Economic Information Daily: The central bank has obtained 74 digital currency patents and will accelerate the research of legal digital currency

Accelerate the pace of research and development of my country's legal digital currency (DC/EP), track and study the development trends of virtual currencies at home and abroad, and continue to strengthen the rectification of Internet financial risks.

The People's Bank of China held a video conference on the work of the second half of 2019 on August 2, and made arrangements for the key tasks in the second half of the year. The meeting required that eight key tasks should be completed in the second half of the year, one of which is to develop financial technology in accordance with the situation, strengthen follow-up research, and actively meet new challenges. Accelerate the pace of research and development of my country's legal digital currency (DC/EP), track and study the development trends of virtual currencies at home and abroad, and continue to strengthen the rectification of Internet financial risks.

Digital currency and cryptocurrency have become hot topics in the market recently. Facebook officially announced the Libra cryptocurrency plan, which aims to create a stable currency based on a secure and stable open source blockchain, which is backed by real asset reserves and managed by an independent association. On August 1, the US Patent and Trademark Office disclosed documents showing that retail giant Walmart is applying for a patent for digital cryptocurrency. Not only commercial institutions, but also central banks of many countries, including the Bank of England, the Bank of Canada and the Swedish Central Bank, are also conducting research and development of legal digital currencies. The IMF once stated that it plans to launch a global digital currency, IMF Coin, based on the Special Drawing Rights (SDR) mechanism.

The research and development of legal digital currency in my country started a few years ago. Wang Xin, director of the Research Bureau and the Currency, Gold and Silver Bureau of the People's Bank of China, said in public recently that in order to promote the research and development of the central bank's digital currency, a digital currency research institute of the central bank was specially established to work closely with local governments in Shenzhen and other regions to carry out systematic development. Public information shows that in 2017, the Digital Currency Research Institute of the People's Bank of China was officially established to carry out digital currency research. Since then, the institute has actively deployed research and development institutions in various places. On June 15, 2018, Shenzhen Financial Technology Co., Ltd. was established, and the company is 100% controlled by the Digital Currency Research Institute of the People's Bank of China. In September 2018, the "Nanjing Financial Technology Research and Innovation Center" and the "Digital Currency Research Institute of the People's Bank of China (Nanjing) Application Demonstration Base" were officially unveiled. The Economic Information Daily reporter checked the patent search system of the State Intellectual Property Office and learned that as of August 4, 2019, the Digital Currency Research Institute of the Central Bank had applied for a total of 74 patents involving digital currency.

Wang Xin said that the central bank's digital currency is defined as M0 in China and is a substitute for cash to a certain extent. He also pointed out that the digitization of the central bank's currency will help optimize the central bank's currency payment function, improve the central bank's currency status and the effectiveness of monetary policy. The central bank's digital currency can become an interest-bearing asset that meets the holder's reserve demand for safe assets, and can also become the lower limit of bank deposit interest rates. In addition, the central bank's digital currency interest rate can become a new monetary policy tool. The central bank can influence the bank's loan interest rate by adjusting the central bank's digital currency interest rate, which will help break the zero interest rate lower limit.

Industry insiders said that China has created the most digital assets in the world. In this case, China has advantages in issuing legal digital currency and needs to make achievements in this field, and the research and development process of legal digital currency is also worthy of close attention. Zhou Sha, CEO of Jingtong Technology, said in an interview with reporters that if the People's Bank of China wants to issue sovereign digital currency, the key point is whether to allow large enterprises and individuals to open accounts in the central bank system and give interest on deposits. In this way, the central bank can better regulate monetary policy and set benchmark interest rates. Once the potential of digital currency is released, it may have an impact on the secondary system of "central bank-commercial bank". The central bank's monetary policy will directly affect enterprises and individuals, the money multiplier factor of commercial banks will disappear, and the commercial banking system will also shrink to investment and financial institutions or commercial lending institutions. Such changes are topics that need to be closely watched and studied.