Digital RMB: Chance of overtaking in corners?

“There is always a chance to try advanced technology in China. I am very willing to try the digital renminbi!” Knowing that the Beijing Winter Olympics will promote the pilot application of digital renminbi, Guyana’s ambassador to China Zhou Yaxin was eager to try it.
What she didn’t expect was that the digital renminbi wallet has various forms, including mobile apps, video cards, ski gloves, smart watches, badges and other styles to choose from. Not only that, during the Winter Olympics, users can also easily obtain and open digital renminbi wallets through multiple channels, and use digital renminbi in various consumption scenarios in the closed-loop area.
The 2022 People’s Bank of China Work Conference held on December 27 requires that the level of financial services and management be comprehensively improved, and the digital RMB research and development pilot program should be promoted in a steady and orderly manner. As of October 22, 2021, 140 million digital renminbi personal wallets and 10 million public wallets have been opened. The cumulative number of transactions is more than 150 million, and the cumulative transaction amount is approximately 62 billion yuan. According to incomplete statistics, in 2021, at least 11 places in Beijing, Shenzhen, Suzhou, Shanghai, Xiongan, Chengdu, Hainan, Changsha, Xi’an, Qingdao, and Dalian have distributed digital RMB red envelopes, with a cumulative amount of over 340 million yuan.
Digital RMB will be the technological “business card” of the Winter Olympics. The Winter Olympics is expected to become an important milestone in the implementation of digital currency applications
. Public transportation has also realized digital renminbi payment; if you want to shop, key business districts such as Wangfujing, Century Jinyuan, and Wumart supermarkets and other chain stores have supported the use of digital renminbi; if you want to buy medicine, some designated hospitals in Beijing and Zhangjiakou and hundreds Pharmacies support the acceptance of digital renminbi; if you want to travel and sightseeing, payment scenarios such as the Badaling Great Wall, the Forbidden City, and the Old Summer Palace have completed the construction of the digital renminbi acceptance environment, and many contracted hotels have officially implemented digital renminbi payment…
“The Beijing Winter Olympics scene is the next step The key areas of the pilot program.” Fan Yifei, deputy governor of the People’s Bank of China, said earlier that he will vigorously promote the central bank’s digital currency, continue to expand the scope of the pilot, and increase the scope of the pilot. Since the beginning of this year, Beijing and Zhangjiakou have successively launched digital RMB pilot activities, with increasingly diverse application scenarios and steady increase in transaction scale, laying a solid foundation for the construction of payment scenarios.
As time approaches, the digital RMB Beijing Winter Olympics scenario pilot is expected to drive my country’s digital currency to usher in new development opportunities. Research institutions believe that the digital renminbi will be the most certain technological “business card” of the Winter Olympics, and the Winter Olympics is expected to become an important milestone in the implementation of digital currency applications.
According to relevant people from the central bank, the acceptance of environmental construction work in the Beijing Division is accelerating. Among them, all the scenes in the Beijing Winter Olympics Organizing Committee Park have been completed. The construction of the digital RMB acceptance environment within the Winter Olympics security red line and the construction of the venues are simultaneously advanced. Seven categories of scenes including communication services, ticketing and entertainment have been fully covered. In the Zhangjiakou competition area, the payment scenarios within the Winter Olympics security red line are basically covered. 100% of the payment scenarios of the completed venues have been implemented, and the remaining venues have also been signed and connected.
The “White Paper on China’s Digital RMB Research and Development Progress” released in July this year outlines the “Winter Olympic Time” for digital RMB: During the pilot period, digital RMB focuses on continuous exploration of application model innovation, using smart contract technology to give digital RMB programmable features and improve Expansion capabilities to promote in-depth integration with application scenarios.
Our country has been on the digital currency issue for a long time. In 2014, the central bank began to conduct research on issues such as the digital currency issuance framework and key technologies. In August 2019, the central bank made it clear that “accelerating the pace of my country’s legal digital currency (DC/EP) research and development” as one of the key tasks in the second half of the year. Starting from the end of 2019, digital renminbi has launched pilot tests in Shenzhen, Suzhou, Xiongan New District, Chengdu and the 2022 Winter Olympics. In August 2020, the Ministry of Commerce announced the launch of digital RMB pilot projects in the Beijing-Tianjin-Hebei region, the Yangtze River Delta, the Guangdong-Hong Kong-Macao Greater Bay Area, and the pilot regions in the central and western regions where conditions permit. In October of the same year, 6 pilot test areas were added in Shanghai, Hainan, Changsha, Xi’an, Qingdao and Dalian.
“The functions and properties of digital currency are exactly the same as banknotes.” Mu Changchun, director of the Central Bank’s Digital Currency Research Institute, introduced that digital renminbi is not an encrypted asset that some people understand, but the digitization of the renminbi.
The digital renminbi is actually not a mystery, it is essentially electronic cash. Mu Changchun pointed out that the digital renminbi is a digital form of legal tender issued by the central bank. It is operated by designated operating agencies and exchanged with the public. Based on the broad account system, it supports the loose coupling function of bank accounts and is equivalent to banknotes and coins. Value characteristics and legal compensation support controllable anonymity.
“Digital currency can be circulated like paper money. It is positioned as a substitute for cash. It is legal tender like cash. It has national credit endorsement and has unlimited legal reimbursement. No one can refuse to accept it.” Said Deputy Dean Zhao Xijun.
“Theoretically, after using the central bank’s digital currency, there is no transaction behavior that cannot be seen by the regulatory authorities, and the cash flow is completely traceable.” Xu Yuan, a finance professor at the National Development Research Institute of Peking University, believes that the digital renminbi must be circulated online, and then It brings two important features: one is the need to rely on encryption technology to ensure the security of digital currency; the other is that cash flow and information flow data can be entered into the database in real time and become traceable.
New technological innovations represented by digital renminbi will become an important breakthrough for carbon neutrality to enter the daily life of users,
whether it is to avoid disposable tableware when ordering takeaways, or to buy air tickets and train tickets online, or to prepare environmental protection when buying fresh food Bag green self-promotion…As long as consumers have green and low-carbon consumption behavior on a certain Internet platform, they can receive the corresponding digital RMB red envelope reward. On December 15, the digital RMB carbon neutralization pilot ushered in a new upgrade.
Previously, the pilot shared bicycle riding activity was launched for three months, attracting more than 8 million users to sign up, and riding more than 42 million kilometers, which reduced carbon emissions by about 11,400 tons compared with driving a gasoline vehicle. Insiders said that the new technological innovation represented by the digital renminbi will become an important breakthrough for carbon neutrality to enter the daily lives of users.
The Central Economic Work Conference pointed out that it is necessary to persist in giving priority to conservation and implement a comprehensive conservation strategy. In the field of production, promote comprehensive resource conservation, intensive, and recycling. In the field of consumption, we will enhance the nation’s awareness of conservation and advocate a simple, moderate, green and low-carbon lifestyle. The industry generally believes that the digital renminbi has conditions to become an important starting point for green finance and has certain value in promoting a green and low-carbon life.
The digital renminbi has the characteristics of low cost, high efficiency, safety and reliability. Under the premise of large-scale, it can save currency circulation costs and save the paper needed for printing cash. Therefore, it is itself a green and low-carbon currency tool and payment tool.
“Whether digital renminbi is used in the domestic green financial product market, for green financial incentive policy implementation, or cross-border use, it is used as a currency tool for international green financial product transactions. It is a new opportunity and may generate new opportunities. The radioactive blue ocean effect.” Li Lihui, the former governor of the Bank of China, believes that the digital renminbi will change the pattern of the payment market. In the mobile payment market dominated by market-based payment methods such as WeChat Pay and Alipay, the increase of official payment methods is beneficial to each other. Competition and mutual promotion will further improve the efficiency and reliability of payment.
What is the difference between digital renminbi, Alipay and WeChat Pay? Mu Changchun explained that Alipay and WeChat Pay are digital wallets. Before the birth of digital renminbi, they carried commercial bank deposit currencies; after the birth of digital renminbi, the contents of the wallet may increase the central bank digital currency, and everyone can still use the original Wallet for payment.
Third-party payment tools such as WeChat and Alipay charge a certain fee when used, while digital RMB is a public product without any fee when used. my country’s mobile payment is more driven by business and is an electronic payment method, rather than a digital “renminbi” in the true sense.
After the trial operation, some people think that the digital renminbi is not as subversive as expected, and it seems that it has not brought fundamental changes in currency form, actual functions, and operating mechanisms. In this regard, Wang Yongli, former vice president and executive director of Bank of China, believes that it is very normal for the digital renminbi to have no changes in the front-end application, that is, to minimize major changes to the user experience.
Put aside the front end and look at the background. Both users and service providers must download a unified App. Wang Yongli pointed out that this has brought about a major change in the payment operation system and mechanism: the central bank has become the core entrance and clearing center for the operation of digital renminbi. This means that for every receipt and payment of digital renminbi, relevant information must be sent to the central bank for verification of the account under investigation, so that the central bank can fully grasp the full transaction information of digital renminbi exchange and circulation, and grasp the total amount of digital renminbi in real time. And the distribution situation, and necessary monitoring analysis and regulation can be carried out, so as to greatly improve the accuracy and effectiveness of monetary policy.
This change is also in line with the essential characteristics of digital currency different from traditional currencies: digital currency closely integrates currency and payment and settlement, realizing “money is payment and payment is settlement”.
“Controllable anonymity” not only protects user privacy, but also meets financial stability requirements such as anti-money laundering, anti-terrorist financing, and anti-tax evasion.
After many pilot projects, how long will it take for the digital renminbi to be fully popularized?
“Small countries are easier to innovate and conduct pilots. If problems are found after the pilots, or if the solutions are not optimal, switching is relatively easy. Large countries are not easy in this regard, but the advantage is that they can accommodate multiple solutions in parallel.” Boao Forum for Asia Zhou Xiaochuan, vice chairman and former governor of the People’s Bank of China, pointed out that it only takes about one year for some small European countries to change from banknotes to plastic banknotes. It took about ten years for China to switch from the third-generation renminbi to the fourth-generation renminbi to the fifth-generation renminbi each time.
Regarding the digital renminbi, some people worry that the central bank will control user transaction information and infringe on user privacy; others believe that its anonymity may make it a criminal tool. In response to these concerns, Mu Changchun explained that the digital renminbi is anonymity under the premise of controllable risks. It not only requires the protection of user privacy, but also meets financial stability requirements such as anti-money laundering, anti-terrorist financing, and anti-tax evasion. It is “an objective way to maintain financial security.” need”.
Current payment tools, whether bank cards, WeChat, or Alipay, are bound to the real-name system of bank accounts, while digital renminbi is loosely coupled with bank accounts, enabling small amounts of anonymity. The digital renminbi wallet adopts a hierarchical classification design. An anonymous wallet can be opened with only a mobile phone number, but the balance and daily transaction limit are also the lowest. If you want to make large payments, you can upgrade the wallet.
“The consideration of this design is to meet the public’s reasonable privacy protection needs on the one hand, and to prevent large-scale suspicious transaction risks on the other.” Mu Changchun pointed out that according to relevant laws and regulations, the central bank cannot obtain users’ true identity information by checking their mobile phone numbers.
“Any issuance must not harm currency and financial stability; coexist with cash and other forms of currency in a flexible and innovative payment system; the characteristics of central bank digital currencies should be beneficial to innovation and efficiency.” October 2020, Federal Reserve, Europe The central bank, the Bank of Japan, and other seven central banks and the Bank for International Settlements jointly released the “Central Bank Digital Currency: Basic Principles and Core Features” report that lists the basic principles of central bank digital currencies.
Zhou Xiaochuan believes that the seven central banks hope to find the best solution for central bank digital currencies, and DC/EP is a two-tier, dynamic mid-term evolution system. Two-tier system, the first tier is the central bank, and the second tier includes commercial banks, telecom operators, and third-party payment network platform companies. In this system, the central bank occupies a central position, responsible for wholesale digital renminbi to designated commercial banks and full life cycle management, and commercial banks and other institutions are responsible for providing exchange and circulation services to the public.
Some analysts pointed out that the centralized management of digital renminbi is beneficial to resist the erosion of encrypted assets and global stablecoins, prevent the currency issuance rights in the digital economy era from being sidelined, and at the same time improve the efficiency of the payment system and improve the transmission of monetary policy. At the same time, realizing payment and settlement and improving the capital turnover efficiency of merchants will help solve the liquidity problem of small and medium-sized enterprises, help break down retail payment barriers, and promote inclusive finance.
Digital RMB grasp first-mover advantage, and explore potential areas of RMB internationalization
in recent years, the development prospects of digital currency and the impact on the international monetary system, causing widespread concern at home and abroad.
“Global central bank digital currencies are rising rapidly as a whole, and competition among major powers surrounding digital currencies is intensifying, and international cooperation in digital currencies is also gaining momentum.” Zhu Jun, Director of the International Department of the People’s Bank of China, pointed out that we must grasp the first-mover advantage of the digital renminbi. Explore the potential areas of RMB internationalization.
First of all, the digital renminbi pilot program can be expanded steadily and orderly in areas where conditions permit, and the functions of digital renminbi can be continuously optimized and enriched, and the relevant legal framework and institutional arrangements can be improved to lay a solid foundation. Secondly, as a new thing, the central bank’s digital currency must explain and communicate with the public and the market. At the same time, it is necessary to steadily promote the central bank’s international cooperation in digital currency research and development, and actively participate in the discussion and research of international rules.
Zhu Jun said that the current digital renminbi focuses on improving the efficiency of domestic retail payments, and there is no arrangement for cross-border payments. However, it should be noted that the introduction of digital currencies for cross-border payments by other reserve currency issuing countries may strengthen the demand for these reserve currencies, consolidate or even strengthen their international status, and affect the internationalization of the renminbi. We should pay close attention to the research and development trends of central banks’ digital currencies.
At present, Ecuador, Tunisia, Senegal, Marshall Islands, Uruguay and Venezuela have officially issued central bank digital currencies.
In terms of the actual situation, the direct motivations of central banks in researching and exploring digital currencies are roughly as follows: one is to resist US economic sanctions and maintain the stability of the domestic economy; the second is to reduce dependence on the US dollar; the third is to pursue the development of financial technology and grasp the future The initiative of economic development; the fourth is to maintain the stability of the existing monetary system.
It is the common desire of most countries to establish a fairer, more efficient and more advanced global cross-border payment system. Ju Jiandong, director of the International Finance and Economic Research Center of the National Institute of Finance of Tsinghua University, pointed out that the ultimate goal of the new digital renminbi cross-border payment and settlement system is to focus on serving specific industries and key enterprises that are subject to financial sanctions by other countries, creating a “financial blockade”. The “spare tire” plan.
From the initial bartering of objects to shells, gold and silver, and banknotes, currency continues to evolve along with technological progress and the development of economic activities. Looking back on the history of currency, there are two things that have profound impact: one is that Britain took the lead in adopting the gold standard in 1816, which promoted the full roll out of the industrial revolution; the other is that the Bretton Woods system was established in 1944, and the U.S. dollar gradually became the global currency system with the help of gold. Base.
Right now, we will be able to witness a new round of history: With the landing of digital currency, the commercial and financial forms of human society will undergo tremendous changes. More and more countries put central bank digital currency on the agenda. China, which has planned its layout early, is expected to use its first-mover advantage to achieve corner overtaking in more areas.

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