Recently, the risk warning about virtual currency has been issued frequently. On November 13 and December 11, the central bank twice refuted rumors on its official micro blog, saying that “no legal digital currency (DC / EP) has been issued, and no asset trading platform has been authorized to conduct transactions”; during this period, the inter ministerial Joint Conference Office for the disposal of illegal fund-raising issued a letter to remind us to guard against the risk of illegal fund-raising in the name of blockchain; the official micro blog of Mutual Financial Association also issued a notice on the prevention of illegal fund-raising in the name of blockchain on December 13 In the name of blockchain, the risk warning of initial coin offering (ICO) and “virtual currency” trading activities.
Behind the tightening of the wind is the sign that the speculation of virtual currency appears again. According to the monitoring of relevant departments, bitcoin has soared by more than 40% recently, and its price has risen above the $10000 mark. The sharp rise and fall of bitcoin makes some people smell the opportunity of speculation, and even cheat under the guise of blockchain.
In essence, this kind of activity is not really based on blockchain technology, but in the name of blockchain, the transaction between ICO and “virtual currency” violates the relevant provisions of the announcement on preventing the financing risk of token issuance jointly issued by seven ministries and commissions including the people’s Bank of China in September 2017, and will damage the legitimate rights and interests of consumers.
“At present, the policy of cracking down on virtual currency transactions and ICO has not changed.” Financial regulators said that China’s virtual currency transactions still maintain a strike hard situation, policy orientation has never changed. In essence, ICO is a kind of unauthorized illegal public financing behavior, which is suspected of illegal selling of token bills, illegal issuing of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal criminal activities.
But at the same time, market participants also noticed a signal released by the central bank. Fan Yifei, vice governor of the people’s Bank of China, said recently that in the next step, we will follow the principle of stability, safety and controllability, reasonably select the pilot verification area, scene and service scope, continuously optimize and enrich the functions of DC / EP, and steadily promote the introduction and application of digital legal tender.
What Fan Yifei said about DC / EP is the legal digital currency that China plans to launch. Unlike bitcoin and Libra, which Facebook plans to launch, the digital currency to be launched by the central bank is backed by national credit, which can ensure the stability of currency value.
The Central Bank of China started the research on digital currency as early as 2014, and it has been five years. Up to now, the central bank’s digital currency can be said to be ready. However, the central bank’s digital currency is mainly used in small retail scenarios, which will not crowd out deposits, lead to financial disintermediation, and have a big impact on the existing real economy.
Industry insiders said that the design of DC / EP not only maintains the properties and main features of cash, but also meets the needs of portability and anonymity. It is a better tool to replace cash. The digital currency of the central bank adopts controllable anonymity to meet the legitimate anonymity transaction needs of the public. At the same time, it also implements the functions of anti money laundering, anti-terrorism financing, preventing Internet gambling and any Internet crime.
This means that, unlike bitcoin, which emphasizes decentralization, the central bank’s digital currency will still adopt a centralized management approach. At the time of issuance, the central bank first converts the digital currency to banks or other operating institutions, and then these institutions convert it to the public. In this process, it is necessary to maintain the central position of the central bank and exchange currency by designated institutions. The purpose of centralization is to avoid the over issuance of money by designated operating institutions, not to change the existing account system, and not to change the transmission mode of monetary policy.
The central bank’s legal digital currency is also very different from Libra. The sponsor of Libra is composed of several companies. It plans to become an international reserve currency that is decoupled from sovereign countries and can maintain long-term stability of currency value. According to the white paper of Libra, the biggest difference between Libra and most cryptocurrencies is that it uses 100% of its real assets as reserves and guarantees. Users can convert their Libra into US dollars, euro and other legal currencies at any time, and become a stable currency through “linking” with legal currencies. Whether the currency value can be stabilized is the key to Libra’s acceptance.
In addition, in the era of credit currency, how Libra can be trusted is a big problem. The sponsors of Libra are many companies, which have not obtained the national credit endorsement. Apart from supervision, Libra is more likely to become a hotbed of money laundering, terrorist financing and other criminal activities. After the trust crisis, a number of companies, including visa and MasterCard, said they would withdraw from Libra.
Another question is, what is the difference between using digital money and WeChat and Alipay? In this regard, industry insiders said that for the common people (68.800, 0.53, 0.78%), the boundary between the basic payment function and the central bank digital currency DC / EP is actually relatively vague. Of course, the central bank digital currency will be very different from the electronic payment in the realization of some functions.
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Editor in charge: CT