Read the "Digital Yuan" in one article

Recently, the central bank officially announced that the digital yuan transaction volume exceeded 87.5 billion yuan, and the digital yuan APP has supported digital yuan payment applications in dozens of domestic cities such as Shenzhen, Chengdu and Suzhou. According to official data from the central bank, as of December 31, 2021, there were more than 8,085,100 digital yuan pilot scenarios, 261 million personal wallets opened, and a transaction volume of more than 87.565 billion yuan.

On January 18 this year, a state-owned enterprise in The Hainan Free Trade Port successfully paid 104.3 million yuan in taxes to the tax bureau through a digital yuan-to-public wallet, which is a rare practice of paying taxes in digital yuan, and it is also the largest amount of digital yuan tax payment business in the country so far, which has aroused widespread concern.

The future has come, and the digital yuan is like a spring rain, entering our lives silently and changing our lives. Today, the sajie team will talk to you about all aspects of the digital yuan.

1. What is the digital yuan?

The Digital Renminbi, also known as e-CNY, is a legal tender currency in digital form issued by Chinese Minzu Bank, operated by designated operating institutions and exchanged with the public. The digital yuan is a digitized renminbi, which is also endorsed by the national credit, has a mandatory and legal basis, and can be used as a general payment instrument.

Mu Changchun, director of the central bank's digital currency research institute, said: "The functions and attributes of digital currency are exactly the same as banknotes, except that its form is digital. ”

2. The meaning, positioning and functions of the digital yuan

What the digital yuan means for the mainland: At present, the digital economy is an increasingly important driver of global economic growth. According to the view of Yi Gang, governor of the central bank, the research and development and application of legal digital currency is conducive to efficiently meeting the public's demand for legal tender under the conditions of digital economy, improving the convenience, security and anti-counterfeiting level of retail payment, and accelerating the development of the mainland digital economy.

Positioning of the digital yuan: an alternative to banknotes and coins (i.e. M0), which is the same as cash, is a legal tender, and maintains the attributes and main characteristics of cash, meeting the needs of portability and anonymity, with national credit endorsement, legal compensation, no one can refuse to accept.

Functions of the Digital Yuan:

The function of money refers to the specific embodiment of the essence of money, which has five major functions: value scale, circulation means, storage means, payment means and world currency.

(1) The function of the digital yuan has a value scale: the digital yuan can be used to measure and express the value of goods.

(2) Digital rmb has the function of means of circulation: Digital rmb has the function of acting as a medium of exchange for goods. In the process of commodity exchange, the seller of goods can convert the goods into digital yuan, and then use the digital yuan to buy goods. Here, the digital yuan plays the role of a medium of exchange, performing the function of a means of circulation.

(3) Digital rmb has the function of means of storage: Means of storage refers to a function in which digital yuan withdraws from the field of circulation and acts as an independent form of value and a general representative of social wealth. The digital yuan is a general equivalent of legal compensation, which can be used to purchase goods, and it can perform the function of storage means, in this sense, the storage of digital yuan is not much different from the storage of various valuable things.

(4) Digital rmb has the function of a means of payment: that is, it refers to the function performed by the digital rmb in the activities of paying off debts, paying taxes, paying wages and rent. (The digital yuan function as a means of payment is still under pilot and development, and has not been widely used on a large scale)

(5) Digital rmb has the function of world currency: The world currency function of digital rmb refers to its function of performing general equivalents on the world market. Traditional belief is that in order to be the world currency, it must be fully valued gold and silver, and it must take off the regional cloak of coinage and appear in the shape of gold and silver. In the current era of economic globalization and informatization, the digital yuan also assumes the function of being the world's currency, and under the vigorous promotion of the mainland government and the central bank, the overseas payment and settlement of the digital yuan will be more convenient and reliable. In the future, with the advancement of the internationalization process of digital yuan, perhaps in addition to gold and silver, legal digital currency will also play an important role in the world currency.

3. The core characteristics of the digital yuan

(1) Double-deck operation:

At present, the mainland has adopted a two-tier operation system for the issuance of digital yuan. That is, Chinese Bank does not directly issue and exchange the central bank's digital currency to the public, but first converts the digital yuan into designated operating institutions, such as commercial banks or other commercial institutions, and then converts it to the public. At the same time, the operating institution needs to pay 100% of the reserve to the People's Bank of China for a 1:1 exchange.

The principle and basic logic of the two-tier operation system and the issuance of banknotes are the same, which is to prevent the digital yuan from having a big impact on the existing financial system and at the same time to ensure the stability of the real economy.

According to Mu Changchun, director of the Digital Currency Research Institute of Chinese Min Bank, another advantage of the two-tier operation model is that it does not compete with the traditional business model of commercial banks, and can promote the innovation of banks and other institutions in technology: when the currency generation request meets the verification rules, the corresponding quota voucher is sent, which ensures that the digital yuan is not over-issued to a certain extent.

(2) Dual offline payment

The digital yuan adopts the latest dual offline payment technology, which can ensure that the device can still make normal payments when the network is disconnected, improve the convenience of the use of the digital yuan, and make it more friendly to the elderly and those who do not like to use the Internet.

Mu Changchun, director of the Central Bank's Digital Currency Research Institute, introduced: "As long as you and I have a DC/EP digital wallet on our mobile phones, there is no need for even the network, as long as the mobile phone has electricity, two mobile phones touch, you can transfer the digital currency in one person's digital wallet to another person." Digital currency does not need to bind any bank account when paying, unlike weChat and Alipay now, which requires a bank card. ”

(3) Controllable anonymity

Anonymity is to meet the needs of reasonable anonymous payment and privacy protection. The current payment tools, whether it is bank cards or WeChat or Alipay, are bound to the bank account system, and bank account opening is a real-name system, which cannot meet the anonymous demands.

The purpose of controllable anonymity is to protect user privacy and security while preventing criminals from using digital yuan for money laundering and other illegal and criminal activities. At present, the digital yuan mainly protects user privacy and security through two means: wallet classification and setting sub-wallets.

In terms of hierarchical classification of digital RMB wallets, digital RMB adopts the technology of loose coupling with bank accounts, and opens different levels of digital wallets according to the different degrees of KYC to meet the different payment needs of the public. Among them, the wallet with the weakest KYC strength is an anonymous wallet, which can be opened with only a mobile phone number, of course, the balance and daily transaction limit of such wallets are also the lowest, which can only meet the daily micropayment needs. If you make a large payment, you will need to upgrade your wallet, and the wallet balance and payment limit will increase as kyc strength increases.

The central bank cannot obtain the real identity information of the user by querying the mobile phone number used by the user to open the digital yuan through the telecom operator. According to Article 9 of the Provisions of the Ministry of Industry and Information Technology on the Protection of Personal Information of Telecommunications and Internet Users, telecommunications business operators and Internet information service providers must not collect or use users' personal information without the consent of users. Article 10: Telecommunications business operators, Internet information service providers, and their staffs shall keep users' personal information collected or used in the course of providing services strictly confidential, and must not leak, alter, or destroy them, and must not sell or illegally provide them to others.

Therefore, the wallet opened with a mobile phone number is completely anonymous for the People's Bank of China and various operating institutions, and only when the competent authorities issue corresponding legal documents in strict accordance with the procedures, can telecom operators provide corresponding user data for the competent authorities, conduct data verification and cross-comparison, and provide information support for cracking down on illegal crimes.

In terms of sub-wallets, every online transaction based on a bank account will leave a "digital footprint", and the most critical of which is all kinds of financial information and consumption information. Some Internet platforms and third-party payment institutions have tracked and obtained such information from a large number of users in order to conduct user portraits and big data pushes.

In order to solve this problem, in the online consumption scenario of digital yuan, the user's payment information will be packaged and encrypted, and pushed to the e-commerce platform in the form of a sub-wallet, and the platform cannot directly obtain the user's personal information. Even banks that provide services, merchants that receive offline payments, and individuals who receive transfers do not obtain the personal information of payment users, and transactions between digital rmb wallets have been anonymized through technology and systems. It can be said that the protection of user privacy by the digital yuan is the highest level among the current payment instruments.

Other technical features of the digital yuan:

(1) High security: If misappropriation and other behaviors really occur, for real-name wallets, digital yuan can provide a loss report function;

(2) Multi-terminal selection: People who are unwilling to use or do not have the ability to use smart phones can choose IC cards, function machines or other hardware;

(3) Point-to-point delivery. Through the way of digital currency smart contracts, fixed-point to-person delivery can be realized. People's livelihood funds can be distributed to the digital wallets of the masses, thus eliminating the possibility of false declarations and false claims, interception and misappropriation;

4. The main risks faced by the digital yuan

(1) The legal norms are not yet perfect

The current existing legal supervision system in the mainland is mainly aimed at traditional renminbi (paper money, coins), and the legislation for digital renminbi has yet to be improved. There are legal gaps in the issuance, use, circulation and supervision of digital renminbi.

Although transfer payment methods such as WeChat Wallet and Alipay have been popularized and applied, WeChat and Alipay are essentially different from the digital yuan. The digital yuan in the current pilot is limited to retail payments and has not yet been used for settlement, so there are still problems in the process of popularization and promotion of digital yuan. For example, there are potential risks such as hacker network attacks that are widespread in the field of information networks that seriously affect financial security and social stability.

In this regard, the mainland's legislation and related research must keep up as soon as possible to ensure the promotion and application of the digital yuan. At the same time, improving and strengthening the relevant legislation on the digital yuan can also establish the authority of the digital renminbi to a certain extent.

(2) There are risks in technical safety

The digital yuan born on the basis of blockchain technology has higher security and anti-counterfeiting than traditional physical currencies, but this does not mean that the digital yuan is absolutely safe and foolproof.

The digital yuan is a special virtual currency endorsed by the credit of mainland countries, so it has technical similarities with virtual currencies such as Bitcoin and Tethercoin. It is not uncommon for users to steal and lose virtual currency due to technical security flaws and vulnerabilities on major overseas virtual currency trading platforms.

In early 2014, Japan-based bitcoin exchange Mt Gox, the world's largest bitcoin exchange, suffered a massive hack due to a technical flaw, losing about 740,000 bitcoins, worth the equivalent of $460 million. Although 200,000 bitcoins were eventually recovered, the remaining 650,000 were never recovered.

Therefore, although the digital yuan is technically different from the traditional virtual currency, its controllable anonymity also provides a certain guarantee for the security of the digital currency, but we have to be vigilant against various network attacks that may pose a threat to the digital yuan.

(3) May be used as the object of a crime

Although the current digital yuan has just entered the promotion pilot, it has entered the vision of criminals and has become a tool for breaking the law and committing crimes. At present, the digital yuan mainly has criminal risks such as money laundering, fraud and counterfeiting.

It is used as a tool for money laundering. On January 7, 2022, the Public Security Bureau of Jincheng City, Shanxi Province, cracked a criminal case of money laundering using digital yuan. The special police traveled to Fujian and Guangdong provinces, arrested 6 criminal suspects, found out that the amount involved in the case was hundreds of millions of yuan, and cracked more than 20 cases of telecommunications fraud impersonating public procuratorial law involving 7 provinces including Xinjiang, Heilongjiang, Jilin, Hunan, Jiangsu, Guangdong and Shanxi.

After investigation, after the criminal gang posed as a public prosecutor and law personnel, the gang members in Ningde, Fujian Province, and Jieyang, Guangdong Province, used overseas chat software to communicate with the upstream criminal personnel, transferred the stolen money involved in the case in the form of digital yuan in accordance with the requirements of the other party, and then illegally profited from it by buying low and selling virtual currency through the overseas virtual currency platform, and the amount involved was hundreds of millions of yuan.

In terms of digital yuan fraud, Mu Changchun, director of the Digital Currency Research Institute of Chinese Min Min Bank, said: "At present, the central bank has found counterfeit digital yuan wallets in the market. "Digital renminbi is also the legal tender of the mainland, so the act of forging digital yuan and digital yuan wallets, holding and using counterfeit digital currency may constitute the crimes of "counterfeiting currency", "holding and using counterfeit currency", "selling, buying and transporting counterfeit currency" or "changing currency" as provided for in Articles 170 to 173 of the Criminal Law.

In terms of fraud, criminals may take advantage of the convenience of the birth of the digital yuan and the lack of public awareness of the digital yuan, and use means such as exchanging on behalf of others and setting up a digital yuan wallet as a gimmick to defraud others of their property, thus constituting the crime of fraud. This crime is essentially a derivative and development of traditional telecommunications fraud, and the digital yuan often acts as a tool for the flow of funds in this kind of crime.

Write at the end

The digital yuan transaction volume exceeded 87.565 billion yuan is a landmark event, but strictly speaking, the digital yuan is still in the early stages of development, there are only dozens of urban areas that have opened pilot tests, and various functions have yet to be developed and strengthened, and many applications still only support WeChat and Alipay payment. While the maturity of the digital yuan will take time, the future is already here.

This article originated from Xiao Salawyer