Former President of China CITIC Bank: Digital currencies, including blockchain currencies, will coexist with sovereign currencies for a long time
On December 11th, the 2020 China Banking Development Forum Smart Finance Summit hosted by Sina Finance was held in Beijing today. Zhu Xiaohuang, former Chairman of the Board of Supervisors of CITIC Group and former President of CITIC Bank, attended the meeting and delivered a speech.
Zhu Xiaohuang said that digital currency includes the long-term coexistence of blockchain currency and sovereign currency. From a legal perspective, sovereign currency is a historical phenomenon that accompanies national phenomena. Compared with legal tender, network currency is more conditional to return to the essence of transaction contracts. For example, Bitcoin is a payment currency recognized by both parties of the transaction and then contracted. It may be more in line with the attributes of the market, which is more conducive to the efficiency of market resource allocation and operation efficiency. Neither can we use traditional monetary theory to measure the nature and characteristics of virtual currency, nor can we indulge in the characteristics of the network, and abandon the legal regulations of the market order on the network economy and virtual currency and its risk management. Therefore, this is a long process. In this process, digital currencies and sovereign currencies will coexist for a long time.
The following is the full text of the guest’s speech:
Friends of the Internet, I am very happy to participate in the forum on Sina.com.
The topic and content of my speech is about the function evolution of banks in the future. I would like to talk about two issues. One is the changes in bank functions, and the other is the future impact of financial technology on our banks.
When it comes to the future, we have to ask how long is the future? There is no sudden future, only an evolving future. Some people say that “the future has come”, this is an Internet language. In terms of economic life and economic events, the present, future, and past actually constitute a whole world. When we talk about an economic event, the past, present, and future are actually a whole, a comprehensive concept, and they are inseparable. When we say that “the future has come”, it’s just that certain landmark events or phenomena have occurred, rather than the whole suddenly entering the future. The future is determined, influenced, and delineated by today.
Speaking of future trends, we must first study the characteristics of today. The bank of an era depends on its function. We know that the traditional banking functions are probably deposits, loans, and remittances, namely financing, payment, and financial management. Financial management is rooted in inflation. Of course, this truth is more complicated. Currency issuance continues to grow. Currency depreciation that we can feel is also a basic economic phenomenon. Therefore, financial management is a basic requirement of bank functions. Financing is rooted in development. During the entire development process of the economy, there is a lot of demand for capital flow. The demand for development has resulted in the derivation and development of bank financing functions. The root of payment lies in the circulation of economic elements. Banks play a very important role in the circulation process. No matter what kind of product we are now, what kind of formulation, in fact, it is inseparable.
What changes have taken place in contemporary banking functions? I think there are several characteristics that are very clear.
First, the Internet has changed the financial ecology, especially the expansion of channels and changes in transaction methods, but these changes cannot change the basic functions of finance. Therefore, like the P2P and digitalization that have already appeared, in the final analysis, the different expressions of financing, payment, and financial management are all related to the relationship between income and risk. But to see the emergence of the Internet and the emergence of networking, great changes have taken place in coverage, that is, everything is beyond reach. Through the Internet, we can reach corners of society, all aspects, and all kinds of people. I think this is the Internet that has changed the entire financial ecology.
Second, in addition to deposits and loans, contemporary finance may require more intellectual services, the so-called “financing and intelligence.” Many of our banks often use the term “financing and wisdom” when promoting a product. I think “financing and wisdom” is not a slogan, but a real expression of the bank’s function. With the diversification of market elements, the application of banking technology, especially the application of risk management technology, and the application of data technology, the professional knowledge of banks has become more intensive, and related intellectual services have become part of the bank’s functions. Asset risk pricing, risk rating, risk warning, robo-advisors, various financial solutions, exchange rate trend analysis, etc., all need models and modeling to deal with, and even general financial analysis, all require intelligence as a background professional , Dedicated personnel can do it.
Therefore, if contemporary banks do not possess such skills and talents, we will obviously feel that they lack functions and are not competitive. The simpler, more intuitive, and more convenient the service to the society, the higher the demand for bank intelligence. Therefore, its second feature is to put forward new requirements for intellectual services, and banks must have the function of turning comprehensive intelligence into service capabilities.
Third, the custody of wealth. For the accumulation of wealth in developed and underdeveloped societies, this demand has evolved from traditional financial management to the storage and appreciation of wealth stock. In addition to the traditional precious metals, foreign exchange reserves, asset allocation, safe deposit boxes, agency, trading, ABS, securitization, etc., these are all created for the preservation and revitalization of wealth, which is the effective and safe custody and appreciation of the existing wealth stock. It is a new function of the bank. In terms of function, compared with the traditional deposit and loan exchange, it has evolved to this day. In my opinion, deposits, loans, and remittances have not disappeared, but the Internet, intelligence, and custody have come, so banks have to change with time, and functional changes have already taken place. This is a fact.
Based on the rigorous function, we can see the future bank, which will build a new business system from these six functions around the “six functions”: deposit, loan, remittance, network, intelligence, and management. Deposits, loans, and foreign exchange rely on risk management technology, while Internet, intelligence, and management rely on modern intelligent technology. Therefore, the bank of the future is a bank that goes hand in hand with risk control and intelligence. In the market environment, the six functions are the root of the product, and the two technologies are the competitiveness. No matter how dazzling the name, how dazzling the appearance, how novel the language, how complicated the structure, in my opinion, this is “6+2”, which is six functions plus two technologies. This is a judgment on the future evolution of banks’ functions.
The second is the issue of co-existing financial ecology with technological innovation.
In the past few years, the scale of investment and financing in the financial technology market has shown a burst of growth. The total amount of investment and financing in technology in the global financial market has reached more than 100 billion U.S. dollars, and the growth rate is very large. In China, the application of technology in the financial sector has basically gone through five stages. One is the stand-alone use of computers in the late 1980s and early 1990s; the second is that after the mid-1990s, the computer network system began to be used; the third stage, after 2000, the data application of the system was mainly used by customers A large amount of data is used in analysis, credit card payment, and risk management; the fourth stage is around 2010, when Internet finance and online payment began to be widely used; the fifth stage, where big data and blockchain technology are currently used There are also many scenes.
However, we must also realize that the essence of financial technology is the application of technology, which means that the application of financial technology needs to return to common sense. It is financial innovation, not technological innovation, but the innovation of service models and business models. Banks are knowledge-intensive enterprises, ideal scenarios for the application of various technologies, such as supply chain finance, payment, credit card, risk control, wealth management, etc., which have a high technical application content and also have the motivation to use these new technologies. In addition, banks also have strong financial strength, but this does not mean that they can lead technological innovation with financial strength. Banks do not have technological genes, only service genes. This is the essence of banks. Financial institutions are service-oriented companies. Any use of technology must take into account the market’s feelings. All service objects, whether they are corporate customers or individual customers, determine what kind of technology financial institutions use and how to use them. And where to use it.
When it comes to the future trend of financial technology, the following coexisting phenomena can be summarized. This is the bank of the future, and it must have several phenomena coexisting.
1. The long-term coexistence of intelligence and counter service. The intelligent, convenient, and automated transformation of banking service channels is a microcosm of the high-quality development of the Chinese economy. Bank analysis, transaction, risk control, payment and other positions have actually achieved a certain degree of intelligence to a large extent.
In April 2018, we saw the first unmanned bank in China unveiled in Shanghai, but the needs of the elderly and low-end people in society should also be considered. In the long run, intelligence and counter services must coexist. Because the behavior of different customer groups and their needs for services vary greatly. Therefore, a fully intelligent bank will lack service functions, which is unfair to people who are unable to use modern tools.
2. The long-term coexistence of cash and payment instruments. The birth of non-cash payment tools such as WeChat and Alipay is an extension, supplement and replacement of cash payment functions. The complementarity of cash and non-cash payment tools meets the diverse needs of the public for payment. Despite the rapid development of modern payment methods, the demand for circulating cash is still relatively large. In April 2019, the balance of M0 was 7.4 trillion, a year-on-year increase of 3.5%. At present, many people still rely on cash for payment, especially the elderly and people in remote areas. Looking at cash and non-cash payment tools in the long run, I It is believed to coexist for a long time.
3. Digital currency includes the long-term coexistence of blockchain currency and sovereign currency. From a legal perspective, sovereign currency is a historical phenomenon that accompanies national phenomena. Compared with legal tender, network currency is more conditional to return to the essence of transaction contracts. For example, Bitcoin is a payment currency recognized by both parties of the transaction and then contracted. It may be more in line with the attributes of the market, which is more conducive to the efficiency of market resource allocation and operation efficiency. We can neither use traditional monetary theory to measure the nature and characteristics of virtual currency, nor can we indulge in the characteristics of the network, and abandon the legal norms of the market order on the network economy and virtual currency and its risk management. Therefore, this is a long process. In this process, I believe digital currency and sovereign currency will coexist for a long time.
4. Advanced background data batch processing and market transaction level humanization, personalization and personalization coexist for a long time. I think all management activities are based on three basic issues: first, facing human nature; second, surpassing oneself; third, information symmetry. If we don’t handle it well, we actually already have some digital divides. We can’t let everyone live together in the data environment and the existing financial environment. If we can’t form such an ecology, the functions and value of finance will be in the future. There are many problems. We cannot gain what we call technological advancement at the expense of the rights of some people, even a small number of people. These things are not desirable. Therefore, to build a good coexistence ecology, I think this is a very important topic at present.
5. The physical network and online trading will coexist for a long time. We cannot imagine that a large commercial bank no longer has a physical network. At least at this stage, this scenario is hard to imagine. In the foreseeable future, I don’t see the possibility that the physical network will disappear. I think they play their own functions and play different roles. The network, physics, and the ground form a coexisting ecological framework. Therefore, I believe that physical networks and network transactions, transactions at outlets, and transactions on the network will coexist for a long time.
From the perspective of banking functions, the rigorous functions of banks and the new functions brought to finance by technological advancement, the question it brings to us is how to build a coexisting financial ecology, and this financial ecology must take care of different groups in society, Different people, different customers, and different regions, everyone can smoothly enjoy perfect, fast, and safe financial services in a financial ecosystem. I think this is an important part of observing today’s finance and the future of finance. The topics and important concepts.
