Digital RMB pilot survey: Suzhou is testing dual offline payments, Hong Kong wants to open up cross-border payment

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Digital RMB pilot survey: Suzhou is testing dual offline payment, Hong Kong wants to open up cross-border payment closed loop

As the central bank’s statutory digital renminbi (DCEP) pilot program accelerates, more and more local governments are actively seeking digital renminbi pilot programs.

On December 10, the “Proposals of the Shanghai Municipal Committee of the Communist Party of China on Formulating the Fourteenth Five-Year Plan for Shanghai’s National Economic and Social Development and Long-Term Goals for 2035” was formally released, in which it proposed to “actively strive for pilot projects for the use of digital RMB.”

According to industry insiders, Shanghai’s pilot application of digital renminbi may not only focus on the small retail scene, but also set foot in the field of trade settlement and payment.

Prior to this, the People’s Bank of China Digital Currency Research Institute signed a strategic cooperation agreement with the People’s Government of Changning District, Shanghai. The two parties will establish a Shanghai Financial Technology Company to gradually realize the implementation of a trade finance blockchain platform and technology research and development center.

A day later, Suzhou held a launch ceremony for the issuance of pilot digital renminbi. The digital renminbi red envelopes issued this time can be consumed at designated offline merchants in Suzhou area through the “digital renminbi APP”, or online through JD.com.

A bank’s IT department manager who is familiar with the development of digital renminbi said that as the central bank’s statutory digital renminbi application scenarios continue to expand, relevant banks currently need to solve three major challenges. First, continue to improve the stability of the digital renminbi payment and settlement system and transaction processing and settlement. Efficiency in order to meet the increasingly frequent and high volume of digital RMB transactions. The second is to effectively avoid the emergence of moral hazards such as double spending. That is, in the dual offline payment environment, some people take advantage of the digital RMB to be transferred out and take the digital RMB twice. Consumption; The third is based on the lack of interest income from digital renminbi, how can relevant banks cooperate with merchants to launch more affordable digital renminbi payment activities, so as to attract more people to use digital renminbi and increase the popularity of the latter.

It is worth noting that the application area of ​​the central bank’s statutory digital renminbi is no longer limited to China.

In early December, Hong Kong Monetary Authority President Yu Weiwen stated that the Hong Kong Monetary Authority is currently working with the People’s Bank of China Digital Currency Research Institute to study the use of digital renminbi for cross-border payment technology testing, and make corresponding technical preparations.

In his view, current cross-border payments have problems such as long time required, high costs, and low transparency. The reason is that different regions have different operating time zones, different ways of implementing international standards, and different technical standards of payment systems. However, this also gives digital RMB more room for development to solve these industry pain points.

“Of course, if the digital renminbi is to be popularized in the field of cross-border payment, two prerequisites are needed.” Li Lianxuan, chief researcher of Ouke Cloud Chain Research Institute, pointed out. First, China has signed currency swap agreements with other countries to open up the exchange and two-way circulation channels of overseas digital renminbi. The second is to build a multi-layer operation system and settlement model of the central bank of China-commercial banks-overseas central banks to ensure that the digital renminbi can be used overseas. Transaction settlement and exchange operate efficiently and steadily.

First test of dual offline payment to solve the “double spend” problem

On the evening of the 11th, Suzhou held a launching ceremony for pilot digital renminbi issuance.

Specifically, the people who have won the digital RMB red envelope can either use the “Digital RMB APP” to go to designated offline merchants in the Suzhou area to make purchases, or to make online purchases through JD.com.

When the successful applicant uses digital renminbi to pay, the red envelope will be given priority, and the insufficient amount can be recharged to the wallet before payment, or other payment methods can be combined to pay.

From the perspective of industry insiders, compared to the digital RMB red envelope public test completed in Shenzhen, this time they are more concerned about the digital RMB red envelope dual offline payment and Internet scenario online payment test carried out in Suzhou.

It is reported that this pilot will select less than 1,000 customers who participate in the digital renminbi consumption red envelope draw to participate in the offline wallet experience activity. Once the digital renminbi realizes the dual offline payment function, it will undoubtedly make the digital renminbi’s functions such as payment and transfer and transfer without the Internet more accessible, making the digital renminbi infinitely close to “cash in circulation.”

The head of the aforementioned bank’s IT department revealed that another important purpose of the dual offline payment test is to solve the double spending problem of the digital RMB in this scenario. In the internal testing phase, they found that due to the low efficiency of the digital renminbi system in transaction settlement, the digital renminbi in the user’s wallet has not been “transferred” for a long time, so that they can use the digital renminbi to make a second purchase. Moral Hazard.

“We plan to introduce a repayment mechanism, that is, if the user has a double spend situation, the bank will recover the relevant consumption money from him. However, the bank’s legal department thinks that this is quite cumbersome and requires the bank to communicate with the user repeatedly and collect sufficient evidence, which will consume a lot of money. Manpower and material resources.” He pointed out. Therefore, they have done a lot of internal system tests to ensure that the settlement processing efficiency of digital RMB in the dual offline payment scenario is greatly improved, and the probability of double spending problems is minimized.

In the opinion of many bankers participating in the digital RMB pilot program, if the settlement processing efficiency of digital RMB in the dual offline payment field is further improved, its application scenarios are expected to extend to the small-value trade and trade finance scenarios, because many small and micro enterprises are competing The time limit for the downstream trade funds to be received is even higher.

A person in charge of the East China branch of a joint-stock bank pointed out to the reporter that in order to properly solve the settlement and reconciliation problem of digital renminbi in the trade scenario, they have introduced a large number of blockchain technology to ensure that the funds settlement of each enterprise in the upstream and downstream trade chains is “accounted.” Can be followed”.

However, he found that for the current digital renminbi to be popularized in the trade settlement and supply chain finance fields, two major bottlenecks still need to be broken. One is that the existing blockchain technology still cannot meet the high concurrency demand of fund payment settlement business in the trade field; It is the fact that digital renminbi cannot bring interest income, which has caused some core companies in the supply chain to be reluctant to use digital renminbi to pay for trade goods, because this will cause companies to sacrifice a considerable interest return on funds.

“At present we are also trying to solve these bottlenecks.” He pointed out. For example, the bank is drawing on certain technical concepts in the blockchain field, including asymmetric encryption, proof of work, time stamps, etc., combined with its own research and development of UTXO models, smart contracts and other patents to meet the high concurrency of the digital RMB settlement business in the trade chain demand.

The journey of cross-border payment scenarios

It is worth noting that with the acceleration of the digital RMB research and development pilot, its internationalization process has quietly moved.

“Last year, we conducted research with the Central Bank of Thailand to use the central bank’s digital currency and blockchain platforms to solve various problems in cross-border payments.” Yu Weiwen said that the current joint research has entered the second stage, including discussions on specific business applications Solutions, and the operability and extensibility of the platform (that is, expansion to three or more central bank digital currencies).

In Li Lianxuan’s view, the prospects for cross-border payments of digital RMB are actually quite broad. Many countries need to introduce digital currencies on the one hand to effectively solve the problems of restricted circulation of domestic paper money, lower exchange rate fluctuations, and improve the ability to track currency investment. On the other hand, it hopes to increase cross-border trade volume by popularizing digital currency cross-border payments and create more income for local farmers and small and micro enterprises.

“However, the current internationalization of the digital renminbi also faces many challenges.” He pointed out. First, China needs to sign currency swap agreements with these countries first, so as to create operational space for digital RMB exchange and two-way circulation. Second, all parties need to build a multi-layer operation system and settlement model from the Central Bank of China, global commercial banks, and overseas central banks. Ensuring the efficiency of overseas circulation and exchange processing of digital renminbi is stable and efficient.

A person familiar with the study of digital renminbi cross-border payment pointed out to reporters that cross-border payment of digital renminbi may give priority to the small retail scene of mainland tourists during their travel in Hong Kong. After all, the use of renminbi in Hong Kong is quite popular, its exchange and two-way circulation channels are fairly smooth and merchants are more willing to accept it, bringing more yuan of payment options to people in both places.

“If the digital renminbi is effectively popularized in the Hong Kong-Mainland trade scene, and even becomes a new choice for trade financing and settlement payments, the relevant departments can choose the opportunity to promote the relevant mature operating system to other countries, and gradually promote the internationalization and transformation of the digital renminbi. Large-scale cross-border use.” He pointed out.