Digital RMB internal measurement, super function! Will it replace cash?

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Original title: Digital RMB internal test, super function! Will it replace cash?
Beijing, Beijing, May 3 (reporter Li Jinlei) recently, with the exposure of an internal test picture of a digital currency wallet, the central bank’s digital currency, which has been studied since 2014, has finally opened a corner of the mystery.
Digital currency map. Photo source: visual China
Digital currency open internal measurement
The digital currency Research Institute of the people’s Bank of China recently revealed that the current online digital RMB system (DC / EP) information is the test content in the process of technology research and development, but it does not mean that the digital RMB is officially launched. In the current stage, the pilot test of internal closure will be carried out in Shenzhen, Suzhou, xiong’an, Chengdu and the future Winter Olympics.
According to media reports, from May, 50% of the transportation subsidies in the salaries of some employees of the government departments, enterprises and institutions in Xiangcheng District of Suzhou will be paid in the form of digital currency.
Digital currency has opened the internal test, everyone’s curiosity has been aroused, and a series of questions have come one after another: what is digital currency? What are the benefits? How to release and use? Will it completely replace paper money? Will it replace Alipay and WeChat? Will it cause inflation?
What is digital currency?
In short, the central bank’s digital currency is a digital alternative to paper money. It has an English Name: DC / EP (digital currency electronic payment), that is, digital currency and electronic payment tools.
“The functions and properties of digital currency are exactly the same as paper money, but its form is digital.” Said Mu Changchun, director of the central bank’s digital currency Research Institute.
Yi Gang, governor of the people’s Bank of China, said at a press conference in 2019 that in the future, the goal of China’s digital currency and electronic payment is to replace part of M0 (cash in circulation), rather than the narrow money M1 (cash in circulation + demand deposits of enterprises) or the broad money M2 (cash in circulation + demand deposits of enterprises + time deposits + savings deposits of residents + other deposits).
Zhao Xijun, vice president of the school of Finance and finance of Renmin University of China, told chinanews.com that digital currency can circulate like paper money, and its positioning is the replacement of cash. Like cash, it is legal currency, with national credit endorsement and unlimited legal compensation. No one can refuse to accept it.
Infographic: people pass by the people’s Bank of China. Photo by Zhang Xinglong, reporter of China News Agency
How good is digital currency?
Mu Changchun once described such a scenario: as long as you and I have digital wallets of DC / EP on mobile phones, you don’t need the network. As long as the mobile phone has power, one touch of two mobile phones can transfer the digital currency in one person’s digital wallet to another person.
Moreover, when making payment, there is no need to bind any bank account. Unlike WeChat or Alipay, it is necessary to bind a bank card, but DC/EP does not need it.
Mu Changchun said that unless you want to charge money to the digital wallet, or you want to withdraw money from the digital wallet to manage money, in addition, the mutual transfer between users does not need to bind the account. This means that DC / EP can flow like paper money.
Dong ximiao, chief researcher of Xinwang bank, told zhongxin.com that digital currency can realize “dual offline payment”, and both the revenue and expenditure can also be paid offline. As long as the mobile phone has power, even if the whole network is disconnected, payment can be realized. This is indeed more advantageous than WeChat payment and Alipay.
In addition, digital currency can realize controllable anonymity, that is to say, it can meet the demand of anonymous payment. As long as you don’t commit a crime, it can be used for consumption that you don’t want others to know. The payment of Alipay and WeChat is tightly tied to the traditional bank account system. They are all paid by real names and can not meet the needs of anonymity.
How to release and use?
It is understood that digital currency adopts the same “double-layer operation” delivery mode as cash – the people’s Bank of China to commercial banks, commercial banks or commercial institutions to the public. It does not issue digital currency directly to the public.
Yi Gang once explained that “the future framework of our digital currency is a two-tier operation system of the central bank and commercial banks, which does not change the current monetary delivery path and system, so as to fully mobilize the enthusiasm of the market.
Mu Changchun pointed out that the exchange of digital currency will still maintain this structure: commercial banks open accounts in the central bank, pay 100% of the reserves in full, and individuals and enterprises open digital wallets through commercial banks or commercial institutions.
So for users, they don’t need to go to commercial banks. Just download an app, register it, and the wallet can be used. For example, to receive other people’s payment, or to exchange digital currency, you just need to use your bank card to exchange.
Digital currency map. Photo source: visual China.
Will it completely replace paper money?
Mu Changchun introduced that the central bank’s digital currency DC / EP should start from M0, that is to say, it should start from replacing paper money and coins in circulation, not all RMB. In fact, the balance in the commercial bank account is already in digital form, so there is no need to replace it.
According to Dong ximiao, digital currency cannot completely replace cash. At least for now, there are still some technical limitations. In addition, due to different user habits, not everyone is used to this payment method. For example, some older people may not accept digital currency. However, if the digital currency is officially launched, the bank or merchant cannot refuse to use it.
Zhao Xijun said that there are two constraints for digital currency to replace paper currency, one is whether users are willing to use it, and the other is whether technical conditions can be met, because the speed of transaction payment is subject to technology. When the number of transactions breaks a certain limit, it may cause failure, downtime and software crash.
Will Alipay and WeChat pay?
“Alipay or WeChat?”
“I use digital currency!”
In the future, this kind of scenario may become a reality.

Dong Ximiao pointed out that the central bank’s digital currency is legal tender, while WeChat payment and Alipay are just a way of payment. The effectiveness of digital money is not the same as WeChat’s payment and Alipay. From the perspective of users, the central bank’s digital currency is more widely used, with unlimited legal compensation and mandatory, while other means of payment do not have this function.
“Specifically, there is no legal problem for organizations or individuals to accept Alipay or WeChat payments. But it’s illegal to refuse users to pay in cash or digital currency. ” Dong Ximiao pointed out that there may be a possibility that the number of people using the central bank’s digital currency is increasing, and that people who use Alipay and WeChat pay less and less.
Zhao Xijun said that after the introduction of digital currency, because it can pay offline, has higher security and wider use scope, and does not bind bank accounts to achieve controllable anonymity, it is expected that the use scale of both sides will change.
Will it lead to inflation?
If the cost of digital currency is low, will over issuance lead to inflation?
Xu Yuan, a senior researcher at the digital finance research center of Peking University, believes that digital currency and paper currency are exchanged one by one. To obtain digital currency, commercial banks must exchange the former currency instead of increasing the total amount. This is the first step, and the total amount will not be increased during the pilot period.
The central bank said that considering that the early digital currency is only limited to pilot projects, it will not issue and comprehensively promote a large number of currencies in the short term, and the velocity of currency circulation will maintain a normal level.
Do you expect digital currency? (end)