Planning/Subuk
Written by/Gu An (Senior Observer of Chunqiu New Technology)
No one saw the grass growing.
In 2020, the Ministry of Commerce announced on August 14th that Shenzhen, Chengdu, Suzhou, Xiongan New District and other places and relevant departments of the future Winter Olympics will assist in the promotion of the digital RMB pilot program, and the application of “central bank digital currency” has entered a substantive stage.
On September 21, the State Council issued a notice on the overall plan for the Beijing, Hunan, and Anhui Pilot Free Trade Zones and the expansion plan of the Zhejiang Pilot Free Trade Zone, and the Beijing Free Trade Zone became a digital economy pilot zone.
According to Zhou Xiaochuan, in 2014, the central bank began to study legal digital currencies. At the end of 2017, with the approval of the State Council, the People’s Bank of China organized some commercial banks and related institutions to jointly develop the digital RMB system.
Looking back, the central bank’s sensitivity is commendable: On December 5, 2013, the People’s Bank of China, the Ministry of Industry and Information Technology, the China Banking Regulatory Commission, the China Securities Regulatory Commission, and the China Insurance Regulatory Commission jointly issued the “About “Notice to Prevent Bitcoin Risks”, it is said that not long after this “notice”, the central bank began to study legal digital currencies.
The familiar and unfamiliar central bank digital currency is worthy of our careful understanding.
Free Trade Zone: Put “international” at the door, and central bank digital currency has a clear “scene”
Earlier, we heard that “RMB settlement” or “RMB internationalization” is mostly about how to do business abroad with RMB, and people from other countries also use RMB.
The “Free Trade Zone” has changed this “old thinking.”
“Free trade zone” is called a free trade zone in its entirety. All areas where a free trade zone is set are areas of “international trade”, which is equivalent to “international trade” at home or even at home.
With the advancement of the central bank’s digital currency, the free trade zone has been “naturally bound” with the central bank’s digital currency.
On August 14th, the Ministry of Commerce issued the “Notice on Printing and Distributing the Overall Plan for Comprehensively Deepening the Pilot Program for the Innovation and Development of Trade in Services”. When the notice was issued, the signs of recovery of China’s economy were obvious, and the “decoupling” was also facing turbulent times. The notice announced that the People’s Bank of China will formulate policy guarantee measures, starting with Shenzhen, Chengdu, Suzhou, Xiong’an New District and other places and relevant departments in the future Winter Olympics scenes to assist in the promotion of the digital RMB pilot plan, and then expanding it to Beijing, Tianjin, Hebei, and Changsha as appropriate. Triangle, Guangdong-Hong Kong-Macao Greater Bay Area and the central and western regions.
On September 21, the State Council issued a notice on the overall plan for the Beijing, Hunan, and Anhui Pilot Free Trade Zones and the expansion plan of the Zhejiang Pilot Free Trade Zone. By bundling and supporting digital currencies with the Free Trade Zone, the Beijing Free Trade Zone will become a digital economy pilot zone, and the Beijing Digital Trade Pilot Zone will become the core content of the Beijing Free Trade Zone.
For Beijing, the design highlights the leading position of the Beijing Free Trade Zone as the future of my country’s digital economy, and for the central bank’s digital currency, it has found a broad application scenario.
According to the latest news, the central bank and other departments will carry out trade designated placement business to strengthen the circulation and use of renminbi and support the new trade industry that settles in cross-border renminbi. It also included cross-border RMB business as a key part of supervision. At the same time, it also optimized multinational companies to conduct cross-border RMB collection and external payment. This clearly shows that the central bank’s digital currency is in the “renminbi internationalization” Meaning.
The central bank’s digital currency can implement RMB internationalization in China
As we all know, after World War II, the “Bretton Woods System” realized the link between the U.S. dollar and gold. With U.S. dollars, you can go directly to the Federal Reserve to exchange a fixed amount of gold. Later, the U.S. reached an agreement with oil exporting countries such as Saudi Arabia. The agreement stipulated that oil-producing countries only accept U.S. dollars. As the only currency for pricing and settlement of oil exports, the U.S. dollar has been linked to oil. In conjunction with it, the SWIFT supporting U.S. dollar settlement is controlled by the United States.
According to data from October 2017, the U.S. dollar is the largest payment currency, with a transaction utilization rate of 39.47%; the euro has a utilization rate of 33.98%, making it the second largest payment currency; British pounds, Japanese yen, Swiss francs and Canadian dollars rank third to sixth Bit. According to a report released by SWIFT, the RMB accounted for 1.56% of international payments in February 2018, and the currency still ranked seventh. As China and the United States moved from “trade war” to “decoupling” to the United States The “sanctions” against Chinese companies and the blatant “robbery” are matched by Trump’s increasingly frequent use of the SWIFT system to sanction other countries.
(The world is bitter for dollars) It’s been a long time.
There is no doubt that China is the key target of US sanctions and strikes. With the growth of the Belt and Road Economic Belt, “settlement” is a key issue that China needs to break through.
In the face of “dollar hegemony”, the whole world is thinking of ways to break through.
China continues to expand the scope of currency swap agreements with other countries. In 2017, there were more than 30 countries that have reached currency swaps with China, and the total currency swaps amounted to 3.33 trillion yuan, which was approximately US$530 billion at the exchange rate at the time. By 2018, the scale of currency swaps had doubled. In August 2019, the total amount has reached 3.67 trillion yuan. At the same time, China continues to expand the scope of RMB settlement in cross-border trade. At the end of 2018, the scale of China’s foreign trade with RMB for cross-border settlement has reached RMB 7 trillion. In the first 11 months of 2019, China’s total imports and exports reached 28.5 trillion yuan, of which more than a quarter were paid in yuan.
From the perspective of China’s own economy and trade, “RMB settlement” is a rigid demand, and the central bank’s digital currency is almost ready.
The central bank’s digital currency also bears the responsibility of the times that came into being.
It is not only China that suffers from the dollar, and it is not only China that breaks through.
On January 31, 2019, Germany, France, and the United Kingdom issued a joint statement announcing the creation of an “Instrument for Supporting Trade Exchanges” (INSTEX) for trade settlement with Iran and avoiding US sanctions.
INSTEX is a bartering system for the purpose of “de-dollarization”. After 20 years of the 21st century, human beings have returned to the era of bartering, which shows the importance of the “oppression” of the US dollar.
On November 30, 2019, INSTEX continued to expand. In addition to the founding member countries of Germany, Britain, and France, INSTEX also joined six European countries: Belgium, Denmark, Finland, Norway, the Netherlands and Sweden. With the rapid expansion of INSTEX, it will weaken the financial hegemony of the U.S. dollar to a certain extent. In addition, INSTEX will certainly not meet the pure “bartering” needs, and they also need better settlement tools.
The central bank’s digital currency, successfully implemented in China, is very likely to become a strong support for INSTEX; in addition, the “free trade zone” can originally provide INSTEX countries with convenient trade, payment and settlement, and “extended it” is not impossible and is just around the corner.
With “cash” in your hand, don’t you only care about “interest”?
On September 14, the deputy governor of the central bank published an article titled “Analysis of Policy Implications for the Positioning of Digital RMB M0.”
“The central bank’s digital currency has no interest” caused a debate among netizens. Most people probably did not expect that there would be “bartering” without mentioning international payments.
The essential attribute of the central bank’s digital currency is cash, and it is normal that the “cash” in hand has no interest.
But what is certain is that the central bank digital currency is much stronger than the old “cash”:
First, it is more convenient to carry than cash. In international trade, it is certainly unreasonable and inconvenient to carry a cart or a box of banknotes. On the contrary, carrying a box of banknotes to do business is an “underground transaction” in the movie. Digital currency is a bunch of digital codes that can be used with mobile phones or similar terminals, which completely solves this problem.
Second, during World War II, Germany made a large number of counterfeit British pounds to buy supplies. Even if the British government knew it, it was afraid of causing pound credit problems and public panic, so it could only block the news; the central bank of China digital currency solved this problem.
Third, the central bank’s digital currency has designed a two-tier operational delivery system. The central bank provides credit guarantees for the issued legal digital currency. The operational delivery system is a different business. Commercial banks and other institutions are responsible for issuing central bank digital currencies to the public. Pay 100% of the full reserve to the central bank to ensure that the central bank’s digital currency does not exceed the issuance of the central bank’s digital currency. In a sense, it can ensure the stability of the central bank’s digital currency.
No interest is certainly a problem, but it is also important not to depreciate!
The central bank’s digital currency itself cannot have interest. The reason is the same as the cash in your pocket has no interest. If you want to get interest, the way is still very clear:
First, depositing “paper currency” in the bank is interest. For central bank digital currency, “purchasing central bank currency” means exchanging “cash”; and “reverse purchase”, that is, depositing in one’s own account, is equivalent to Cash deposit banks have interest.
Imagine carrying a suitcase in your hand, which is full of hundred dollar bills. What can you do?
The central bank’s digital currency is cash, and there is a lot of “cash” in hand. Although this cash cannot earn bank interest, there are many things that can be done besides consumption. For example, buying assets is like the legendary old man wearing slippers carrying sack to buy a house; for example, lending, a lot of private loans in Wenzhou a few years ago, using suitcases and sack cash; such as mortgage, guarantee, investment.
It can be said that as long as there is “cash” in hand, there are more ways to make money besides interest.
Central bank digital currency + DeFi, opportunities for ordinary people are worth exploring
DeFi is very popular recently.
The term DeFi comes from Decentralized Finance. The conventional translation is: distributed finance or decentralized finance, which is relative to “centralized” finance. If you use traditional finance as an analogy, in fact, the central bank of Defi is the Ethereum public chain, and DeFi is a variety of financial services provided around Ethereum (central bank) and various other currencies. Such as banks, asset management, securities firms, exchanges, insurance, etc.
The current limitations of Defi are too obvious:
1.95% of Defi use Ethereum, and the rest use EOS, Bitcoin, USTD, etc., while Bitcoin, EOS, etc. are strictly regulated in China. For ordinary people, the operation is too troublesome and the intervention cost is too high. ；
2. Because the background of its operation is mainly the Ethereum public chain, the performance of Ethereum is not good, which causes network congestion. As a result, the transaction fee is too expensive, and the interest earned has not been paid. The fee is too much for many people.
3. Bitcoin and Ethereum, as a relatively circled system, currently have a small number of participants, and Bitcoin is defined as a “commodity” in mainstream countries around the world, and the price is not stable, which leads to , The income after collateralizing these “commodities” is also unstable.
But distributed finance, that is, DeFi itself, is a very high-quality mechanism. The central bank is a digital currency that can completely solve the above three main problems. In other words, as long as there is a better public chain than Ethereum, the central bank digital currency This currency is more stable than Bitcoin and Ethereum, allowing more people to participate more easily and conveniently.
With the support of blockchain technology, the central bank’s digital currency can be used to make loans, mortgage and invest, and set up income methods on the system. The real financial inclusion is here.
It can be boldly imagined: With the large-scale development of the “free trade zone”, some people can participate in the “business” of the free trade zone due to work or geographic location, and obtain the development dividend of the free trade zone, while the other part If there is no business, or if you are far away from the free trade zone, you can also realize income and obtain development dividends through the investment and circulation of “money”.
