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Compared with the widely used third-party payment platforms such as Alipay, the biggest difference of digital renminbi is the adoption of the “account loose coupling + digital wallet” model, which can meet the needs of offline transactions when users face-to-face.
Original title: “Li Lihui: Some considerations before the gradual expansion of the DCEP pilot program”
Interviewee: Li Lihui, Former President of Bank of China, Head of Blockchain Research Group of China Internet Finance Association Source: China Daily
According to official sources from the People’s Bank of China, the digital renminbi pilots are currently undergoing internal closed pilot tests in Shenzhen, Suzhou, Xiongan New District, Chengdu and future Winter Olympic scenes. In view of the current progress of the digital currency pilot, whether the scope of the pilot will be further expanded in the future, and other related hot issues, China Daily recently invited Li Lihui, the former president of the Bank of China and the leader of the blockchain research group of the China Internet Finance Association, to conduct an exclusive interview .
Li Lihui, Former President of Bank of China, Head of the Blockchain Research Group of China Internet Finance Association
Reporter: What is the current status of the digital currency pilot? Do you have the conditions to further expand the pilot?
Li Lihui: Judging from the current pilot situation, some small-scale application scenarios have been verified and there are public cases. However, the scope of the pilot program is still relatively small and involves a small number of people. It may take some time to truly expand the pilot program. In the future, digital currency pilots can be gradually promoted. The premise is to ensure that the underlying technology and system platform meet the standards of stable operation, the design of application scenarios can meet the needs of the public, and it has certain market competitiveness.
From the perspective of the degree of progress, it is possible to further expand the scope of the digital currency pilot within this year or early next year, but whether it can be promoted to the whole country quickly remains to be seen.
If the digital currency pilot is launched further, it is necessary to meet the basic conditions for large-scale and reliable operation, that is, to meet the requirements of “super-large market-level business” and “high concurrency”. “Super-large market” means that once the pilot is expanded, it will cover the major economically developed regions of China, with a wide range and dense consumer population. “High concurrency” refers to the technical guarantee that the digital currency system can process a considerable number of user requests in parallel at the same time. If the pilot is extended to Hong Kong and Macau, the corresponding institutional arrangements must also be considered. When it comes to cross-border use of digital currency, there must be a comprehensive technology platform for docking.
From a technical perspective, the corresponding digital currency research and development, application, marketing and other standards should be formed during the pilot process, and third-party audits and certifications should be accepted when mature. Some problems that existed during the experiment need to be resolved in the existing pilot arrangement process, so that a more solid foundation can be established after the expansion of the experiment.
From an institutional perspective, before the official issuance of digital legal currency, the regulatory authorities should also issue relevant regulations to improve the regulations and regulatory measures for the entire system, which will require a longer preparation cycle.
Reporter: What are the competitive advantages of digital RMB for the widely used third-party payment platforms?
Li Lihui: Compared with the widely used third-party payment platforms, such as Alipay and WeChat Pay, the biggest difference between digital renminbi is that it adopts the “account loose coupling + digital wallet” model. In this mode, there is no need to bind a bank account, which can meet the offline transaction of users face-to-face, that is, the two parties can move the terminal devices close to each other when they are offline, and use the near field communication function to realize the exchange of value. This is also a number Currency is an important breakthrough compared with third-party payment. In addition, digital currencies may also have certain breakthroughs in large payments.
Whether the central bank’s digital currency can replace third-party payment mainly depends on its convenience, reliability and security, as well as the level of operation and maintenance and use costs. If after piloting, the application of digital currency can reach a certain scale, and whether it can replace third-party payment is a process of market selection. During this period, the market operation mechanism of third-party payment institutions can also be used for reference and corresponding incentives can be adopted. Solve efficiency issues in scientific research and development, system maintenance, and market operation.
From the current design perspective, it may be a more certain trend that digital currency will replace bank cards to a certain extent in the future. It is expected that the central bank’s digital currency will 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.
Reporter: How will the issuance of digital currency help the RMB internationalization process?
Li Lihui: The central bank’s digital currency needs to solve a series of problems in order to go abroad. The most important thing is the communication and convergence of the financial system. After years of advancement, some achievements have been made in the internationalization of the RMB. In the first quarter of 2020, in the official foreign exchange reserve currency composition data released by the International Monetary Fund, the renminbi accounted for more than 2% of global foreign exchange reserves, which is the highest level after the renminbi joined the SDR package of currencies in 2016. However, compared with the U.S. dollar and the Euro, there is still a certain gap between the renminbi to become a true international currency.
An important basis for promoting the internationalization of the RMB is to maintain the stability of the RMB currency, which mainly relies on the long-term stable and healthy development of the Chinese economy. Currently, in the current account, there are basically no restrictions on the cross-border movement of RMB under trade and services. In terms of further opening up capital projects, the external environment must also be considered comprehensively, mainly the spillover effect brought about by the ultra-loose monetary policy and fiscal stimulus recently implemented by advanced economies, and the impact of speculation in the international capital market on the domestic capital market. While opening up the capital account, special attention should be paid to the issue of financial security. In this process, there will also be resistance from the outside.
The cross-border use of the digital renminbi requires docking with foreign platforms, and also involves related arrangements for the currency swap system. Therefore, it requires more complex foundations and conditions. It is a gradual process that will affect the entire international financial market. The design of the system has a corresponding impact.
The design goal of digital currency at this stage is to replace paper money and cash in circulation, namely M0, which is mainly used in daily consumption and retail payment scenarios, and will not become a tool used in financial transactions and cross-border investments.