Eighty percent of central banks carry out legal digital currency research and development, and the world may accelerate into the era of paperless currency

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Eighty percent of central banks carry out legal digital currency research and development, and the world may accelerate into the era of paperless currency

The encrypted digital currency market is surging, attracting the attention of investors from all over the world. From Bitcoin to Facebook’s “Libra”, to central banks in various countries chasing and developing legal digital currency application scenarios, the global government digital currency boom is also Constantly heating up.

On January 11, the Hong Kong Financial Development Council (hereinafter referred to as the “Hong Kong Finance Bureau”) released a report on the development of digital currencies by global central banks. The reporter learned from this report that about four-fifths of the world’s The central bank conducts and conducts research and development work related to central bank digital currency. The Hong Kong Finance Bureau stated that although the term central bank digital currency has not yet been defined, its general interpretation is roughly the same-that is, the International Monetary Fund (IMF) The term is defined as “a new form of currency, issued digitally by the central bank and intended to be used as legal tender.” The report of the Hong Kong Financial Affairs Bureau also pointed out that the Hong Kong region of my country has already begun the research work of the central bank’s digital currency in 2017. The Hong Kong Monetary Authority led the Hong Kong dollar note-issuing banks to launch the LionRock project, which has now entered the second stage.

“Financial regulation and financial technology innovations between the Mainland and Hong Kong have been synchronized in recent years. The RMB and the Hong Kong dollar have basically achieved barrier-free circulation through the capital markets of the two places. The development of digital renminbi is convenient for the use of RMB in cross-border scenarios. There will be a substantial improvement. Recently, some netizens found in the digital renminbi wallet opened by Bank of China Mobile Banking that they can see common countries or regions such as Mainland China, Hong Kong, Singapore, etc. The Hong Kong Monetary Authority is working with the Digital Currency Research Institute of the People’s Bank of China to study the use of digital renminbi for cross-border payments and make corresponding technical preparations. In other words, digital renminbi may have been studied and tested with Hong Kong, Singapore and other regions Cross-border payment.” On January 14, Yu Jianing, the rotating chairman of the Blockchain Committee of the China Communications Industry Association and the president of Huobi University, said in an interview.

It is worth noting that the report said that at present, including China, nearly 80% of central banks in the world, such as Japan, Thailand, Canada, the United States, France, and Switzerland, have each developed digital currencies, while nearly 10% of countries such as China The central banks have already applied the digital currencies of their respective countries.

Different countries have different digital currency scenarios

It is reported that there are many types of central bank digital currency forms that are currently in the research phase or are undergoing pilot tests. The report of the Hong Kong Financial Affairs Bureau also distinguishes mainly from the four aspects of users, scope, structure and technology. Among them, the central bank digital currency adopts one of the following three models under the account-based or token-based structure: a centralized model, where users have their own accounts with the central bank and store the value of currency units for trading; In the decentralized model, there is no identifiable planned operating organization. Financial institutions and other institutions act as intermediaries and provide “wallet” services for digital currency users to realize value transfer; hybrid mode, centralized mode and decentralized mode are combined into one, users You can choose to use a central bank account, or you can choose not to use central bank currency numbers through the account.

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“The central bank’s digital currency also has two forms, and different countries have different choices. Taking China as an example, it restricts digital currency to transaction and payment functions, which have the same effect as cash. Japan’s goal is to develop into a reserve currency. Take the route of trading currency because it takes into account the Japanese habit of paying in cash.” In this regard, Chen Fengying, a researcher at the China Institute of Modern International Relations, analyzed and pointed out.

Yu Jianing said that the central bank digital currency issuance is divided into two types: wholesale and retail. The use of wholesale central bank digital currencies is limited to the central bank and financial institutions and is not open to the public; retail central bank digital currencies are mainly for ordinary people. The user uses it. According to a report issued by the Bank for International Settlements (BIS) in mid-2020, as of mid-July 2020, 18 central banks have published research on retail CBDC, and another 13 have announced the research or development of wholesale CBDC jobs.

“The implementation and circulation of central bank digital currencies in different countries will have certain differences, but the widespread use of central bank currencies worldwide will greatly promote the development of legal currency digitalization, improve the convenience of legal currency circulation, and enhance the efficiency of the global financial settlement system Optimize the currency payment experience. Of course, a series of new problems and challenges have arisen. For example, new management mechanisms and international coordination methods are needed for issues such as global anti-money laundering and cross-border capital flow management; some funds may be from the bank deposit level ( M2) Transfer to the digital currency (M0) level, which will affect the sound operation of banking and financial institutions; strong currencies may have a substitution effect on the currencies of small countries; technical risks and challenges will be further highlighted. But there is no doubt that these Problems can only be solved in development.” Yu Jianing pointed out.

The report also shows that according to a survey by the Bank for International Settlements (BIS), of the 66 central banks that responded to the survey, about 80% of central banks are participating in central bank digital currency-related research and development, and half of them are conducting wholesale and general-purpose (or Retail type) Central bank digital currency research and development work. Among them, the wholesale central bank digital currency is mainly used for huge currency transactions between banks and other related institutions; while the retail central bank digital currency aims to meet the daily consumer needs of the public. It is worth noting that 40% of the central bank’s R&D work has developed from the concept research stage to the testing or proof-of-concept stage, and 10% of the central banks have launched related pilot programs.

“In the development of different countries, Ecuador and Venezuela have issued central bank digital currencies. The main purpose is to promote their financial inclusion. There are also several examples where central bank digital currencies are adopted to reduce dependence on other currencies. Policy. Cambodia launched the Bakong platform in October 2020 to use digital tokens to support and promote exchanges between the U.S. dollar and the Cambodian riel. However, the market still has differences on whether the digital token is a central bank digital currency. In addition, The market response, usage and public awareness of the digital token are still very limited. At the same time, the work of other economies such as France and Singapore is entering the pilot test stage, and Sweden is also working on its e-krona (electronic krona). ) Cooperate with retailers to conduct field tests in order to develop a safe and effective digital payment system.” The Hong Kong Finance Bureau report pointed out.

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The reporter checked the information and found that in October 2020, the Bank of Japan announced a series of principles for “general-purpose” central bank digital currencies (wholesale central bank digital currencies are not excluded), and related research and development work will begin at the beginning of the first fiscal year of 2021. Enter the proof-of-concept stage.

It is worth noting that my country’s Hong Kong Special Administrative Region began to conduct research on central bank digital currency in 2017. The Hong Kong Monetary Authority led a group of Hong Kong dollar note-issuing banks to launch the LionRock project. The concept certification research carried out by the project includes a single distributed Token-based central bank digital currency and debt securities are issued under the ledger technology system. Through in-depth analysis, the LionRock project demonstrates the feasibility of using distributed ledger technology to issue central bank digital currencies and perform atomic transactions using dual payment (DvP) settlement. Compared with traditional bank payment systems, central bank digital currencies can reduce the settlement process. The potential of the number of intermediaries and architectural layers involved in In addition, the Hong Kong Monetary Authority decided to expand the scope of research to include cross-border fund transfers and foreign exchange settlements, and later cooperated with the Central Bank of Thailand, which had conducted similar research through the Inthanon project.

“The joint plan of the Central Bank of Thailand and the Hong Kong Monetary Authority is called the Inthanon-LionRock project. The first phase of the project was launched in September 2019 and was completed in December 2019. The project aims to create a concept certification model with A Thai Baht-Hong Kong dollar regional corridor network to connect the LionRock and Inthanon networks-local payment networks in Hong Kong and Thailand each operating with distributed ledger technology. The corridor network is built on R3’s Corda blockchain platform, It allows Inthanon and LionRock network participants to transfer funds and execute foreign exchange transactions in a peer-to-peer manner, thereby reducing the number of settlement structures. The corridor network also aims to assist banks in managing foreign exchange liquidity and adopting a multi-currency liquidity deposit mechanism. And introduce local regulatory compliance systems where applicable.” In the report of the Hong Kong Finance Bureau, the application scenarios of the digital Hong Kong dollar are also introduced in detail.

Speeding up the process of paperless money

From the perspective of industry insiders, whether it is the central banks of Asian countries, the European Central Bank, North America and African countries, they are stepping up the research and development of legal tender digitalization.

“The reason why digital currency attracts the attention of global central banks is first of all that digital currency has advantages. Compared with paper currency, digital currency can not only save manufacturing, issuance, and circulation costs, but also improve transaction or investment efficiency and enhance the convenience of economic transaction activities. And transparency; secondly, to adapt to the digital economy and technological era; thirdly, to meet the challenges of other digital currencies.” In this regard, Hou Ruoshi, deputy director of the Finance and Taxation Big Data and Policy Research Center of Zhejiang University, pointed out to reporters.

Hou Ruoshi further analyzed that the current world is still dominated by nation-states, and the right to issue currency is a manifestation of sovereignty, but Bitcoin and “Libra” have challenged the sovereign currency of the country, and even suspected of robbing the market. Central banks of various countries are racing to develop digital currencies. There are considerations for demonstrating national sovereignty and expelling private institutions from issuing digital currencies. In the view of the central bank and other regulatory agencies, digital currencies such as Bitcoin and Libra may also disrupt global financial stability, damage user privacy, and encourage criminal activities such as money laundering.

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Yu Jianing said that with the support of blockchain technology, central bank digital currencies are more difficult to forge than banknotes and coins issued by central banks. And unlike the distributed accounting of other digital currencies, the central bank’s digital currency will have a general ledger that is centrally managed by the central bank, so that the central bank has the ability to track payments, meet the requirements of preventing money laundering and counter-terrorism financing, and also facilitate the fight against tax evasion and bribery And other criminal activities.

“Recently, the price of digital assets represented by Bitcoin has risen wildly, which will increase the attention of all sectors of society to blockchain technology and digital assets. However, the relevance to the digital currency research and development of central banks is not high. There is no doubt that the future digital The economy will further change lifestyles and production methods, digital assets will experience explosive development, and the financial system will accelerate the transition to digital finance. Central bank digital currency is a very important financial infrastructure for the development of digital economy, and it is digital finance. An important guarantee for further development and prosperity will also be expected to meet the new financial needs brought by new technologies such as 5G, artificial intelligence, and the Internet of Things.” Yu Jianing also made expectations when interviewed.

It is worth noting that on the global digital currency “track”, emerging market countries are running faster than developed countries.

Investigating the reason, Yu Jianing said that the currency and financial systems of emerging market countries are not yet sound. They have to withstand the pressure of the US dollar exchange rate fluctuations and also deal with hyperinflation. Digital currencies are easier to control than cash and can strengthen Social and economic management and control capabilities; moreover, emerging market countries skip the credit card stage and are easier to connect with the digital age; in contrast, the monetary system, financial network, legal and management systems of major countries are more mature and more digital, so There is no strong willingness to change.

People will have less and less cash, travel will become more and more secure, corruption will become more and more difficult to hide, and thieves will become more and more difficult to deceive—someone once described the picture of the digital currency era. The “central bank digital currency” used by consumers is already available in my country, but in the process of using legal digital currency, there are risks such as technical loopholes, information leakage, and hacker attacks.

“Although the central bank’s digital currency is endorsed and managed by the state, it also has limitations in tracking individual direct transactions. In order to prevent illegal use, security standardization work requires international coordination. Facing the wave of digital currency, compared with young people, old people In an embarrassing situation; compared with countries with advanced Internet and smart phones, some countries with weak network infrastructure and less popular mobile phones are relatively at a disadvantage, so it will take time for digital currency to be fully promoted. As for the digital RMB, The main obstacle to achieving internationalization through digital renminbi is not the carrier form of currency and the existing payment and settlement system, but the problem of the lack of full convertibility of the capital account. These problems can only be gradually resolved through further deepening of financial reforms.” Yu Jianing finally told reporters.