The central bank has gone too far this time! Your banknotes may be in danger...

“I won’t accept any gifts this year, but if I do, I’ll accept digital currency!”

Can you imagine such a scenario: maybe in the next three to five years, the New Year's red envelopes you send out will no longer be a stack of banknotes, but a series of digital codes: you copy it to a USB drive and give it to your grandmother; you send an email to your parents, and send it to your children and nephew via mobile phone.

This time, the central bank is really powerful!

Recently, the People's Bank of China has been taking frequent actions to issue digital currency, and now there has been new progress.

According to media reports, before the Spring Festival, the blockchain-based digital bill trading platform promoted by the central bank had been successfully tested. After the Spring Festival, the central bank's digital currency research institute will also be officially launched.

This means that the pilot application scenario of digital currency has been established! At the same time, the People's Bank of China will become the first central bank in the world to issue digital currency and carry out real applications. Digital currency is really coming!

So, what is digital currency?

Let me say it three times. Digital currency is the legal tender issued by the central bank... the legal tender issued... the legal tender...

Simply put, digital currency is the string of passwords and certificates you hold. Through the central bank's host, a series of passwords have been developed. The central bank "biu" presses the send button, and the currency is generated. "Biu" presses the send button again, and the currency is issued!

Digital currency is a matter that affects how everyone goes out on the streets in the future. It is truly groundbreaking...

Alternative banknotes

At present, there is no very accurate definition of digital currency. He Maochun, director of the Central Economic Committee of the China Democratic League, said that in a broad sense, digital currency is a kind of electronic currency that is closely related to network technology, has payment and circulation properties, and can be used as a substitute for paper currency.

In today's society, paper money has already appeared in electronic form. For example, more and more people are using Alipay or WeChat Pay, and there is no trace of paper money in the entire payment process.

However, Alipay and other payment methods are only electronic payment methods. The money used in transactions comes from bank accounts, which means that the money in Alipay actually corresponds to individual banknotes.

In actual usage experience, digital currency may feel similar to electronic payment methods, but there are still significant differences between the two in essence.

In addition, digital currency is different from virtual currency. For example, the well-known Q coins and the currency used to top up in various games are virtual currencies. These virtual currencies can only be purchased with real money and cannot be converted into real money.

Globally, the most famous digital currency may be "Bitcoin", in addition there are "Litecoin", "Dogecoin", and our country's folk "Yuanbao Coin" and so on.

Why develop digital currency?

Why develop digital currency? Will paper money still be used in the future? Also, how can we use digital currency to pay the vegetable vendors when we go to the street to buy vegetables? In the future, the central bank can issue digital currency with a host computer. What role will commercial banks play?

Don’t be impatient, let’s explain them one by one.

1. Why develop digital currency?

From a central bank’s perspective, issuing digital currency could:

☆ Reduce the high cost of issuing and circulating traditional paper currency;

☆ Improve the convenience and transparency of economic transaction activities;

☆ Reduce illegal and criminal activities such as money laundering and tax evasion;

☆ Enhance the central bank’s control over money supply and money circulation;

☆ Better support economic and social development;

☆ Assist in the full realization of inclusive finance;

etc...

2. What role will commercial banks have in the future?

The legal digital currency issuance and circulation system can still adopt the "central bank-commercial bank" binary system used by traditional paper currency in design, with the central bank issuing currency to the bank vaults of commercial banks, and then commercial banks directly providing digital currency services to the whole society. However, the digital currency transportation method has become electronic transmission, and the storage method has become cloud computing space for storing digital currency. Doesn't it sound advanced?

3. Will it be easier to launder money in the future?

Traditional currency has a certain anonymity. It is not certain where a 100-yuan bill comes from or who it belongs to. However, after a certain algorithm is used, not only does each currency have a unique code, but it also stores information such as the currency owner's account number and transaction process. The government and other institutions can review it according to laws and regulations to investigate whether the source of funds is legal.

4. Will paper money still be used in the future?

China has a large population and a large size. It takes about ten years to change a version of the RMB. Therefore, the introduction of legal digital currency should also be gradual. One or two closed application scenarios (such as the bill market) can be selected to promote it first, and then promote it nationwide after it matures.

In addition, legal digital currency and cash will be in parallel and gradually replace each other for a long time. The transaction cost of cash will gradually increase in the future. For example, in the future, you may have to pay a fee to withdraw cash from a bank. With the incentive mechanism, people will naturally use legal digital currency more!

5. How will you pay for groceries in the future?

In fact, it is very simple. To put it in layman's terms, digital currency is equivalent to the central bank giving you a cash red envelope, rather than a QR code for payment. Generally speaking, if you can use a mobile phone, you should be able to use digital currency.

6. What if I don’t know how to use a mobile phone?

You can use WeChat to read articles! Do you still not know how to use your mobile phone?

Most people may not realize that the fate of paper money has actually undergone a historic reversal in the last two months of 2016.

Paper money is in danger!

→ On November 8, 2016, Indian Prime Minister Narendra Modi announced the end of circulation of 500 and 1000 rupee notes.

→ On December 11, 2016, Venezuela announced that the country’s largest denomination 100-Bolivar banknote would be completely withdrawn from circulation within 72 hours.

→ Next, the Australian government is considering abolishing the $100 note and restricting cash payment transactions.

→ The fourth is Pakistan, where the country's Senate has proposed to abolish the country's largest denomination 5,000 rupee banknote, but the government has not yet agreed.

→ It is reported that Russia had similar considerations a few years ago, but did not dare to take rash action due to economic sanctions.

He Maochun said that compared with paper money, digital currency has obvious advantages. It can not only save the cost of issuance and circulation, but also improve the efficiency of transactions or investments, and enhance the convenience and transparency of economic transaction activities. The issuance of digital currency by the central bank also ensures the consistency of financial policies and the integrity of monetary policies, and also guarantees the security of currency transactions.

The central bank also has considerations on issues such as digital currency anti-counterfeiting and supervision. Zhou Xiaochuan said that the central bank will cooperate with the financial and scientific communities to further increase research and rational use of various innovative technologies.

Although the issuance method of digital currency is still under study, paper currency has been regarded by some professionals as "the previous generation of currency", and it is an inevitable trend for it to be replaced by new technologies and new products.