What Are the Past Lives of e-CNY

TL;DR

• The direct motivation for the PBOC to study fiat digital currency is not Bitcoin, but Giori Digital Money (GDM) advocated by Giori, a traditional banknote printing company in Switzerland.

• After Mu Changchun took over the digital currency research and development, its progress and external voice were significantly accelerated and improved.

• Compared with the dead Libra, which clearly proposed to solve the problem of cross-border payment and the payment of people without accounts, the positioning of the digital RMB, which is expected to replace domestic cash, is much more ambiguous than the former.

• It is undeniable that the progress of the People's Bank of China is ahead of schedule, but it is not the only sovereign state regulator that is making digital currency calculations.

Original Intention

Standing behind the digital RMB is the Digital Currency Institute, a rather low-key institution under the People's Bank of China.

According to the article "The Origin, Development and Future of Digital Currency" written by Yao Qian, the first director of the People's Bank of China Digital Currency Research Institute, the direct motivation for the PBOC to study fiat digital currency is not Bitcoin, but Giori Digital Money (GDM) advocated by Giori, a traditional banknote printing company in Switzerland.

Yao Qian recalled in the article that Giori proposed to establish an electronic network based on the existing paper currency system model, so as to launch the fiat digital currency GDM established and issued by the central bank, and preach to several central banks, including the People's Bank of China.

This is an interesting origin. The first step of the central bank's digital currency is to replace paper currency, but it is precisely a money printing company that started this change. Since then, in 2014, the People's Bank of China officially launched the research on fiat digital currency to demonstrate its feasibility. In 2016, the People's Bank of China Digital Currency Research Institute was established to undertake the research and development of fiat digital currency, with Yao Qian as the first director.

Yao Qian, 50, is a typical technocrat. He is an engineering doctor in the Information Management Department and the Computer Department of Nanjing University. He joined the CSRC in 1997 and worked in the Computer Management Office of the Information Center; In 2002, he was transferred to China Securities Depository and Clearing Co., Ltd. (China Securities Depository and Clearing Corporation) and served in the Technology Development Department and the System Operation Department; In 2010, he was transferred to the Central Bank and held an important position in the Credit Information Center and the Science and Technology Department.

Since 2016, Yao Qian has frequently published papers on the digital currency of the People's Bank of China, which can basically link up the idea of the People's Bank of China for issuing digital currency at that time, namely, one currency, two databases and three centers.

"One currency" refers to the central bank's digital currency, which is an encrypted digital string representing a specific amount guaranteed and signed by the central bank. "Two databases" refer to the digital currency issuance database and the digital currency commercial bank database. The former refers to the central bank's storage and issuance database on the central bank's private cloud of digital currency, which is managed according to the central bank's cash operation management system. The latter refers to the commercial bank's storage database of the central bank's digital currency, which can be in the commercial bank's data center or in the private cloud, and follow the commercial bank's cash operation management norms. The "three centers" include certification center, registration center and big data analysis center.

As a technologist, Yao Qian has great enthusiasm for blockchain, distributed finance and digital assets, and is quite cutting-edge and radical in some ideas. From some of his public articles and speeches, Yao Qian paid more attention to the connection between digital fiat currency and digital assets in the future, rather than merely being satisfied with the substitution of digital fiat currency for cash payment function. On the eve of the Spring Festival in 2017, the fiat digital currency researched and issued by the Central Bank was tested on the blockchain based digital bill trading platform.

However, Yao Qian did not continue this career. In October 2018, Yao Qian suddenly left the Institute of Mathematics and returned to China Zengdeng, where he once worked, as the general manager.

Transition

Mr. Yao was succeeded by Mu Changchun, deputy director of the central bank's payment department. Different from Yao Qian with technical background, Mu Changchun was born in a very pure financial system and served as the secretary of Zhou Xiaochuan (former governor of the People's Bank of China). According to the domestic media Caixin, Mu Changchun, 47 years old and from Inner Mongolia, has been working in the head office of the Central Bank since he graduated from the Department of Finance and Finance of the National People's Congress with a major in international finance in 1995. He has successively served in the International Department, the General Office and the Payment Department. During this period, he worked in the African Development Bank and studied at Macquarie University in Australia. In 2010, he served as Deputy Director of the General Office, and in 2017, he served as Deputy Director of the Payment Department. Mu Changchun is able, diligent, has overseas study and work background, excellent English language skills, and is highly recognized for his ability to work within the central bank system.

Six months after Mu Changchun took office, a big event happened: in June 2019, the Libra project led by Facebook officially released a white paper. It adopts a two-layer operation system similar to the digital currency of the People's Bank of China: the first layer is Libra Association plus validation nodes, and the second layer is dealers authorized by the Association. Libra Association does not sell Libra directly to the public, but sells Libra to dealers, who then sell Libra to the public.

In September 2019, Mu Changchun opened a paid course "Frontier of Science and Technology Finance: Libra and Digital Currency Outlook" on the "Get", which explained the design ideas of the PBOC's digital currency in simple terms and was also a pioneer of Chinese government officials.

In the introduction of this version, at least in terms of external setting, some minor changes have taken place: first, it is emphasized that only M0 is replaced, and other designs are not mentioned temporarily, such as linking with digital assets for corporate business; Second, it is no longer focused on blockchain or distributed ledger technology. In fact, Mu Changchun clearly pointed out that "blockchain is not suitable for payment". The Central Bank does not pre-set a technical route. When commercial institutions exchange digital currencies for users, no matter whether they use blockchain technology, traditional account systems, electronic payment tools or mobile payment tools, as long as they can meet the requirements of the Central Bank for concurrency The requirements of customer experience and technical specifications can be adopted.

After Mu Changchun took over the digital currency research and development, its progress and external voice were significantly accelerated and improved.

In August 2019, Mu Changchun said that the central bank's digital currency was "ready to come out" at the China Finance 40 Forum (CF40); In September 2019, Yi Gang, governor of the Central Bank, said that the research on digital currency had made positive progress, but there was no timetable for the introduction of digital currency; In April 2020, the Central Bank officially responded that it would conduct closed test in Shenzhen, Xiong'an, Suzhou, Chengdu and Beijing Winter Olympic Games.

Digital RMB has been online for a long time. When governments around China stimulate consumption and promote digital wallets, the consumption vouchers and subsidies issued to the market are deeply bound with digital RMB wallets, and the settlement systems of major banks and mainstream software have been opened. The era of digital RMB has already quietly come to you. Can you feel it?

Implentation

Compared with the dead Libra, which clearly proposed to solve the problem of cross-border payment and the payment of people without accounts, the positioning of the digital RMB, which is expected to replace domestic cash, is much more ambiguous than the former.

Presently, the Digital Currency Research Institute has at least cooperated with Meituan, DIDI, ByteDance, Bilibili and some government enterprise communication applications. It may soon be possible to realize the retail use scenario of digital RMB in the future, such as ordering takeout, taking taxes, rewarding the network anchors and award bonuses.

Earlier, the media reported that in Suzhou, China, some civil servants have received part of their salaries in the form of digital currency; In Xiong'an New Area, 19 companies including McDonald's have started to pilot digital currency.

Whatever the purpose, it feels like "looking for nails with a hammer". Although various papers on the central bank's digital currency have discussed various benefits, such as the ability to accurately implement monetary policy or even negative interest rate policy, reduce the cost of printing and shipping money, etc., it seems that they are not sufficient reasons for such a big fight. Especially when Alipay and WeChat payment have occupied 94% of the mobile payment market, and the mobile payment coverage has exceeded 80%, a possible reasonable explanation is:, Chinese regulators are reluctant to leave infrastructure as important as payment to the private sector.

This can be seen in the speeches of Zhou Xiaochuan, the former governor of the Central Bank, and Mu Changchun. Zhou Xiaochuan mentioned many times in public that financial infrastructure does not necessarily have to be built by government departments, but the private sector should still engage in infrastructure under the guidance and supervision of the government, or through cooperation between the public sector and the private sector. If the private sector participates in financial infrastructure, it must have a public spirit. Mu Changchun, who works in the Payment Department of the Central Bank, is no stranger to the two payment giants. Although he did not name them, he emphasized that the winner takes all issues under the network effect more than once, which is also consistent with Zhou Xiaochuan's idea.

From centralized deposit of reserves to "connection after cutting off the direct connection" (refers to the mode of direct connection with banks before the third-party payment institutions cut off, and access to UnionPay or UnionPay), from guiding the release of China UnionPay's Quick Pass to promoting "the connectivity for bar and code payment and passing code", the central bank has never given up its efforts to change the pattern of dual oligarchy in the payment market. However, after the "connection after cutting off the direct connection", the problem of duopoly has not been solved, but has been further aggravated.

Take Alipay as an example. With the help of account balance, Yu'ebao and Ant Pay, a "internal circulation" of funds has actually been formed. Once the funds of the payer have been disbursed from the bank account and entered the system of the payment institution, no one knows about the subsequent transaction except the payment institution, and no one knows about the transfer of funds between different payment accounts within the institution.

Although in the previous "Get" course, Mu Changchun emphasized that digital RMB will not affect Alipay and WeChat payment, however, the controllable anonymity function of digital RMB, which is "anonymity at the front, real name at the back" and only discloses transaction data to the central bank, a third party, means that the central bank can actually track the flow of this money, and it is difficult for the third-party payment institutions in charge to obtain relevant information. In the central bank's statement, the emergence of digital RMB is precisely to meet the public's demand for anonymous payment and avoid too much data being sold to third-party institutions. The question is, will the public think so?

This also extends to another popular guess: that is, the main purpose of digital RMB is to monitor the flow of funds, especially to fight corruption and prevent capital flight. Theoretically, if digital RMB is applied to the payment of civil servants' salaries, poverty relief funds and demolition funds, it can really monitor the flow direction and prevent misappropriation. There is no evidence to support this conjecture, but as a reasonable doubt, there is nothing wrong with it.

Conclusion

It is undeniable that the progress of the People's Bank of China is ahead of schedule, but it is not the only sovereign state regulator that is calculating about digital currency.

What kind of pattern the global central bank digital currency will take in the future is also a very difficult thing to predict. To what extent can the People's Bank of China try to explore how to change the original payment system, especially the cross-border payment system, and to what extent can central banks cooperate or confront each other. Who will be more popular with the digital currency issued by the private sector or the central bank? Or the public may not be willing to accept any payment method. Whether the original cross-border payment system, such as SWIFT, can self innovate to prevent being overtaken by later generations, they are all outstanding issues.

After all, there is a game between sovereignty and national strength behind the currency, and technology can only add to the cake, not provide timely help. Whether the digital RMB can break out of the tight encirclement, perhaps more attention should be paid to the sustained growth momentum of China's economy and the continuous improvement of its global status.

Author: Gate.io Observer: Byron B. Translator: Joy Z.

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