Technology crossover, different positioning
In 2009, Satoshi Nakamoto published the Bitcoin white paper on the website, marking the beginning of Bitcoin. The purpose of Bitcoin's development is to get rid of the constraints of third-party institutions and establish a peer-to-peer electronic cash system. Bitcoin has no issuing entity. It is generated based on cryptographic encoding and complex algorithms. During the circulation process, it relies on a distributed database composed of many nodes in the P2P network to confirm and record all transaction behaviors. This makes Bitcoin decentralized, anonymous in transactions, difficult to tamper with, and difficult to trace. Therefore, it is often used in illegal transactions such as money laundering, tax evasion, and capital flight, posing great challenges to global financial supervision.
In 2019, the global social platform giant Facebook released the Libra white paper, aiming to establish a simple borderless currency. Libra is positioned as a stable currency based on the alliance chain. Although it is similar to Bitcoin at the technical level, it is not completely decentralized. Instead, it has a management company that performs technical maintenance and information record maintenance. In addition, Facebook has also established a Libra Association with a number of leading companies to provide credit endorsement for Libra. Each newly generated Libra has a basket of bank deposits and short-term government bonds of corresponding value as asset reserves. The emergence of Libra has been opposed by central banks and financial regulatory agencies in almost all countries, believing that it will impact the legal currencies of various countries and also make central banks of various countries full of a sense of crisis.
Mu Changchun, director of the Digital Currency Research Institute of the People's Bank of China, once publicly stated that digital renminbi is neither a form of encrypted assets such as Bitcoin, nor a form of stable currencies such as Libra. According to the top-level design of the People's Bank of China, the digital renminbi is positioned as a legal tender that can replace cash under the design of a centralized, two-tier investment system. It is legal and has exactly the same functions and attributes as banknotes. Digital RMB can be loosely coupled with accounts to achieve "dual offline" payment, ensuring that both parties can successfully complete transactions even if there is no network. In addition, digital RMB will also have outstanding advantages in protecting user privacy, improving regulatory capabilities, reducing transaction costs, and simplifying cross-border payments.
In addition, compared with Libra, the former has unlimited legal liability, while the latter does not. Even though Libra's credit base is a basket of reserve assets including bank deposits and short-term Treasury bonds, it has not yet received permission from U.S. financial regulators. The digital renminbi is only used to replace cash and will not involve any other currency forms such as demand deposits and time deposits; Libra's coverage is wider. In addition, the digital renminbi supports "dual offline" payment and is anonymous; Libra must be authenticated online, and transactions must be based on a clear account concept.
"The promotion of digital renminbi has become a general trend. Its emergence can not only protect the monetary sovereignty and legal tender status of our country's legal tender in the situation of diverse digital currency classifications, but also While reducing the reliance on accounts in the transaction process, digital currencies will be the main focus of the global financial market in the future, and the country that takes the lead in launching central bank digital currencies will have a first-mover advantage," Song Jiaji said.
The product has not been moved yet, but the patent comes first
How does the digital renminbi operate, how it is launched and how it is used by ordinary people? What kind of it may be possible to get a glimpse of the design ideas and evolution path of the digital renminbi. Patent application information related to digital renminbi directly demonstrates these changes.
After a patent search, it was found that there are three entities applying for patents related to digital renminbi: the Digital Currency Research Institute of the People's Bank of China, the Printing Science and Technology Research Institute of the People's Bank of China, and the China National Banknote Credit Card Industry Development Co., Ltd. Between 2016 and 2019, these three companies submitted 97 patent applications. More than 58 patent applications were concentrated at the user function level, involving transaction exchange, wallet design, digital currency chip cards, etc.
Specifically, in terms of wallet form selection, the design method of digital currency chip cards is similar to the IC phone card model, through entity-based chips The card sets up an electronic wallet, and the card can be used for currency deposits and withdrawals at ATM terminals. This digital currency does not break away from the original bank card model based on the account system, and fails to give full play to the advantages of smart terminals. Wallets based on payment terminal devices directly set up the wallet on mobile terminals such as mobile phones, and the usage experience is more similar to third-party payment. There are essential differences between these two wallet forms in terms of architecture, anonymity, and account system dependence.
In terms of changes in the underlying architecture, before 2017, the patented technologies related to digital renminbi were all distributed architectures, which were distributed using the blockchain and could not be tampered with. Set up a multi-center ledger system to achieve anonymity by assigning a new address to each transaction. After 2017, the design of the underlying architecture clearly leans towards centralization. Transactions are recorded through a centralized digital currency registration center, which has stronger scalability and avoids the contradiction between decentralization and unified supervision by the central bank.
The two-tier investment system of digital RMB means that the People’s Bank of China (digital currency issuance library) first releases digital currency to commercial banks or institutional libraries similar to commercial banks ( Digital currency bank library), and then a commercial bank or an institutional library similar to a commercial bank exchanges digital currency to the public (personal digital currency wallet). This system is basically the same as the existing banknote issuance mechanism and has good continuity. The People's Bank of China Digital Currency Research Institute's patent "A method and system for realizing digital currency exchange deposits based on digital currency" (Patent No.: ZL201710494153X) shows that among commercial banks, banks with digital currency issuance rights are "responsible for executing the transfer and transfer of digital currencies." Confirm rights, provide digital currency wallets for storing digital currencies, and exchange them based on the bank account bound by the user, so that the digital currency wallet and its exchange process can be fully integrated into the existing banking system. "Individual users can open separate ones at different commercial banks. Digital currency wallet, and log in to different wallets through a unified digital RMB wallet entrance to operate. For individuals with bank accounts, they can directly cash out their current deposits into digital currencies; for individuals without bank accounts, they can only obtain digital currencies through digital currency terminal recharges or transfers from others. With digital currency in the wallet, transaction operations can be performed, including offline face-to-face "dual offline" operations, that is, transactions realized through the near field communication function of smart terminals, and online third-party payment scenarios, such as "confirm receipt" in online shopping. "Pay later" conditional transaction scenario.
Opening the barriers, we can look forward to the future
The impact of digital renminbi on financial technology business Depends on whether the data is open. Payment is an important entrance for financial technology companies and banking institutions to collect user behavior and scenario data. The impact of the digital RMB transaction function will have a profound impact on the current traffic monetization model that uses payment tools to accumulate traffic, collect customer data, and provide consumer finance and other services, mainly involving online customer acquisition, smart marketing, smart risk control, etc. based on payment fintech or financial solutions business.
If digital renminbi managers can open digital currency payment transaction data analysis interfaces to financial technology companies and others while protecting data security and privacy, it will help break down data silos and promote better and faster development of financial digital transformation.
Of course, some entities in the financial industry chain can also usher in new opportunities during the implementation of digital renminbi. In Song Jiaji's view, bank IT, identity authentication, and payment services are the three main areas of opportunity. Whether it is developing digital currency systems for central banks or commercial banks, or developing user access and application systems, digital renminbi cannot leave bank IT service providers. In the technical path of digital renminbi, identity authentication is an indispensable link. Related technologies include encryption technology and identity authentication qualifications. Companies with relevant reserves in this regard may benefit. In addition, although the digital renminbi adopts a two-tier operating system, "wallet service providers" other than commercial banks are not excluded. Manufacturers with electronic payment experience or licenses are also expected to be shortlisted for the pilot. (Li Yangfang)