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PBoC Is Expected to Establish a Digital Currency Ecosystem

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On November 4, the Digital Finance Research Center of Peking University hosted the second annual “Age for China in Digital Finance” conference. Yao Qian, director of the Digital Currency Research Institute of the People’s Bank of China (PBoC), attended the meeting and said that digital fiat currency is the cornerstone of the development of the digital economy and they will boost the digital economy from 4 aspects.

Yao pointed out:

Pushing forward the deep integration of the Internet with the real economy, speeding up the digitization and intellectualization of traditional industries and developing digital economy are the homeopathic measures for the Chinese economy in a new era.

Yao said that it is great significance to speeding up the research of digital fiat currency and the development of the digital economy.

If we say that finance is the core and backbone of the modern economy and the real economy, currency is the key of the economic core and the blood of the economic backbone. The digital fiat currency is the jewel on the Fin-tech Crown, and will enormously impact the future financial system.

First, it will help improve the quality and efficiency of the digital economy. For instance, digital fiat currency can be used in disbursement of funds by instantly P2P paid and settled, conveniently and quickly, without intermediate reconciliation, liquidation and settlement processes. It can be executed automatically, reducing payment costs and errors and improving payment efficiency.

Second, it can help promote shared digital economy. The digital fiat currency can use digital technology to increase the coverage of financial services in rural areas, remote areas and disadvantaged groups and provide them with a range of suitable and responsible financial services including payment, credit, insurance, securities, financial planning and so on.

Third, it will help the macro-control of the digital economy. Yao believed that the traceability and related technical properties of digital fiat currencies allow the central bank to track and monitor the circulation of digital currencies and obtain holographic information on currency.

On this basis, the central bank can identify the individual behavior of the economy through big data analysis techniques, enhance the predictability, accuracy and effectiveness of monetary control through grasping the macroscopic from microcosmic, and effectively improve the “dual pillar” regulation of monetary policy and macroprudential policy and frame.

Fourth, it helps to prevent digital economy risks. Yao pointed out that, through statutory digital currency flow on the capture of economic information flow and analysis based on big data, the micro-dynamic behavior of the economy can be monitored in time, the regulatory coverage can be extended, the risk data can be aggregated extensively to build an efficient, real-time and intelligent risk monitoring system and a early warning and management system. Both them can improve the efficiency of macroprudential supervision and effectively prevent financial systemic risks.

In addition, the digital fiat currency can also support anti-money laundering, anti-terrorist financing and anti-tax evasion in digital economy.

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