the central bank, introduced at the 2022 China (Beijing) Digital Finance Forum that at present, the construction of the digital renminbi ecosystem has achieved phased results. The practice has proved that the “two-tier operation” architecture is open The optimal solution for the digital renminbi ecosystem has also been widely used for reference by central banks around the world.
It is worth noting that Fan Yifei also proposed for the first time to promote the unification of norms and standards in terms of digital identity, message specifications, two-dimensional code system, Bluetooth and NFC, and to realize the interconnection between the digital renminbi system and traditional electronic payment tools. In the near future, consumers may be able to “scan with one code”, and merchants can support various payment tools without increasing costs.
Money is the same currency, the currency is the same shape
In his speech on September 8, Fan Yifei mentioned that the digital renminbi and traditional payment institutions are “one-stop scanning”, which has attracted a lot of attention. After all, this has never been mentioned in previous regulatory voices.
A reporter from Beijing Business Daily noticed that since the digital renminbi was launched on the public pilot program, there have been many misunderstandings and speculations in the market. Some people questioned what is the difference between the digital renminbi and WeChat and Alipay. Some people also misunderstand that the promotion of the digital renminbi is to compete with third-party payment institutions for the market.
In this regard, the central bank has repeatedly clarified that digital renminbi is not the same dimension as WeChat and Alipay and subsequently emphasized that digital renminbi will coexist with payment platforms. Until today, the proposal of “one-code scanning” has also given consumers more room for imagination.
As we all know, the monetary system is the cornerstone of the market economy, and the unification of standards is particularly critical. Especially in modern society where mobile payment is highly developed, it is even more necessary to break down the barriers between payment tools and improve the efficiency of fund management and consumer payment experience. Fan Yifei made it clear that the digital renminbi, as a public product provided by the central bank to the people, must reflect the people’s nature and make it easier and faster to use. Therefore, in promoting the ecological construction of digital renminbi, the acceptance environment and the expansion of application scenarios need to be broken, and the unification and specification of standards are the keys.
He further mentioned that in order to achieve “money is the same currency, the currency is the same shape” in the digital age, it is necessary to accelerate the standardization of the digital renminbi system from the dimensions of information interaction, business processes, and technical specifications.
Specifically, it is to promote the unification of norms and standards in terms of digital identity, message specifications, two-dimensional code system, Bluetooth, and NFC, and realize the interconnection between the digital renminbi system and traditional electronic payment tools, so that consumers can “one code” Through scanning”, merchants can support various payment tools without increasing costs.
In this regard, Wang Pengbo, a senior analyst in the financial industry of Broadcom Consulting, told the Beijing Business Daily reporter that the realization of “one code scanning” will be beneficial in many ways. First, the implementation of the digital renminbi requires a unified acceptance environment.
With the help of traditional payment systems, it saves resources and promotes the development of inclusive finance and payment facilitation. It is easy to serve as the underlying basic tool for realizing the interconnection of payment systems; in addition, it is also conducive to speeding up the landing of the digital renminbi, especially in offline scenarios, digital renminbi and digital currency wallets may be able to play the role of “middlemen” for interconnection.
However, in order to avoid using information leakage and eliminate data security risks, Fan Yifei also emphasized that in this process, it is also necessary to coordinate and organize all parties to upgrade and strengthen related technologies, improve the level of security protection, and ensure the safety and convenience of payment.
Avoid new information barriers
Regarding the innovative application of digital renminbi at the meeting, Fan Yifei also proposed some new directions. One prominent aspect is programmability, and customized payment can be realized by loading smart contracts.
In fact, the concept of smart contracts was proposed as early as 1994, but no application serving the real economy has been implemented for more than 20 years since then. With the rapid development of financial technology, the technical operating conditions of smart contracts are no longer an obstacle, and their wide application relies more on a credible and open ecosystem.
Fan Yifei introduced that the digital renminbi has outstanding advantages in this regard. At present, digital RMB smart contracts have been successfully applied in the fields of consumer red envelopes, government subsidies, retail marketing, and prepaid fund management, with good results.
On September 8, the digital renminbi smart contract prepaid fund management product – “Yuanguanjia” was officially unveiled. In response to the frequent problems of prepaid fund merchants running away and infringing on consumers’ rights and interests, this product also gave new ideas in recent years.
The solution: convert prepaid consumption into instant consumption, and further clarify that the ownership of prepaid funds belongs to consumers, so as to ensure that prepaid funds are not misappropriated.
For future advancement, Fan Yifei also further raised a number of issues that should be paid attention to.
First of all, the digital renminbi smart contract should play a practical role in supporting the development of the digital economy, serving the construction of the business environment, and enhancing digital governance capabilities. Secondly, digital RMB smart contracts must adhere to openness, inclusiveness, and fair competition, and must be promoted under the principles of central bank centralized management and a “two-tier operation” structure to avoid the formation of new information barriers.
It is necessary to extensively connect various external ecosystems, ensure the interoperability of smart contract systems and external systems, authentication and compliance check data, and operating environments, and more efficiently adapt to the actual needs of all walks of life.
In addition, digital RMB smart contracts should pay attention to the institutional connection and residual risk prevention. On the one hand, the legitimacy, consistency, and versatility of contract templates are an important basis for smart contracts to play the value of mandatory performance, so an effective mechanism must be established to strengthen their management.
On the other hand, the application of new technologies can help solve practical problems, but smart contracts cannot eliminate the inherent risks of various industries. It is necessary to strengthen communication and coordination with relevant industry management departments and judicial departments to jointly discuss the management of residual business risks.
Build an open ecosystem
In the case of large differences in the development of different regions in my country, how to make the digital renminbi fully inclusive and available is also a key issue that needs to be considered in supervision.
The best choice is to build an open digital RMB ecology. Fan Yifei said. The practice has proved that the “two-layer operation” architecture is the best solution for building an open digital RMB ecosystem, and it has also been widely used by central banks around the world.
“We must fully respect the laws of the market, but also cannot ignore the basic attribute of ‘public goods.” Fan Yifei further explained that, first of all, it is necessary to establish a sustainable development mechanism, pay attention to the institutional arrangements in the market economy, and promote the formation of a system that takes into account the interests of all parties.
Balance and business incentive mechanisms, continue to mobilize the enthusiasm of all parties and maintain my country’s first-mover advantage in the field of central bank digital currency.
Secondly, on the basis of respecting market laws and market players, the central bank should better play its role, guide market expectations with policies, clarify the direction of development with plans, and regulate market behavior with the rule of law. Compared with traditional payment methods, the digital renminbi has both commonality and personality, and cannot completely copy physical cash and electronic payment.
Decentralized decision-making and risk sharing
Thirdly, decentralized decision-making and risk sharing are important institutional arrangements of the market economy, which complement each other with incentive mechanisms. Digital RMB must make good use of this rule and insist on equal rights and responsibilities under the “two-tier operation” structure. On the one hand, it strengthens incentives and constraints to avoid the distortion and inefficiency of various institutional behaviors caused by asymmetric rights and responsibilities.
On the other hand, it must achieve Make independent decisions and take risks at your own risk to improve the stability of the digital renminbi ecosystem.
Su Xiaorui, a senior analyst in the financial industry of Analysys, commented that the construction of an open ecosystem will further attract various market players such as financial institutions, Internet companies, technology companies, and industrial companies, and integrate the resource endowments, application scenarios, and technical expertise of all parties.
Various advantages, while accelerating the pilot application of the digital renminbi, inject a steady stream of innovative momentum into the digital renminbi, and promote the digital renminbi to move towards a high-quality development path.