The cryptocurrency circle wake up, digital RMB grasp to understand the

On May 22, former central bank governor Zhou Xiaochuan mentioned the digital RMB at a financial forum in Wudaokou, Tsinghua. The digital RMB era is here, what is the reason for countries to study legal tokens?

The cryptocurrency circle makes people doubt their lives. Musk’s sentence: Bitcoin can buy Tesla. Everyone’s dreams of various virtual coins were ignited, and then he questioned the energy consumption of bitcoin, and opened the virtual coin plunge. Due to the “easy” manipulation of virtual coins, countries are unprecedentedly unanimous in introducing regulatory measures to cut off the exchange of fiat and virtual currencies. The ability to use virtual currencies like fiat currencies has become a mirage.

Just this month, the news of “digital RMB access to Alipay” attracted a lot of attention, and people are looking forward to the future of digital currency, which is the same as the woes of the cryptocurrency world, showing a “fire and ice” situation. Why are countries, including China, choosing to launch their own fiat electronic tokens? What is the difference between legal tokens and other virtual coins?

Today, Fei is here to talk to you about this topic.

What is the difference between different “coins”?
The “coins” we are talking about now can be called digital currencies. But digital currencies are divided into three main types: cryptocurrencies, stable tokens, and legal tokens.

Blockchain Cryptocurrencies

Bitcoin, ethereum, ripple, and all kinds of cat and dog coins nowadays belong to this category. The most important feature is that they are based on blockchain technology and “de-sovereignized” at the same time.

In fact, many financial experts believe that cryptocurrency is not a currency, but a financial asset. The reason is that cryptocurrencies are a medium of exchange, a store of value, and a unit of account, but their value fluctuates drastically and they lack any sovereign backing, which does not satisfy the role of currency preservation and bookkeeping.

Stable Token

It is mainly the Libra (Libra Coin) launched by FaceBook, now renamed as Diem. Although it calls itself a cryptocurrency, it is not the same thing. Its underlying technology is not pure blockchain technology, but a hybrid architecture (its bottom layer of transactions is centralized, while it is blockchain-style only when it reaches the top layer), so it is called a stable token.

Legal Token

A digital currency issued by the national central bank or monetary authority. In addition to China’s DC/EP (Digital Currency Electronic Payment), a representative one is Sweden’s e-Krona.

Why are countries launching legal tokens?
If, you think the evolution from blockchain cryptocurrencies to stable tokens and fiat tokens is just because cryptocurrencies are too risky, it is Too Naive. by analyzing Libra, we know how treacherous the situation is.

The cryptocurrency circle wake up, digital RMB grasp to understand the

Libra carries FB’s huge ambitions

In June 2019, the famous American social company Facebook (“FB”) suddenly released a “white paper” detailing the business plan of the “Libra” cryptocurrency. The paper detailed the business plan of “Libra” cryptocurrency. The reason for this is that FB has a huge number of users from all over the world, close to 3 billion. Many of these users are from underdeveloped countries with cross-border remittances and electronic payments, and the vast majority are young people. The demand of these people for cross-border remittance and payment business makes FB’s business prospect very imaginative.

The white paper also mentions a “governance unit” consisting of 28 institutions, including big Internet companies like eBay and Uber, as well as card clearing organizations like Mastercard and Visa, and payment institutions like PayPal, in addition to FB. Libra is likely to Libra is likely to become a strong global currency because of its strong cross-border remittance and electronic payment capabilities.

Libra represents the ambition of the United States

Here’s a look back at the history of the U.S. dollar. Once upon a time, the UK was the global monetary center. But after World War II, Britain was heavily indebted, and its main debtor was the United States. At this time, the U.S. wanted to take advantage of the British “debt repayment” opportunity to replace it as the dominant player in the world currency market.

Because as early as 1934, the U.S. government set a fixed exchange price of gold and the dollar, that is, $35 per ounce of gold. So the Bretton Woods resolution of 1944: “All countries may hold dollars as reserves because the dollar maintains a fixed ratio to gold.” Countries holding dollars are disguised as having gold reserves, because the United States promised to meet countries’ remittances for gold without conditions. After the Bretton Woods system was established, the dollar was pegged to gold, which is why the dollar is called the US dollar. By the 1970s, although the Bretton Woods system collapsed, the U.S. still maintained its status as the world’s currency by operating so that the U.S. dollar became the sole denomination and settlement currency for Saudi Arabia and other Middle East oil exporters’ organizations.

However, after the economic crisis in 2008, the economic status of the U.S. declined and the hegemonic position of the dollar began to loosen. Many oil countries began to “de-dollarize”, for example, Iran, which “hates” the United States, came up with the “oil euro”. Saudi Arabia and other oil countries took the initiative to choose the economic policy of decoupling from the dollar, the United States has been under unprecedented pressure.

Let’s look at Libra’s “function” of supporting global currency exchange, just like the relationship between the dollar and gold and oil. The “white paper” states that Libra will use a basket of currency deposits as asset reserves, and there is no limit to the type of currency. This means that people can use the amount of savings, whether it is in yuan, euro or yen, as proof of the value of the assets, which can be exchanged for Libra, which has a stable value. Therefore, Libra is likely to become the yardstick of the world’s electronic money, as well as the tool for the United States to dominate the legal token system.

Other reasons: cost, economic security

Some foreign institutions have investigated that 15% of the world’s cross-border remittances will now go through cryptocurrencies, so many tax evasion, money laundering, and even terrorist acts will use cryptocurrencies such as Bitcoin to trade. libra has not solved this problem either. So, countries want to rely on the technology of electronic tokens to reduce these types of crimes.

In addition to economic security, the cost of minting, circulating, and transporting money is now getting higher, but people are no longer willing to carry around paper money or minted coins, and people’s payment habits have quietly changed.

The situation of legal tokens in each country
According to the report of IMF (World Monetary Fund), more than 70% of the countries in the world are currently developing their own legal tokens. The main purpose is still to prevent and change the current economic status quo. For example, countries such as Ecuador and Zimbabwe, which are totally dependent on the US dollar, have their own monetary system basically collapsed and hope to restore their own monetary system through the opportunity of legalized electronic tokens; while European countries such as Russia and France hope to “de-dollarize” through electronic tokens.

China is leading the way with its digital yuan. A report published by the Bank for International Settlements (BIS) entitled “The Rise of Central Bank Digital Currencies: Drivers, Approaches and Technologies” says that the digital renminbi is probably the most advanced project in the world. This is largely attributed to the country’s strategic approach to digital finance and the development of China’s electronic payments sector, which is far ahead of the world.

What to know about the digital yuan
On May 22, former central bank governor Zhou Xiaochuan mentioned the two-tier operating mechanism of the digital RMB and the difference with other payment instruments at a financial forum in Wudaokou, Tsinghua. Here Fei synthesizes media reports and some reports to extract practical knowledge points about the digital RMB, hoping you will understand its use better.

Digital RMB has legal tender. Digital RMB is legal tender, and no person or organization can refuse to accept it.

The digital RMB has the highest validity and security. Because it is a two-tier operating mechanism: the digital RMB is issued by the People’s Bank, just like the issuance of banknotes, commercial banks need to pay the full amount of currency issuance fund to the People’s Bank before they can take the banknotes to commercial banks for exchange to the people, so it has the strongest endorsement.

Digital RMB is completely different from Alipay and WeChat Pay. The relationship between them is like the difference between cash and wallet. Digital RMB is the electronic version of paper banknotes, without the so-called electronic account, as if it were cash; while Alipay and WeChat payment are the tools to pay for digital RMB, which can also be credit cards, access cards and other tools, they are wallets.

Digital RMB uses a hybrid architecture of technology. But unlike Libra, the technology of digital RMB is not pre-defined, meaning that it neither restricts technologies such as blockchain nor absolutely supports traditional account systems.

The Digital RMB does not have to rely on the network. Even if there is no network, digital RMB transfers can be done through cell phone touch.

There are no transfer or withdrawal fees for digital RMB.

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/the-cryptocurrency-circle-wake-up-digital-rmb-grasp-to-understand-the/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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