central bank and the financial institution that handles the business should also adjust the relationship between each transaction to maintain a balance of revenue and expenditure in accounting processing.
“In this way, the central bank can realize the full-scale and full-process strict monitoring of the payment and circulation of digital currency, strengthen the digital currency’s anti-money laundering, anti-terrorist transmission, anti-commercial bribery and tax evasion, and achieve limited anonymity outside the central bank. Appropriate protection of trade secrets and personal privacy will not have a huge impact on the existing monetary and financial system.”
Stop at M0, or one step forward?
According to the central bank’s vision, the digital renminbi is positioned at M0, the cash in circulation.
Wang Yongli believes that the central bank’s digital currency may only start from replacing M0, but it should never be limited to this, but should replace all currencies as much as possible.
“If the central bank’s digital currency only replaces M0, it will only affect less than 4% of the total currency. The impact on the implementation of the central bank’s digital currency policy and the regulation of the total currency will be limited. If the central bank’s digital currency is realized “This account” will be completely different,” he told The Paper. “The introduction of the central bank’s digital currency should be more convenient than it is now, at least not worse than it is now. Otherwise, it will be difficult to be competitive.”
However, Zou Chuanwei believes that the central bank’s digital currency is unlikely to expand from M0 to M1 (narrow money) and M2 (broad money).
“From the perspective of legal relations, the central bank’s digital currency is a liability of the central bank, so it can only be M0. Because a large part of M2 is the liability of commercial banks, it is deposits. Therefore, the central bank’s digital currency will become M2 in the future. This thing is logical In fact, it’s difficult to get through,” Zou Chuanwei said. “If commercial bank deposits are turned into digital M2, it means that it is also controllable and anonymous like cash, which is equivalent to returning China’s deposits to non-real name account opening status. Many things cannot be done in financial supervision.”
He said that if DC/EP can adequately protect people’s needs for anonymity, commercial banks do not need to provide digital M2. If digital M2 is provided, the impact on the financial system will be very large, and from the practice of various countries, no matter what Whether it is retail or wholesale, the central bank digital currency replaces M0.
Wang Zhicheng, associate professor at Peking University Guanghua School of Management, believes that the current public goal is to replace M0 (cash), which is also a correct entry point. After successful operation, it is very easy to further expand and replace M1 (narrow currency).
The relationship between digital RMB, Alipay and WeChat Pay
For ordinary people, the biggest doubt may be: What is the difference between digital renminbi and third-party payment such as Alipay and WeChat Pay?
According to an online survey conducted by The Paper, nearly 30% of the respondents believe that digital renminbi is the same as Alipay and WeChat payment.
“Alipay, WeChat, and digital RMB are not a dimensional concept, and there is no competitive relationship.” Mu Changchun said at the Bund Financial Summit on October 25.
He believes that WeChat and Alipay are financial infrastructures. Generally speaking, they are wallets. In the era of electronic payment, the contents of wallets are actually commercial bank deposit currencies. In the era of digital renminbi, the digital renminbi is added to the wallets of WeChat and Alipay. People can still use WeChat and Alipay to pay, but the payment tools include not only bank deposit currency, but also digital renminbi. Options.
Zeng Gang, deputy director of the National Finance and Development Laboratory, told The Paper that Alipay and WeChat are front-end payment tools, and the back-end is cash numbers. Now Alipay’s back-end cannot be linked to cash because cash is completely outside the system. Just hang a bank account. In the future, Alipay can be linked to both digital currency and bank accounts.
Zeng Gang believes that unless there is a particularly big breakthrough in the application scenario or innovation, the digital renminbi will not have much direct impact on everyone’s payment habits and the current payment market structure.
He said: “The purpose of the digital renminbi is to replace cash, improve the efficiency of cash management, and reduce various problems in the cash management process, not to realize this process while minimizing the impact on the existing system.”
Will the digital RMB change the payment market?
In the current mobile payment market, Alipay and WeChat Pay have a combined market share of over 90%, and barriers have been set up between the two parties. Will the emergence of digital RMB and digital RMB wallets change this pattern?
Li Lihui, the former president of the Bank of China, believes that the central bank’s digital currency is expected to become the main payment tool in parallel with mature third-party payment platforms for a long period of time, and will not have a substitution effect soon.
Dong Ximiao, the chief researcher of the Zhongguancun Internet Finance Research Institute, added in “Breaking the Four Misunderstandings of Digital RMB”: “Digital RMB can break the barriers of the payment industry and realize circulation between supported banks and payment tools. Alipay and WeChat Can’t transfer money between.”
Some scholars bluntly said that the introduction of digital renminbi has the intention of breaking the monopoly of Alipay and WeChat payment, which may have an impact on the payment market in the future.
Wang Zhicheng, associate professor of finance at the Guanghua School of Management, Peking University, believes that new Internet companies have taken advantage of technology to occupy the payment market, and large state-owned banks have also tried to enter the market in recent years, but because user habits and other results are not obvious enough, “currently found is digital currency Antitrust is a boost in the way of
Hao Yi, a postdoctoral fellow at Renmin University of China, believes that even WeChat and Alipay can use digital renminbi in this wallet, and digital renminbi may also have an impact on Alipay and WeChat Pay.
“The most direct way is to transfer the money in WeChat and Alipay to the digital RMB wallet, so that we can save money on WeChat and Alipay,” he said.
Wang Yongli pointed out in the article “Experience is similar to Alipay WeChat payment, where is the real innovation and change of digital renminbi”, digital renminbi needs to download the central bank’s unified APP, which will bring about major changes in the digital renminbi payment operation system and mechanism.
Wang Yongli pointed out that the digital renminbi app can form the most complete digital renminbi receipts and payments big data in the whole society, and it will become a digital asset of great value. It will replace the big data of various financial institutions and payment companies, and it will be a great influence on the Chinese payment system and even financial institutions. The impact of the market structure will be very profound and huge.
“The impact of the change in the operation mode of digital renminbi will put the bank card system and related industries closely related to payment and settlement as well as non-bank payment institutions to bear the brunt! For example, the central bank may control all user information and transaction data of digital renminbi, and It will have a serious impact on the Ant Group, which relies on payment and big data to form a huge market value.” Wang Yongli wrote.
The prospectus published by Alipay’s parent company Ant Group on August 25 pointed out the possible risks of the central bank’s digital currency, but it is difficult to assess the impact of this work on the company’s business, financial status and operating results.
Who will the market choose?
Whether the digital renminbi will have an impact on Alipay and WeChat Pay depends on the choice of the market. We may see some clues from the digital RMB test in Suzhou.
On the merchant side, during the surging news visit to the Suzhou pilot digital renminbi red envelope, many merchants mentioned the advantage of the current digital renminbi exchange without commission. However, some merchants have suggested that it is difficult to lock users out of the current digital renminbi wallet without interest, and some merchants suggest that it will be promoted upstream and downstream in the future.
However, on the question of whether digital renminbi will replace Alipay and WeChat, a deli clerk said: “I think it is unlikely to replace Alipay and WeChat. Now Alipay and WeChat are used more.”
A clerk of an electrical appliance merchant also believes that the future will be the parallel state of digital renminbi wallets and WeChat and Alipay payments. “It will not be substituted, and will be accepted, but everyone will use Alipay and WeChat. Just like the four major banks, everyone I will still use other banks.”
Another mobile phone store manager also said that coexistence is the most likely to be achieved, and substitution (Alipay, WeChat Pay) is unlikely, “unless the country orders only digital RMB wallets.”
For the general public, The Paper conducted an online questionnaire survey.
Regarding the question of “whether a digital RMB wallet will be used instead of Alipay and WeChat Pay”, the results of the 526 valid questionnaires recovered show that 42.59% of the respondents indicated that they would use digital RMB wallet, WeChat Pay and Alipay at the same time, and 26.05% were The investigators believe that it depends on the situation. 24.33% of the respondents choose to use digital renminbi wallets instead of Alipay and WeChat payment, and only 7.03% of the respondents clearly will not use digital renminbi wallets to replace Alipay and WeChat payment.
Among them, the willingness of the elderly to use the digital renminbi is significantly higher than that of the young. The proportion of respondents over 55 who choose to “use digital renminbi instead of Alipay and WeChat payment” is as high as 37.5%, and this proportion is among those under 25 Only 7.3% of them.
Commercial banks: Can you get rid of the cost of cash management, and the “Matthew Effect” is intensified?
In addition to the payment market, what impact will the digital RMB have on traditional financial institutions?
Zeng Gang believes that the emergence of the digital renminbi will actually have no impact on banks except for improving efficiency and reducing bank cash management costs.
He said that the logic of digital renminbi issuance is the same as the use of cash today. It is like going to a bank counter or ATM machine to withdraw the money in the account into cash. If the bank has no money, it will go to the central bank and transfer the money in the central bank’s cash vault. After the shipment, the reserves in the bank account are reduced. In the past, the delivery process was not efficient, and there were also security issues. There are still many escorts who will be sent directly through the account system in the future.
“The current cash management cost of banks is still quite high. If there is no cash in the future, bank counters and cash counters in branches will not be needed. The cost will drop very quickly, the treasury is not needed, and there are fewer ATM machines. Armed escorts, and then from the perspective of social management, every digital currency after cash can be tracked at the central bank level, so that it can be controlled to prevent the cash from being used for illegal purposes, which will improve social governance and management capabilities.” He said.
Zeng Gang believes that the challenge is that cash management is becoming less and less, so these services related to bank cash management may need to be adjusted, and the functions of counter branches must be completely remodeled to provide support to these institutions for bank cash management, including banknote verification. Machine production, armed vehicle escort, etc. seem to be unnecessary.
“Digital RMB is actually more of an opportunity for commercial banks (designated operating institutions).” Hao Yi believes.
He said that the digital renminbi gave commercial banks another opportunity to attract consumers again in the retail sector. At this stage, the retail sector is basically dominated by WeChat and Alipay. Commercial banks have very few opportunities to use their own apps, and they are only involved when using bank cards.
After the arrival of the digital renminbi era, commercial banks will be able to use the identity of digital renminbi operating institutions to integrate their digital renminbi wallets into the digital renminbi ecosystem during the circulation of digital renminbi. Let people pay attention to various information (for example, wealth management products, other services, etc.) that commercial banks put in their wallets during the use of digital RMB.
“How to develop depends on how commercial banks promote the digital renminbi after the digital renminbi pilot, and in the promotion process, let people use their bank accounts to redeem and redeem the digital renminbi.” Hao Yi said.
Hao Yi said: “From the Shenzhen pilot situation, by binding the top-up amount of the four state-owned banks’ bank cards, you can withdraw cash back to the bank card. This is also a means to attract consumers to continue to use commercial bank credit cards. Attracting back to commercial banks will also help commercial banks continue to develop new scenarios on the retail side.”
But as for other commercial banks, Hao Yi believes that it will have some impact on commercial banks that are not operating institutions.
“For example, in order to use digital renminbi, people have to apply for bank cards from the four major banks and accept the services of the four major banks at the same time. This gives those customers of the original city commercial banks an opportunity to accept the services of the four major banks. These users may Abandon the city commercial banks and choose the four major banks. At the same time, in the process of using the digital renminbi, people need to transfer the deposits of the city commercial banks to the bank accounts of the four major banks, but it is impossible to transfer 5 yuan to 5 yuan at a time. After 100 yuan has passed, this may cause the phenomenon of’movement’ of deposits from small and medium banks to large banks.”
