China's central bank: In 2018, it will conduct a cleanup of various virtual currencies

On March 28, 2018, the People's Bank of China held a video and telephone conference on the 2018 national monetary, gold and silver work. Fan Yifei, member of the Party Committee and Deputy Governor of the People's Bank of China, pointed out at the meeting that in 2018, we must further increase the intensity of reform and innovation, steadily advance the research and development of the central bank's digital currency, strengthen internal management and external supervision, and carry out a rectification and cleanup of various virtual currencies.

In January this year, Fan Yifei wrote an article in China Business Network, proposing several considerations for the digital currency of the People's Bank of China. He pointed out that the digital currency of the People's Bank of China can consider adopting a two-tier issuance system, which will be conducive to making full use of the existing resources, talents, and technologies of commercial institutions, and promoting innovation and competition through market-driven and competitive selection.

The article also points out that the current design of China's central bank digital currency should focus on replacing M0 rather than M1 and M2, and will not have a major impact on the existing monetary system, financial system and real economy. In addition, the central bank digital currency should not assume other social and administrative functions besides the four functions of currency, so a cautious attitude should be maintained towards loading smart contracts on the central bank digital currency.

During the 2018 Two Sessions, Zhou Xiaochuan, former governor of the People’s Bank of China, said in his introduction to the central bank’s research on digital currency, “The central bank began organizing seminars on digital currency more than three years ago, and then established the central bank’s digital currency research institute. The latest move is to jointly organize distributed research and development with the industry, relying on the joint cooperation with the market to develop digital currency.”

Zhou Xiaochuan also revealed: "In 2017, the central bank organized a research project on digital currency and electronic payment, which has been approved by the State Council. At present, the industry is still being organized to conduct research and development. After the research and development reaches a certain level, it will enter the testing stage."

China has always attached great importance to the research of legal digital currency. In early 2016, the People's Bank of China held a digital currency seminar in Beijing, and Zhou Xiaochuan and Fan Yifei both attended the meeting. In November 2016, the central bank began to prepare for the Digital Currency Research Institute. In 2017, the Digital Currency Research Institute was officially established.

In a global banking outlook report released on March 28, the International Finance Institute of the Bank of China pointed out that the explosive growth of global digital currencies has caused many problems such as financial instability, and digital currencies lack coordinated and effective supervision.

The report also stated that from the perspective of global digital currency regulatory practices, China has adopted a relatively strict regulatory approach, but this does not mean that China can stay out of the global financial innovation wave. In the future, China should actively participate in the global governance of digital currencies and enhance China's influence and voice in the development of digital currencies and the formulation of regulatory rules.