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Cyber Bitcoin
Edited by qqqpeter at 2019-7-23 10:36

In 2014, under the advocacy of Zhou Xiaochuan, the then central bank governor, the central bank began research and development on crypto and central bank digital currency.

Facebook Libra and other cryptocurrencies are getting more and more attention from senior government officials. Facebook Libra and cryptocurrencies are getting more and more attention from senior government officials.

At the launching ceremony and the first academic seminar of the Digital Finance Open Research Project held on July 8, Wang Xin, director of the Research Bureau of the People's Bank of China, revealed that the State Council has officially approved the research and development of the central bank's digital currency. Currently, the central bank is organizing market institutions to engage in corresponding work.

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Wang Xin, Image from Sina Finance Blockchain

In the speech, Wang Xin introduced the latest research on Facebook Libra, central bank digital currency and digital finance. Wang Xin said that the development of technology has made past transactions and industry restrictions not exist in the digital age. Facebook Libra and other stable coins are used as payment instruments. If they are widely used, they can play more money functions, thereby affecting legal currency and reducing the effectiveness of the monetary policy.

The currency is behind interests, power, international politics, diplomacy. If a payment instrument plays the role of money, it will inevitably impact the legal currency, thus directly affecting a country's currency regulation, financial regulation, and all aspects.

In addition, Wang Xin also discussed how to deal with Libra challenges and strengthen international cooperation in digital finance. The core content includes the following 10 points:

1. In 2014, under the auspices of Zhou Xiaochuan, the then central bank governor, the central bank began research and development on digital currency and central bank digital currency.

2. When Facebook launched Libra, the central bank's digital financial research platform was established at the same time, and it was supported by Alibaba Ant Financial.

3. Now that the Central Bank has been officially approved by the State Council, it is organizing market institutions to conduct research and development of the central bank's digital currency.

4. The research and development of the central bank's digital currency is currently managed by the Central Bank's Monetary Fund Bureau, and Wang Xin is the head of the Central Bank's Monetary Fund.

5. The central bank had worried that cryptocurrencies such as Bitcoin would replace French currency in some respects. However, there are fierce price fluctuations in cryptocurrencies such as Bitcoin, and the transaction is inconvenient. In the end, the central bank believes that the impact of cryptocurrencies such as Bitcoin on financial stability and monetary policy will not replace the real currency to a large extent.

6. However, the launch of Libra has attracted the attention of the central bank. Because it claims to be a basket of currencies, it solves the problem of trust and widespread use to some extent. In addition, it is based on Facebook's large-scale social networking platform. With further use, in addition to its potential to play a role in the payment field, it may also exercise its monetary function. This may have a major impact on the monetary policy, financial stability and even the international monetary system of each country.

7. In order to promote the research and development of the central bank's digital currency, the central bank has set up a central bank digital currency research institute to cooperate closely with the localities in Shenzhen and other cities to carry out system research and development.

8. How to deal with Libra's challenges? Current ideas include: speeding up the introduction of central bank digital currencies, countries issuing their own Libra-like products, and the IMF (International Monetary Fund) previously proposed to issue a super-sovereign digital currency.

9. Rethinking the regulation of cryptocurrencies: In the past few years, we (the central bank) adopted a very strict attitude towards virtual currency and virtual assets. What attitudes and strategies should I take after Libra?

10. In the field of digital finance, it is necessary to strengthen international coordination and cooperation, and it is particularly necessary to issue the voice of China as soon as possible. The voice of China does not necessarily represent the voice of the government. It should also have many important voices of the market and folk voices.

The following is the full text of the speech by Wang Xin, Dean of the Central Bank Research Institute:

Dear Director Li, experts, colleagues, good morning everyone!

I am very happy to have this opportunity to participate in the conference established by the open platform. I think this is really a strong joint academic research platform. Just now, Mr. Huang Zhuo mentioned Libra. In fact, when Facebook released Libra, our digital financial research platform was also established. I think this may not be a coincidence. At least it shows that domestic and foreign countries attach great importance to digital finance, financial technology, etc., and not only from academic research, practical applications and so on, they have raised very urgent issues. Our platform is a number of academic institutions, and we have the support of Ant Financial, our country's most advanced leader in digital financial innovation. At the same time, our very important feature is that our digital finance started. Focus on the real economy and focus on inclusive finance. I think it is very important to continue to compete with peers internationally, maintain a leading position, and ultimately serve the real economy.

Our People's Bank has also been highly concerned and involved in relevant research work. In 2015, our institute established the Internet Finance Research Center. I am also responsible for the work of the IMF, which was originally responsible for the traditional cash business. Most of them are young people, and everyone rarely uses cash. With the rise of Ant Financial, Tencent and other platforms, I thought that my work would be easier and more time to read some books. But I did not expect that, instead, we will participate more in new jobs. From 2014, the Central Bank began its research and development work on digital currency and central bank digital currency under the strong initiative of President Zhou. Now, the Central Bank has officially approved the State Council and is organizing market institutions to conduct research and development of the central bank's digital currency. This work should be said to start early, but as Mr. Huang said, can we continue to maintain our leading position and we need to do a lot of work.

In short, the difference is wrong. Because the central bank's digital currency is defined as M0 in China, it is a partial replacement of cash, so this work also fell to our Monetary Fund. Cash is the most traditional form of currency, and it has since entered the most advanced form of digital currency. We feel that the pressure is very large, and we are eager to cooperate with the industry, academia, the financial community, and the Internet companies to participate in relevant research.

Today, I would like to briefly report to you from the perspective of the Central Bank, introducing some international organizations and new things in the digital finance field that the central bank is paying more attention to. Of course (in this area), before, more is the impact on payments. As we all know, Tencent, Ant Financial, and so on, have made very fast progress in payment. Later, virtual currency, or digital assets, appeared. Everyone is concerned about whether it will form a substitute for the currency. However, due to the volatility of its prices and the inconvenience of transactions, international organizations such as the FSB (Financial Stability Board) believe that it has not really played the role of money for a long period of time, and therefore in the context of financial stability and monetary policy. In terms of impact, it does not replace the real currency. Therefore, the impact on monetary policy is not very large, and the impact on financial stability is not great. Of course, they also raise other important issues.

With the birth of Libra, this time everyone attaches great importance to it. Because it is known as a basket of currencies, it solves the problem of trust and widespread use to a certain extent - because it is based on a large platform. If Libra is expected to achieve significant development prospects in the payment field, especially in the cross-border payment field, then the scope of use will be further expanded, will Libra play more of its monetary function? This problem is very big. Monetary policy, financial stability, and even the international monetary system of all countries may have a major impact. Everyone guesses how much the dollar will play in the back of it. Is it a package of anchored currencies, and the real trend is to anchor the dollar? If the final digital and virtual currency fields are also closely related to the US dollar, then the international monetary system may form a situation in which the former legal currency and the US dollar-centered digital currency coexist. But in the end, everyone is likely to think that it is just a boss, that is, the US dollar, the United States.

If this is the case, it will bring not only economic and financial problems, but also a series of complicated issues such as international politics and political economy. So the discussion in this area is much broader than the dimensions discussed by everyone two months ago. The establishment of our research platform is just the right time. In the next stage, we are also very willing to contribute. From the perspective of policy research, practice, monetary policy, financial stability, etc., we will work with you to conduct more interesting research.

I mainly talk about two aspects:

The first part is to introduce some of the concerns of major international financial organizations and central banks on digital finance and financial technology from the perspective of our central bank;

The second part, from my personal point of view, the next stage at least from a policy perspective, people may be more concerned about the issue, for your reference.

From the perspective of the government and the central bank, we are concerned about three aspects: the first is the impact on financial services, the second is the impact on monetary policy, and the third is the impact on financial stability.

The first aspect is the impact on financial services. Many studies believe that regardless of the development of financial technology or the rise of digital finance, financial technology can enhance the efficiency of financial services, promote service innovation, and bring more efficient and accurate services. The application of artificial intelligence technology can greatly optimize the business model of financial institutions, and will also have an important impact on the behavior of banks. More creative companies can use the Internet and new formats to get credit faster and promote economic growth. For the technology giant, everyone’s interest is getting stronger and stronger. Technology giants can provide high-efficiency, more convenient, and lower-cost financial services, all of which stem from financial innovation itself, but also from the increased competition brought by technology giants. In the product area, these stickiness to customers, to financial institutions and customers, and to the impact of competition, have brought about direct changes.

Obviously, the development of financial technology and financial technology giants will force the transformation of traditional financial institutions. As we all know, big banks are now investing heavily in financial technology, and their progress in these areas is also very fast. At the same time, small and medium-sized banks attach great importance to this piece. They are at the front line of inclusive finance and supporting small and micro enterprises, but now they do not have enough strength to make major investments in financial technology. I will also mention later how to help small and medium-sized banks to catch up with the rapid development of financial technology, transform their business, technology, etc. These are all important issues in the next stage.

Financial big data has made important changes in quantitative investment and smart investment. The development of technology finance enables financial institutions not only to adhere to KYC, to understand your customers, but also to understand your data because of the importance of data. In this way, the risk can be more accurately priced and the effective allocation of financial resources can be realized.

In these respects, promoting the development of digital inclusive finance is a very important application area. In this regard, the People's Bank of China has always attached great importance to it and has always played a leading role in international financial exchanges and international cooperation. At the 2016 Hangzhou Summit, the People's Bank of China represented China as the chairman of the G20 Global Inclusive Finance Partner. At that time, it promoted the introduction of the G20 inclusive finance advanced principles. Since then, the People's Bank of China has also served as the chairman of the joint GPFI (Global Partners for Inclusive Finance) and has been an advocate of Digital Inclusive Finance. Therefore, the People's Bank of China has been cooperating with relevant countries to promote related work. It can be said that digital finance is promising. Because of the characteristics of inclusive finance itself, traditional financial institutions have shortcomings and disadvantages in accessing inclusive finance. With the help of digital finance and financial technology, people can overcome the problem of inclusive financial risk, high cost and low profit to some extent. Of course, with the low-cost collection of large amounts of data and the effective application of scientific and technological means, traditional concepts may also be broken, not necessarily because of high cost and low returns. For example, the familiar practice of Ant Financial is also the use of the power of technology to achieve low-cost provision of inclusive financial services.

We also have some discussions on the impact of monetary policy. This is the area of ​​greatest concern to the central bank, especially in terms of digital currency. The impact on monetary policy is now more discussed, there are several angles:

1. Intensifying competition in the financial industry, big data has improved the ability of financial institutions and the real economy to obtain information. The market may be more responsive to interest rates, making monetary policy more efficient. But it can also lead to overreaction.

2. The development of financial technology has promoted the expansion of non-bank financial institutions. in tradition. Monetary policy is basically transmitted through commercial banks. If more and more financial services and financial services are carried out through non-bank financial institutions, then the transmission of monetary policy will obviously have a direct and significant impact.

3. The impact on asset prices. As we all know, in addition to paying close attention to the CPI price index, the central bank has been arguing about whether or not to pay attention to asset prices. But in any case, the central bank should pay attention to changes in asset prices and economic cycles, which is the unshirkable responsibility of the Central Bank.

In the case of the development of financial technology, changes in asset prices will also have a direct impact. In some transactions on the e-commerce platform (of course, many of them are the transaction prices of traditional commodities), some adjustments in the use of financial technology in the asset market will be more frequent and dramatic.

Virtual currency. If virtual currency can replace traditional currency to a greater extent, and the central bank is mainly targeting traditional currencies, the effectiveness of its monetary policy will certainly decrease. Especially Libra, everyone is very concerned. Libra is likely to be widely used with the participation of the large platforms on its back, as well as a large number of usage scenarios. Some people even think that at a certain stage, it relies on a basket of legal coins as a credit support. However, if it can rely on its own market trust, and thus will be used more and more as a value store, or even as a credit, then virtual currency may have the function of money creation, and the impact on monetary policy will be greater. This is a very controversial issue.

The last point is very important and probably a very important aspect, namely how to strengthen international coordination and cooperation in the field of digital finance. In this regard, our industry and academics have played a very good role, such as high-level dialogue with the IMF (International Monetary Fund). In fact, there is now more and more discussion on the international financial policy platforms such as BIS (BIS), IMF, etc. On these platforms, we especially need to voice China as soon as possible. The voice of China does not necessarily represent the voice of the government. It should also have many important voices of the market and folk voices. In this way, we can better safeguard China's interests and promote the development of our digital finance in terms of international policy discussions, rule standard setting, and even real competition for products and services. Ultimately better support the real economy and better prevent financial risks.
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