About digital currency, the central bank, this is Zhou Xiaochuan's most profound public interpretation so far.

Digital RMB is getting closer and closer. Following the Shenzhen red envelope, it is reported that the digital RMB may be publicly tested in other cities in the near future.

However, most people are unfamiliar with digital currency, the central bank, and all kinds of misunderstandings and misunderstandings are inevitable.

At the second Bund Financial Summit held not long ago, Mu Changchun, director of the digital currency Research Institute of the Central Bank, clarified the biggest misunderstanding of digital RMB. He said: "WeChat, Alipay and digital RMB are not in the same dimension. WeChat and Alipay are financial infrastructure and wallets, while digital RMB is the content of payment tools and wallets ... At the same time, Tencent and Ant's respective commercial banks also belong to operating institutions, so there is no competition with digital RMB. "

165438+1On October 27th, at a series of seminars on "Digital Finance Innovation and New Pattern of Economic Development" held by Digital Finance Research Center of Peking University and the fifth anniversary of the establishment of Digital Finance Research Center of Peking University, Zhou Xiaochuan, president of China Finance Association and former governor of China People's Bank, further clarified digital currency (DC/EP), digital RMB (e-CNY) and digital currency.

Zhou Xiaochuan said that DC/EP is a two-tier R&D and pilot project plan, not a payment product. The DC/EP project plan may include several payment products that can be tried and promoted, and these products will eventually be named e-CNY, that is, digital RMB.

In addition, DC/ Europe and CBDC have different development ideas. For example, in CBDC's vision, currency ownership and liabilities belong to the central bank, while in DC/ Europe, secondary commercial institutions actually own the ownership and payment guarantee of electronic CNY.

Zhou Xiaochuan also stressed that in the DC/EP two-tier management system, the relationship between the central bank as the main body of the first-tier structure and the main body of the second-tier structure is not a simple wholesale-retail relationship that people understand. In fact, secondary institutions need to undertake a series of compliance responsibilities such as KYC, anti-money laundering and user data privacy protection, and general CBDC often thinks that these responsibilities belong to the central bank.

Zhou Xiaochuan introduced that DC/EP is a two-tier R&D and pilot project plan, not a payment product. The DC/EP project plan may include several payment products that can be tried and promoted, and these products will eventually be named e-CNY, that is, digital RMB.

The DC/EP two-tier operation system refers to: the first tier is the central bank, and the second tier is commercial banks, telecom operators and third-party payment network platform companies. At present, four banks, namely, China Mobile, China Telecom, China Unicom, Ant and Tencent, are on the second floor.

Zhou Xiaochuan believes that secondary institutions should at least bear the following responsibilities: First, they should have appropriate capital to reduce risks. Second, know the customer, that is, the responsibility of KYC (Know your customer). On this basis, it also bears the responsibility of anti-money laundering and data privacy protection. The third is the responsibility of technical equipment investment and equipment operation and maintenance.

As the main body of the primary structure, the responsibilities of the central bank include the following aspects:

The first is to keep the value of digital RMB stable. The central bank can maintain the stability of the currency by asking the secondary institutions for capital or reserve.

The second is to establish reliable infrastructure, such as settlement and liquidation. According to Zhou Xiaochuan, in theory, the central bank should also engage in research and development, but the focus of the central bank's own research and development is not the digital currency products themselves, but should pay more attention to building reliable infrastructure such as settlement and liquidation.

Third, the central bank has the responsibility to promote the interconnection between different payment products. When the standards or parameters used by different payment products are inconsistent, the central bank can coordinate them, thus improving the versatility of products, which will be more beneficial to consumers.

Fourth, the central bank should prepare emergency and replacement plans in the dynamic evolution system. Whether it is a system failure or an upgrade, there needs to be a substitute or an emergency plan to ensure that the payment function is not interrupted, otherwise the whole market may be affected. From this perspective, the central bank itself should also study a digital currency that can play an emergency or substitute role.

Generally speaking, Zhou Xiaochuan believes that in the two-tier operation system of DC/EP, the central bank needs to fully mobilize the enthusiasm of each subject through its own role design, so as to give full play to the strengths of each subject.

Zhou Xiaochuan said that the development idea of DC/ Europe plan is not completely consistent with CBDC mentioned internationally. DC/EP is not a concept in CBDC system, and there are mainly the following differences between them:

First of all, the secondary institutions of DC/EP actually own the ownership and payment guarantee of e-CNY, as well as the corresponding systems, technologies and equipment.

According to Zhou Xiaochuan, to some extent, this idea has been studied and used for reference by three note-issuing banks in Hong Kong (HSBC, Standard Chartered and BOC Hong Kong). Note-issuing banks are required to pay US$ 65,438+0 to the Hong Kong Monetary Authority every time they issue 7.8 yuan dollars, and HKMA will issue a certificate of 65,438+000% reserve. From the balance sheet, the banknotes issued by banks are their liabilities and assets are reserves, while the liabilities of the central bank are the payment vouchers for reserves issued by them. Therefore, from the perspective of balance sheet, this issuance model is different from CBDC's assumption that both monetary ownership and liabilities are owned by the central bank.

Zhou Xiaochuan also suggested that in order to maintain the stability of the currency, the central bank can adopt different methods. For example, you need to prepare 65,438+000% cash, and the way to provide proof is similar to that in Hong Kong. You can also try the form of comfort letters. It should be noted that under different schemes, the degree of support from the central bank is also different. In addition, even the 100% reserve is only for cash, which is M0 in China, and other quasi-cash categories are not included, let alone M 1 and M2.

Secondly, the secondary subject relationship in DC/EP is not what some people think "the central bank engages in wholesale and the secondary institutions engage in retail". As mentioned above, secondary institutions need to perform a series of compliance responsibilities, including KYC, anti-money laundering and data privacy protection, which CBDC generally considers to be the responsibility of the central bank. Zhou Xiaochuan also pointed out that in order to better maintain the stability of the system and understand the operation of the system, the central bank should master the transaction data it needs, but this is only a backup, and the central bank itself does not involve direct commercial interests.

Someone once used such a metaphor to explain the relationship between the central bank and secondary entities: A commercial bank issuing a central bank digital currency is like sending an envelope, and the banknotes in the envelope are the banknotes of the central bank, but the envelopes designed by different banks are different from the anti-counterfeiting, but in essence the banknotes in the envelope are all the banknotes of the central bank. In this regard, Zhou Xiaochuan said, "This metaphor is very interesting, but it is not completely accurate."

He further explained that the envelope can contain the central bank's currency, reserve certificates or comfort letters issued by the central bank, and even things designed by commercial banks themselves. But in any case, it is necessary to maintain its stability and effectiveness in the end. From this perspective, the first responsible person is the secondary institution, not the central bank.

In fact, as early as 20 15-20 16, the People's Bank of China put forward the idea of two-tier system internationally. The reason for considering the two-tier system is that digital currency, the central bank of China, is more suitable for adopting a competitive, multi-scheme and dynamic evolution management system.

Does the central bank have the ability to judge and choose the best technical route? Zhou Xiaochuan's answer to this question is "very difficult". Moreover, for a big country like China, it takes a long time to switch from one scheme to another. Judging from the experience of banknote upgrading, it takes about ten years for each generation of RMB to switch, and there are still many problems left over. But at the same time, China's super-large market can accommodate or try a variety of technical solutions. Therefore, the competitive and multi-scheme central bank digital currency system is more suitable for China.

DC/ Europe is also a dynamic evolution system. The development of financial technology is very rapid, and the payment system must adapt to this development speed and constantly evolve and iterate. Zhou Xiaochuan reminded that we should pay attention to anti-monopoly in this process, because monopoly may hinder new technological routes.

Zhou Xiaochuan also talked about his views on blockchain and distributed accounting technology (DLT). Regarding some technical features of blockchain and DLT, such as decentralization, Zhou Xiaochuan believes that it is necessary to consider whether the modernization of payment system really needs decentralization.

In fact, his views are not certain, which may bring many disadvantages.

Another example is that it cannot be tampered with. Zhou Xiaochuan pointed out that the existing system, especially the account system, has a very low probability of being tampered with. But also consider how to actively modify the transaction when it goes wrong. "There are occasional mistakes in the payment field and need to be changed, but this change is not just hedging through negative transactions, but completely changing or erasing the original wrong transaction records, otherwise the wrong transaction information may be misused, such as entering the credit information system by mistake. However, the non-tampering emphasized by the blockchain at present contradicts this demand. "

Zhou Xiaochuan also said that blockchain and DLT have always been one of the schemes in the central bank's digital currency system, but there are still technical problems to be solved, especially the payment processing capacity to be improved. Judging from the application of retail system, this technology can not occupy the mainstream for the time being, and needs further development and improvement.

Regarding the issue of data privacy protection that people are generally concerned about, Zhou Xiaochuan said that digital currency transactions require controllable anonymity, that is, anonymity, but not complete anonymity. It is necessary to ensure that regulators, especially anti-money laundering agencies, can master these data, and on this basis, protect the privacy of customers to the maximum extent.

Zhou Xiaochuan advocated fully studying and absorbing some rules in the European General Data Protection Regulation (GDPR).

At present, a problem facing China is that when big data transactions are prevalent, many personal privacy data have been leaked, and many people don't even know that their data have been leaked or traded. Although you can delete some information or change your password and account number, such an operation is very complicated and time-consuming and cannot effectively guarantee security. Zhou Xiaochuan pointed out that in this case, some risk control measures are needed to ensure data privacy, such as hierarchical quota management of accounts.

When talking about the central bank, the cross-border payment in digital currency, Zhou Xiaochuan thinks that there are some problems in the application of cross-border remittance, which is similar to Libra. Digital currency should pay attention to the application of cross-border payment in the retail system, and at the same time pay attention to the payment of cross-border tourism and other current items.

On the premise of retailing, Zhou Xiaochuan emphasized the need to respect the policies and laws of various countries. If a country attaches great importance to its own currency sovereignty, its own exchange rate system and the provisions on exchange and remittance, then digital currency should also give full respect when implementing it. Some countries will worry about "dollarization" or "RMB". In this regard, Zhou Xiaochuan believes that the central bank should focus on the liquidation of cross-border payment cooperation.

This article is based on the speech made by Zhou Xiaochuan, President of China Finance Association and former President of China People's Bank, at the seminar series on "Digital Finance Innovation and New Pattern of Economic Development" held by Digital Finance Research Center of Peking University and the fifth anniversary conference of the establishment of Digital Finance Research Center of Peking University, which has not been reviewed by myself.