International Finance Forum (IFF) Session: Digital Currency Future and Public Chain Solutions

The IFF 2021 Spring Meeting on May 30 will feature a special session on “Digital Currency and Future Digital Transformation”, inviting relevant officials, academics and technology representatives to discuss the hot topic of digital currency and digital transformation.

International Finance Forum (IFF) Session: Digital Currency Future and Public Chain Solutions

With the rise of digital currencies in recent years and the in-depth study of digital currencies by central banks, the discussion on digital currencies is gradually heating up in both official and private circles. At the IFF 2021 Spring Meeting held on May 30, a special panel on “Digital Currency and Future Digital Transformation” was held, inviting officials, scholars and technology representatives to discuss the hot topic of digital currency and digital transformation.

The International Finance Forum (IFF) is a non-profit, unofficial and independent international organization based in China, founded in October 2003 by leaders of more than 20 countries, regions and related international organizations, including China, the United States, the European Union and the United Nations, as a high-level permanent dialogue, exchange and research institution in the field of global finance. As a platform for international financial cooperation and strategic think tank between China and emerging economies, it is known as the “F20 (Finance 20)” in the global financial field.

In yesterday’s sub-forum, IFF Academic Member Chen Bingcai, Researcher of the State Administration College of the Central Party School, chaired by Yao Qian, Director of the Bureau of Science and Technology Supervision of the China Securities Regulatory Commission, Siddhartha Tiwari, Chief Representative of the Bank for International Settlements in Asia Pacific, Nie Qingping, Chairman of China Securities Finance Corporation, An Qingsong, President of the China Securities Association, He Ping, Director of the Department of Finance of the School of Economics and Management of Tsinghua University, and IFF Academic Member and Chief Economist of Asia of Banco de España Exterior (BBVA) Xia Le, Chief Scientific Officer of Vienna Blockchain Center Alexander Eisele, Founder of RChain Lucius Gregory Meredith (Greg), Partner of Lordship Technology Yi Aimin and other guests attended and delivered speeches.

Among the guest speakers, Yao Qian, Tiwari, Nie Qingping and He Ping discussed the design, regulation and application level of digital currencies, while Greg and Yi Aimin elaborated on the current problems of blockchain public chains and alternative solutions, respectively.

The following are the highlights of the speeches given by the main guests.

Yao Qian, Director of Technology Supervision Bureau, CSRC: R&D and Reflections on Central Bank Digital Currency

Director Yao Qian discussed the key points to be considered in the R&D of the central bank’s digital currency from seven aspects.

  1. technical route. This is divided into account-based and token-based. China’s digital RMB adopts the account-based route, but the two technical routes, account-based and token-based, are not either/or. In essence, a token is also an account, only it is a new type of account – a crypto account. In a sense, the early digital currency experiments of China’s central bank are in line with the idea of cryptocurrency. As the technology continues to develop and mature, the central bank’s digital currency will also absorb various advanced technologies and continuously improve its technical architecture system.
  2. Value attributes. Is the central bank directly indebted, or is it an operating institution? The essential difference lies in the liability column of the central bank’s balance sheet, whether it is the central bank digital currency of the end user or the reserve of the agency operator.
  3. Operational architecture. Double-tier or single-tier? At present, a two-tier architecture is gradually forming a consensus among countries, and the digital RMB also adopts a two-tier operation system. However, it is not an either/or relationship between two-tier operation and single-tier operation, both of them seem to be compatible for users to choose.
  4. Interest-bearing or not. Currently, the digital RMB is not considered interest-bearing.
  5. Mode of issuance. Issuance or exchange? The difference is that the former is initiated by the central bank and is an active supply, while the latter is initiated by the user of the currency and is an on-demand exchange. The question depends on its positioning and the needs of monetary policy. If it is only an M0 substitution, it is an on-demand exchange; if the central bank initiates the issuance of digital currency to the market by means of asset purchases in order to achieve monetary policy objectives, it is an extended-form issuance. Table expansion issuance is subject to defining eligible asset types and operating at appropriate quantities and prices.
  6. Smart Contracts. Digital currency cannot be just a simple simulation of physical currency, and the future digital currency will definitely go to smart currency. Of course, the current maturity of smart contract technology still needs to be improved. Therefore, the central bank’s digital currency should start with a simple smart contract and gradually expand its potential on the basis of full consideration of security.
  7. Regulatory considerations. On the one hand, KYC, anti-money laundering, anti-terrorist financing and anti-tax evasion are the basic guidelines that central bank digital currencies should follow, while on the other hand, the protection of users’ personal privacy should be fully considered. In the digital world, the issue of authenticity, privacy and security of digital identity may involve a larger social governance proposition, which requires us to do in-depth research.

Siddhartha Tiwari, Chief Representative of the Bank for International Settlements, Asia Pacific: Do we need digital currency?

Tiwari began his speech with three questions, “First, do we need a digital currency? Second, if we do, who should we be using to issue digital currency? And third, how should digital currencies be designed?”

And then he said that we are going through a major transformation, and digital currency technology can effectively reduce the cost of transformation and improve efficiency, while bringing in many new business models. The evolution of digital currency technology has already had an impact on the financial system, for example in Singapore, Shanghai, Hangzhou, Hong Kong in China, and so on. Now, the positioning of money has changed in a new way. In the end, each country has to make its own choice and make a choice based on its own situation, not that one solution fits all countries.

Nie Qingping, Chairman of China Securities & Finance Corporation: How to understand digital currency

According to Nie Qingping, it is very necessary to make a good distinction between legal digital currencies and virtual currencies from the perspective of financial regulation at present. Digital currency is a security-type asset that broadly includes fiat digital currency (i.e. CBDC) and virtual digital currency, but virtual digital currency is not a currency. Virtual currencies like BTC are not backed by underlying assets nor do they have a value metric, and can only be considered a securitized asset. From the perspective of financial history, its future direction is likely to become another “Dutch tulip hype” ending.

He further analyzed that the central bank digital currency is essentially a new digital payment instrument and an independent monetary expression; while the stable coin is not a legal digital currency, as it is not a digital token issued by the government. However, there are still several challenges in the wide application of central bank digital currency in the future, such as whether the corresponding commercial banks and clearing houses can invest in a large scale, the security of central bank digital currency compared with commercial banks in terms of transfer and whether consumers can accept such an emerging and independent form of currency.

He Ping, Director of the Department of Finance, School of Economics and Management, Tsinghua University: Some issues of the application of the central bank’s digital currency

In He Ping’s view, compared with traditional payment methods, the central bank digital currency as a means of payment has several core features: de-intermediation, online and offline full coverage, limited anonymity, and intelligence. However, there may also be some cognitive misconceptions in the public perception, and as a scholar, he raises four aspects.

  1. the role of commercial banks. Is the money supply changed through the issuance of the central bank’s digital currency. When the central bank transfers the digital currency to the accounts of commercial banks, theoretically if the cash supply is to be maintained commercial banks need to exchange the same amount of paper money for these central bank digital currencies. We need to pay attention to the exchange of central bank digital currency with commercial banks, it is not just a change in holding preference, it may bring about a change in the underlying placement.
  2. Payment boundary. If the central bank digital currency replaces banks’ B2B payments, such as large transfers, this may bring about a large amount of financial disintermediation, which will definitely cause a huge impact on the short-term financial system.
  3. The internationalization of RMB. In the international payment system, the limited anonymity of the central bank’s digital currency, which is only transparent to the central bank of the issuing country, will in fact bring about the anonymous flow of international capital which is not conducive to the monitoring of capital flows by countries. In other words, what role should the central bank’s digital currency play in international payments? Regional or global? Large or small amounts? This requires our discretion.
  4. The question of intelligence. In theory, all electronic payments can be programmed to be intelligent, that is to say, commercial banks or third-party payments can be intelligent. In a sense, in the future, more intelligence may not be implemented in the central bank’s digital currency, commercial banks and third-party payment institutions have more advantages and incentives. In which scenarios does the central bank’s digital currency need to be implemented intelligently? We need to look at these issues from a top-level design perspective, not blindly pushing for intelligence, as there is always a cost and benefit trade-off.

RChain founder Lucius Gregory Meredith: The Currency of Concurrency (The Currency of Concurrency)

RChain is a public chain project with the vision of becoming a key global orchestration technology, and the only representative invited to this Digital Currency Forum as a public chain project in the blockchain industry.RChain’s founder Lucius Gregory Meredith (Greg) is a highly recognized mathematician who also holds a PhD in distributed computing from Imperial College in the UK, and has worked in He has been the chief architect of IBM, AT&T and other internationally renowned companies for a long time. In this conference, Greg will share in a video format.

Greg believes that the current climate issues may lead to significant changes in human productive relationships, and in this crisis, humans need to seek a new way of collaboration without trust, and blockchain is likely to be a key collaboration technology.

The core of blockchain technology development is to form an economically secure, distributed consensus algorithm that requires no leadership. Although the industry has entered a new phase after the development of Bitcoin and the Ethernet network, the core issues faced by the underlying technology (such as public chain scalability and security) are still not well addressed.

RChain has improved both consensus algorithms and virtual machine types to make concurrent asynchronous block out and execution, while seamless interoperability between slices can be ensured, achieving scalability in both vertical and horizontal directions and solving the scaling problem. The computational model of the Rho algorithm perfectly achieves completeness, composability, concurrency, and complexity, and builds a behavior type system based on it for fast and automatic formal verification, which can complete the orchestration of a large number of on-chain contracts and make them collaborate in a safe and orderly manner.

At the end of the sharing Greg emphasized that RChain’s core vision is to be a global computer and database providing key coordination technologies for global climate issues, and to amplify the extraordinary capacity of human coordination and cooperation to the fullest.

Edwin Yi, Partner of Lords Technology: The Mathematical Pain of Digital Currency

In the opinion of Yi Aimin, there are currently performance, capacity, and security issues prevalent in various blockchain public chain projects. Although the industry has started to seek solutions from the perspectives of consensus algorithm, sharding, DAG structure, side chain, off-chain computing, etc., there is no public chain in the market that can perfectly solve the problems that hinder the development of blockchain technology.

As the characteristics of blockchain such as decentralization, non-tamperability and trustworthy computing process are essentially different from traditional technologies, it may be difficult to make a breakthrough in the development of blockchain technology under the guidance of the existing Turing computing theory, which is equivalent to solving the relativity problem with Newton’s knowledge system. Only by achieving a breakthrough and upgrading of the von Neumann computer architecture is it possible to fund blockchain technology according to large-scale applications in the future.

He further believes that the future practical blockchain must have the following characteristics: parallel computing, concurrent computing; composability, interoperability, scalability; composable security and automatic and rapid formal verification.

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