At the just-concluded 2020 National Two Sessions, blockchain became a hot topic. According to incomplete statistics from Tiantian Lianxun, during the two sessions this year, a total of 53 deputies to the National People's Congress and members of the CPPCC National Committee submitted relevant bills and proposals on blockchain, covering product traceability, copyright protection, medicine and health, and digital currency.
Tiantian Lianxun had a dialogue with Professor He Ping from the School of Economics and Management of Tsinghua University, and analyzed and interpreted the central bank's digital currency (DCEP), digital asset transactions and other related content.
Professor He Ping is the director of the China Financial Research Center of the School of Economics and Management, Tsinghua University. He initiated the establishment of the Blockchain Finance Research Center of the Tsinghua School of Economics and Management. He is an expert in the field of digital financial research.
He believes that DCEP is actually a kind of electronic cash, which is M0 in the currency system. Its functional attributes are exactly the same as paper money, but it exists in digital form.
Compared with banknotes, B2B payment will be the largest application scenario of DCEP, and as the trend of industrial integration accelerates, B2B payment scenarios will continue to increase and the frequency of transactions will become more frequent, and the role of DCEP will become more prominent.
As for the statement that "DCEP will replace the role of commercial banks, Alipay, and WeChat payment", Professor He Ping pointed out that this is inaccurate. DCEP will not completely replace existing channels, but it will increase people's preference for holding currency.
With DCEP, the functions and roles of commercial banks as monetary policy implementation channels will be clearer and clearer. Quantitative monetary policies with fiscal attributes can be issued directly to economic individuals through DCEP, while price-based monetary policies can be implemented through commercial banks. Produce effects through market mechanisms.
He judged that the time for the large-scale application of DCEP is still unclear. The biggest problem before landing is to do a good job in the top-level design, straighten out the logic, and avoid causing too much impact on the existing currency system and causing chaos.
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Cryptocurrencies such as DCEP and BTC are very different
Tiantian Lianxun: The digital currency DCEP of the People's Bank of China has begun internal testing in Chengdu, Xiong'an and other places. How do you define DCEP? What is the difference between it and cryptocurrencies such as BTC in circulation on the market?
He Ping:DCEP is actually a kind of electronic cash, which is M0 in the currency system. Its functional attributes are exactly the same as paper money, but it exists in digital form.
DCEP can realize traceability, anti-counterfeiting, and directional circulation of every transaction, and its entire life cycle from issuance, circulation to recycling can be fully traced and closed-loop controllable. This also makes DCEP have many advantages that paper money does not have: for example, it is conducive to strengthening the supervision of criminal acts such as money laundering and corruption; it can achieve more accurate monetary policy and macro-control through big data analysis.
In addition, banknotes will have printing, transportation, storage and other costs during the issuance process, and there will also be some losses during the circulation process, while DCEP can solve these problems well, reduce costs, and improve the efficiency of large transactions .
The difference between DCEP and cryptocurrencies such as Bitcoin is very large. First of all, technically speaking, DCEP does not completely adopt decentralized blockchain technology like Bitcoin. DCEP rarely uses blockchain technology, but there are some distributed ledger designs.
Bitcoin is completely decentralized. Although the risk of large-scale attacks rarely occurs due to cost issues, the risk of a single node account being attacked is still high. DCEP, on the other hand, is centralized, technically more secure, and the risk of being attacked is very low.
The most important thing is that the central bank's digital currency is backed by national credit as a legal currency, and its price is relatively stable, and there will be almost no major fluctuations. However, cryptocurrencies such as Bitcoin are more digital currencies with investment attributes, and their prices are completely determined by market expectations, which is extremely unstable.
Tiantian Lianxun: Many countries in the world are designing and developing central bank digital currency. Digital currency first appeared in foreign countries. Why is China ahead of developed countries such as Europe and the United States? What is the strategic significance of China's issuance of DCEP?
He Ping:Whether it is from a domestic or international perspective, it is very necessary for China to launch DCEP.
From a domestic perspective, DCEP is an improvement and enhancement of the existing monetary system through technical means. With the development of the industrial Internet, my country has entered the era of digital economy represented by 5G, Internet of Things, artificial intelligence, etc. DCEP can better adapt and meet the social development needs of the era of digital economy. In the long run, it will definitely produce huge positive impact.
From an international point of view, after the Bretton Woods system, the U.S. dollar established its hegemony in the world monetary system. In the following decades, the U.S. made further progress through the large financial institutions it controlled and the link between the U.S. dollar and oil transactions. It has consolidated the hegemony of the US dollar and established the US dollar-dominated SWIFT international currency settlement system around the world.
Although all countries are aware of the various disadvantages of the US dollar as a world currency, the US dollar has a long-standing hegemony, and it is still necessary to use the US dollar when conducting international trade settlements. Therefore, establishing a diversified international currency settlement system is a method that can improve efficiency and be safer.
The digital currency represented by DCEP can realize point-to-point direct transactions, and can bypass the dependence on financial institutions controlled by the United States in international trade settlement. It is also more efficient than traditional SWIFT, and it is very likely to establish an independent An international monetary settlement system other than the US dollar system.
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The biggest application scenario of DCEP is B2B payment
Tiantianlianxun: Compared with banknotes, what natural application scenarios do you think DCEP will have?
He Ping:The biggest application scenario of DCEP is B2B payment. At present, there is actually a lack of specialized B2B payment institutions in China. B2B payment and settlement are mainly completed by commercial banks as intermediary agencies. Due to the huge amount of funds involved, high security requirements, docking, approval, accounting and other processes are very complicated. , time-consuming and inefficient.
DCEP can solve these pain points very well. Institutions with B2B payment and settlement needs can open DCEP accounts, and conduct point-to-point direct transactions through DCEP accounts, which can not only ensure security, but also greatly improve efficiency.
As the current trend of domestic industry integration continues to accelerate, B2B payment scenarios will continue to increase and the frequency of transactions will become more frequent, and the role of DCEP will become more prominent.
In addition, in B2B payment and settlement scenarios involving cross-border transactions, DCEP can bypass the restrictions of financial institutions in the United States, and the two parties conduct direct transactions through DCEP accounts. This is conducive to promoting the internationalization of the RMB.
Tiantianlianxun: It was previously reported that the digital currency wallets of banks such as Agricultural Bank of China, Bank of China, and China Construction Bank are all under test. Will such digital currency wallets replace existing e-wallets such as Alipay and WeChat wallets in the future? In addition to banks, is it possible for companies to participate in the construction and operation of DCEP?
He Ping:DCEP is M0, Alipay, WeChat, etc. are M1 or M2. The DCEP wallet will not completely replace mobile payment software such as WeChat and Alipay, but it will increase people's preference for holding coins.
As mentioned earlier, the biggest application scenario of DCEP is B2B payment, while Alipay, WeChat, etc. are more for C-end retail consumption scenarios, and the popularity is already quite high, and it is very convenient to use, so there is no need to replace them.
However, Alipay, WeChat Pay, and commercial banks may increase deposit interest rates in order to attract users, which will increase their deposit absorption costs.
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DCEP makes the functional division of commercial banks and the central bank more clear
Tiantianlianxun: In theory, DCEP can be issued directly to enterprises or individuals without going through commercial banks. Will this weaken the role and status of commercial banks?
He Ping:Actually weakening is an inaccurate word. It should be said that with DCEP, the functions and roles of commercial banks as channels for monetary policy implementation are clearer and clearer. Quantitative monetary policies with fiscal attributes can be issued directly to economic individuals through DCEP, while price-based monetary policies can be implemented through commercial banks, with the help of market mechanisms to produce effects.
After the use of DCEP, some monetary policies with fiscal policy attributes can be completed by the central bank through the DCEP account. For example, the central government’s loans to small and medium-sized enterprises and subsidies to residents can be directly completed through DCEP combined with the corresponding asset and liability operations of the central bank and government departments, and the central bank can track and supervise the flow of funds through DCEP to better regulate.
In the past, when commercial banks implemented some fiscal policies and monetary policies, due to the lack of incentives, these policies may not be able to give full play to their effects, which greatly reduced the effect of macro-control. With DCEP, the central bank itself can directly operate monetary policy with fiscal attributes, and commercial banks focus on becoming a channel for market-oriented monetary policy.
Tiantian Lianxun: How long do you think it will take for DCEP to be applied on a large scale? Has the pandemic accelerated its development? What problems still exist in the actual landing application? Is there a good workaround?
He Ping:The large-scale application of DCEP may take about half a year to a year, but it depends on the effect of the pilot and the corresponding top-level design. Before large-scale application, the top-level design must be done well, and there must be a systematic plan that conforms to the logic of economics and currency.
Including which fields DCEP should start from, which institutions should participate, and how it is compatible with the existing financial system, etc., are all issues that need to be considered in advance.
To sum up, there are eight words: clear thinking and steady progress. If the entire operating logic of DCEP is not straightened out, don’t promote it easily, so as to avoid the failure of a new system to be established and disrupt the stability of the existing financial system.
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Digital asset trading center and digital currency exchange are completely different
Tiantian Lianxun: Both Chengdu and Hainan have announced the establishment of digital asset trading centers. What is the difference between this digital asset trading center and private digital currency exchanges? Why did the government set up such a trading center? Which assets are mainly traded?
He Ping:Digital asset exchange and digital currency exchange are two completely different concepts.
Digital asset exchanges use data as assets for transactions. Various valuable objects such as digital photos, videos, music, digital cultural and creative designs, and copyrights are all digital assets and are within the scope of transactions.
Even some of our own data, such as consumption data, health data, etc., may be traded through digital asset exchanges in the future, and these personal data are often used by companies for free.
The transaction of data assets is encouraged by the government. Not long ago, the government has defined data as factors of production and production capital, which means that data can generate greater value through circulation and transactions through digital asset exchanges.
On the other hand, digital currency exchanges use cryptocurrencies as the underlying assets of transactions. Bitcoin and even some worthless air coins and virtual coins can be traded on digital currency exchanges. The legality of these cryptocurrency transactions has not been recognized by the government. will be strictly regulated by the government.
Tiantian Lianxun: It is understood that many blockchain technology companies are actually not making money at present, and they are in the predicament of making profits. Do you think there is a good business model for them to survive and make profits better?
He Ping:Many people think that the business model of the blockchain should be a decentralized model similar to the Bitcoin system. In fact, this is a cognitive error. For blockchain technology, it does not have to be completely decentralized. A better model is to supplement and improve the centralized model.
For blockchain companies, a good business model should be 1+1, not from 0 to 1. Blockchain technology should be integrated with the existing centralized model rather than subverted.
Tiantianlianxun: Since October 24, the central government and the local government have attached great importance to the blockchain. At the two sessions this time, many representatives and committee members have proposed many blockchain-related proposals. Why did the government work report this time not No mention of blockchain? Does this mean that the strategic position of the blockchain has changed?
He Ping:In fact, there are a lot of hype in the current blockchain heat, and the blockchain is not as omnipotent as some people say. There is no direct mention of blockchain in the government work report, which does not mean anything, so there is no need to over-interpret it.
Generally, the work reports of the two sessions report on relatively mature projects, and the blockchain is still in a very early stage. Many policies and projects have not yet been implemented, and there are relatively few achievements worthy of being included in the report. Therefore, the government In this regard, we will be more cautious and prudent. The development of blockchain is the future direction, but when the current global epidemic is still relatively serious, it is obvious that stabilizing employment and ensuring people's livelihood is a more important issue.
This does not mean that the government does not pay attention to the blockchain. The central government has made it clear that it will raise the blockchain to the national strategic level. It must attach importance to and support the development of the blockchain, but it is still in the exploratory stage.
