The pilot scope and scenario of the central bank’s digital currency continue to expand. As a dynamic topic of great concern, the discussion focus around the new stage of its development is also evolving.
At the 2022 Tsinghua Wudaokou global financial forum held on April 16, for “whether to legislate the current digital RMB?” “In the current international context, should we speed up the issuance of digital RMB?” “How to understand the positioning of digital RMB M0?” Zhou Xiaochuan, President of China Financial Association and former president of the people’s Bank of China, responded one by one to the concerns of the industry.
The last thing Zhou wants to see is that the currency should be put in the real money. In addition, he also stressed that China’s e-cny (Digital RMB) is designed for retail, for the convenience of people’s merchants, not to replace the US dollar. It is not ruled out that e-cny may have the prospect of cross-border payment in the future, and it is estimated that it will also focus on the application of cross-border retail.
how to understand the positioning of digital RMB M0
In the current positioning of digital currency of the Central Bank of China, there is still some controversy in the market that only M0 is positioned at this stage.
Zhou Xiaochuan pointed out that the positioning of M0 is based on several considerations: first, it focuses on the application of retail links, hoping to provide greater convenience to everyone with the help of the Internet and mobile Internet terminals. Second, the positioning of M0 also avoids the “chaos war” – as a large institution, any internal business of the central bank needs to be managed by different departments. M0 and M1 are different departments, involving the further management of R & D expenses and pilot expenses. Third, at present, M1 in the central bank and the financial system operates normally. Although there is room for improvement in any business with the development of science and technology, compared with M0, it seems that M1 has limited room for improvement.
It should be noted that M0 and M1 are not isolated and completely separated. Zhou Xiaochuan believes that there is a pipeline between the two. Under certain conditions, there is a pipeline between M0 and M1, which is approximately equivalent. There will be no situation that M0 is highly stable if it is the central bank’s currency and M1 is unstable if it is not the central bank’s currency.
m1 instability is correct
In view of some views on the lack of stability of “M1” in the current market, Zhou Xiaochuan believes that this view is questionable and easy to cause some confusion in trust.
Taking the three note issuing companies in Hong Kong as an example, he believes that if a third-party institution issues money, its stability depends on whether the institution meets high standards – first, a high capital adequacy ratio; Second, the corresponding reserves; Third, there is a deposit insurance mechanism; Fourth, there should be strong supervision on assets and liabilities; Fifth, have good corporate governance ability, the organization has a check and balance structure, and the team is professional enough.
In Zhou Xiaochuan’s view, if third-party institutions want to innovate, do digital currency or participate in the payment system, they should move closer to high standards. If you deviate from these standards, there may be problems with stability. It not only affects the stability of the whole system, but also is not easy to get the full trust of the majority of users. “It should be said that the development of large science and technology companies and science and technology finance companies has a bright future. They have great prospects in the payment industry, but they should pay attention to integrity, not be clever, improve their quality and keep up with high standards.” He said.
whether to promote the current legislation of digital RMB
At this year’s two sessions, a number of proposals related to the promotion of digital RMB legislation.
In Zhou Xiaochuan’s view, the wish is good, but it is impossible to make the legislation so clear about the digital RMB in the process of R & D and innovation. Digital RMB is RMB, which is the substitute of M0, so e-cny has no legal obstacles. However, if it is a token issued by a third party, it is not, and legislative support is needed.
Zhou Xiaochuan believes that it can be seen from the law of the people’s Bank of China that the issue of currency is a sovereign matter and does not involve international standards. “Although we hope that international organizations can play a certain role, especially in guiding and establishing order in cross-border payment standards, there is no legal requirement that there must be standards before they can be done.”
He pointed out that China’s e-cny is designed for retail, for the convenience of people and merchants, not to replace the US dollar. It is not excluded that e-cny may have the prospect of cross-border payment in the future, but it is estimated that it will still focus on retail and the application of cross-border retail.
is it necessary to speed up and increase the issuance of digital RMB in the context of geopolitics
In view of whether the people’s Bank of China should speed up the issuance of digital currency under the current international environment and geopolitical background, in Zhou Xiaochuan’s view, how much money can be printed can be decided by itself, but whether it can be circulated depends on the application. Although the state can give mandatory orders to the currency, which may lead to the improvement of the status of the currency, it still depends on the market in the end.
He also stressed that if digital currency is to be developed, we should pay attention to its real application, which does not mean that this currency must be used for mandatory transactions. Finally, we should see that Lbx Pharmacy Chain Joint Stock Company(603883) is willing to put this currency in the wallet. This is a test and should be considered emphatically.
“At present, in many international discussions, one voice thinks that China’s digital currency is developing very fast. It will be a great weapon and your asset in the future. But people who really know the central bank know that currency issuance is the liability side of the balance sheet. The central bank should ensure that the currency issued by the central bank has purchasing power through system guarantee, commitment and backup support, so it is a liability of the central bank.” He said.
how to balance multi track competition
In Zhou Xiaochuan’s view, digital currency has several different tracks. One is token based track, the other is account based track, and the other is similar to payment order based track, which can also be regarded as a track. Safety is an important standard for competition on different tracks, and fairness should be paid attention to in the process of competition.
Taking the background and course of the birth of UnionPay as an example, Zhou Xiaochuan pointed out that it is impossible to emphasize a high degree of consistency at the beginning, and it is impossible to decide who will make the standard in advance. Advanced standards cannot be formulated. Only by implementing multiple schemes in parallel and selecting the best through competition can the superior survive the inferior. At a certain stage, the corresponding competent authorities will enhance this universality and promote interoperability compulsorily or semi compulsorily, so as to truly improve the aspect Lbx Pharmacy Chain Joint Stock Company(603883) , which is also a current international practice for digital currency.
