Zhang Yifeng, Dean of China Banknote Blockchain Research Institute, talks about why the central bank wants to push digital currency

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Zhang Yifeng, Dean of China Banknote Blockchain Research Institute, delivered a speech on November 11 when attending the “Fifteenth 21st Century Asian Finance Annual Conference” financial technology branch. What kind of digital currency does today’s society need?

Zhang Yifeng believes that ten years of practice has proved that Bitcoin is not an ideal digital currency. First, Bitcoin has not evolved into a scalable and flexible system in technology, so Bitcoin capacity and payment concurrency are still at a relatively early stage. The second is from the perspective of currency issuance, through the mining mechanism to achieve total control, which is incompatible with the entire global currency system today. The third is that the violent fluctuations in the value of Bitcoin are far from the ideal currency.

So what kind of currency is the central bank digital currency?

The English of the central bank digital currency is Central Bank Digital Currency, which has three attributes at the same time: 1. Issuance by the Central Bank; 2. Circulate to the public; 3. Digital form.

“That is to say, the central bank digital currency we are talking about today is essentially the digitization of existing legal tender, rather than creating a new parallel currency. Therefore, beyond today’s international financial reality, talking about super-sovereign currencies is currently only theoretical Research, there is not too high practicality.” Zhang Yifeng said.

Why does the central bank promote CBDC? The Bank of England proposed that digital currency should consider solving problems in the development of the digital economy in the future. Zhang Yifeng believes that with the continuous evolution of the financial system, the three major functions of the central bank have not changed, but the tools and means have changed. Earlier, the central bank mainly served the economy by issuing cash. Today, in the middle of this development process, with the development of electronic payment, it is actually weakened. Under this background, will CBDC serve as a central bank in the digital economy? Real economy and new tools to achieve regulation?

From the current point of view, CBDC, as the first new currency form that has the triple attributes of central bank issuance, public circulation and digitalization, brings a lot of new imagination. Public-facing means that CBDC can widely penetrate into the current micro retail scene. CBDC will directly participate in retail and payment services as a public product provided by the central bank like cash. It will continue and enhance the central bank’s public service capabilities in the digital age. Compared with cash, the natural digital form of digital currency has advantages in data feedback and statistics. In the future, it can become an important way for the central bank to gain insight into the microeconomic situation, and it may become a new means and new tool for the central bank to implement regulation.

“From the perspective of the historical changes in currency morphology, each time iterative spiral development has never happened overnight. Therefore, the CBDC we recognize today may only represent a prelude to the development of digital currency. The horn of departure, for a long time, I think paper money, central bank digital currency and other electronic payment methods will be a long-term process of coexistence and complement each other.” Zhang Yifeng said.