The Global Culture of Digital Currency: How Financial Models in Developed Countries May Change

Digital advantages emerged as a product of the innovation of the times. Why digital results? What is the situation in the country which is the first attempt at the digital currency market? What are the future trends of the financial model?

For banks around the world, digital rewards are also a new experience that "crosses the river with the appearance of rock". The view is bright, but there is still some uncertainty. This free publication marks the start of last year's "Globalization of Digital Currency" publication, offering readers a fresh perspective on digital currencies around the world.

Since paper money has not changed in the long history of mankind, modern technology quickly deposited money through the chains of paper.

New emerging markets continue to dominate with the goal of "financial inclusion", and the Chinese digital yuan market will gradually develop in many parts of the country and investment will continue. We measure slowly as' always there. According to a survey of 65 countries and regions by the Financial Institutions for International Conference (BIS) in January of this year, 60% of intermediary banks have started researching and testing numerical results.

Benoit Coeure, director of the Innovation Center of the Bank for International Settlements, said that "payments could not play a major role in the financial solution", the digital currencies of central banks have increased.

Digital renminbi "against"

The development of the digital renminbi is accelerating.

The People's Bank of China is the world's first major global financial institution to introduce and test digital assets. The digital currency "DCEP" provided by the People's Financial Corporation of China (abbreviations for "digital currency" and "electronic payment") reduces the reliability of the currency in the standard layer of business, making it easier to move and internationalize the business. RMB. .

On October 23, 2020, the Corporate Governance Corporation announced the “Corporate Financial Policy (revised from survey),” and the RMB included both physical and digital documents, which are legal for the Central Bank . Disseminate digital results. The "Recommendations of the Justice Council of China on Establishing the 14th Five-Year Plan for National Development and National Development and Long-Term Goals for 2035," announced on October 3, 2020, spoke of the continuous improvement of digital advantages. . Research and development is seen as a digital conception of currencies in the medium to long term.

The Digital Renminbi pilot project is slowly underway in various locations across the country, and its reach will continue.

Professor Philip Sandner of the Frankfurt University of Financial Management said in a statement that China is a leader in developing digital value and hopes China becomes the first major country to promote digital value. China announced the rule of law, and central banks in Europe and the United States also found themselves lagging behind China. The rise of the digital renminbi has become the third driving force behind the rapid global research and development of digital currencies, after Bitcoin and other cryptocurrencies and Facebook's stable plans. . Given the current situation, China will overtake Europe for at least four to six years.

Fitch analysts Monsur Hussain and Duncan Innes-Ker note that financial policy or a relationship to the US dollar is a key determinant when setting up a digital banking pilot, but the actual motivations are different on new markets and there are about three kinds of the reasons. Developments include: financial integration (mainly in Latin America, Africa and Asia-Pacific), reduced cash flow (eg in Northern Europe and parts of the Asia-Pacific region). ), payments managed by private companies (such as those in China and Western Europe) provided by large companies. There are also concerns about services.

The International Monetary Fund (IMF) said in its special report “Central Bank Digital Currencies: Time, Risk and Impact” in May this year, which reduces the ability to make cross-border payments that currently govern international agreements. China's dominance over the United States will increase the renminbi's financial footprint and strengthen the renminbi's role as a bank.

Developing countries like the United States and Europe are preparing to fight on the basis of global cooperations, such as digital currency, financial integration, research and development. In an interview with Paper, Benoit Coeure, company director for the International Settlement Innovation Center, said the situation in developed and developed countries is different. In many developed countries, many citizens have smartphones but do not have a bank account. So it's about spending money, and we have to find a way for people to have access to the money. In developed countries, where most residents have a bank account, the usage is very different.

Cole predicts that digital renminbi projects can be completed and completed in five years. There is no single answer for developed countries, and the situation varies from country to country. But the reality is that every digital currency bank has grown exponentially and many joint ventures have been promoted as well.

Execution "catch" from emerging market countries

Just as mobile penetration has accelerated in countries with low mobile phone penetration, digital value ratios have become increasingly important in countries with high mobile phone penetration.

In October 2020, the Bahamas, a country west of the Atlantic coast, launched the world's first recognized digital currency, the Sand Dollar. These new benefits include one-on-one integration with Bahamian financial institutions and are advertised and administered by the Central Bank of the Bahamas using blockchain technology. The central bank distributes Saudi money to Bahamian businesses, payment providers, and merchants, and the money can be deposited into consumers' digital wallets. . Businesses and individuals can use Sand Coins to buy and sell products and services and send money to each other.

The Bahamas spans over 70 islands, not only is it difficult to open an ATM or bank, bad weather makes repairs more expensive. By providing services to non-bank investors and supporting modernization of payments, the Central Bank of the Bahamas has announced these digital advantages.

Anke Weber, director of operations for the International Monetary Fund (IMF) in the Bahamas, said the rapid start of the Bahamian Saudi dollar project was due to Hurricane Dorian in 2019 and the spread of New Crown disease. “The central bank has no plans to announce digital gains since its inception,” said John Roll, chief executive of the Central Bank of the Bahamas. or a cell phone wallet for business. "

A story like this is happening in Cambodia.

Many stores in Cambodia today have a red sign that says "Bakong can be used here". "Bakong" is a digital application launched in Cambodia in October 2020. You can use it for payment by downloading the application of the same name on your smartphone and completing the registration.

Bakong is a digital wallet advertised and managed by the Central Bank of Cambodia. As it is a fiat currency similar to cash, in principle it can be used anywhere. The “Bagong Project” started in 2017 and started trial operations in July 2019 and was launched in October of last year.

Makoto Takemiya is the founder and CEO of Japanese blockchain startup Soramitsu and digital currency artist of the National Bank of Cambodia. He pointed out in the letter that many people in Cambodia do not have a bank account, it is important to have a simple electronic payment application that many people can use. After downloading Bakong's app, users can select a bank from the list and open the bank immediately. In this way, the bank will also have new ways to get more customers after joining the Bakong network.

Wu Gongcheng also compared the Bakong to the digital renminbi. Both are two tier systems. Users do not have to communicate directly with the central bank, but do not have to communicate with businesses and payment institutions. The bank is very important to the whole organization and as a service provider the bank is always at the heart of the whole process.

Wu Gongcheng told Letter that Bakong users have grown rapidly since going live in October. Meanwhile, Cambodia had a well-developed infrastructure only two years ago, and the internet was also used in most rural areas. This is sufficient for the electricity bills. Meanwhile, due to congestion and other reasons, people are reducing their consumption of cash and more and more new users are registering every month, electricity bills have become more important, pushing the people continue to use electricity bills because of the transmission.

Fitch analysts Monsur Hussain and Duncan Innes-Ker told the newspaper emerging markets appear to be at the forefront of digital solutions and enhancements. Unlike developed countries where spending is mature and bank-intensive, new entrants are looking to take advantage of laggards and switch to new, unregulated payments.

Cole said his personal decision is that over the next few years, small businesses in the digital banking industry will mature. There are many similar organizations in new trading and developing countries.

Cross-border payments and the role of central banks

At this point, digital banking is more of an “extra tool” for door-to-door payments, but many midsize banks are reluctant to compromise on this financial situation. already exist, but in the long run, the future of central bank digital currency remains. many are there. One of the possibilities is cross-border payment.

On September 28, the International Monetary Fund, the Digital Currency Research Institute of the People's Financial Institution of China, the Hong Kong Monetary Authority, the Bank of Thailand and the Central Bank of the United Arab Emirates participated in the publication of the first phase of the Multilateral Agreement. declaration. Central Bank Digital Currency Bridge. project (mBridge). The report notes that digital banking and many digital banking digital currency (mCBDC) models using distributed printing machines can help improve quality of life. Faster, cheaper and more secure cross-border payments and contracts.

International Settlements Banks (BIS) often use state-of-the-art facilities to manage digital banking institutions. Cole directs the work of the BIS Innovation Center. He told the newspaper that the BIS is still working with 10 mid-sized banks, including the People's Bank of China Financial Research Institute, to complement several digital bank money companies. The Partnership with the People's Financial Corporation of China is an international communications project led by the BIS Hong Kong Innovation Center.

In addition, BIS is working with intermediary banks in Australia, Malaysia, Singapore and South Africa to test the application of wholesale central bank digital currencies in the area of ​​international negotiations, and the project is called " Dunbar Project ”. The project will also focus on designing technology models of various technology subdivisions and explore different business and operating models for mid-sized banks. Introduces CBDC infrastructure.

In addition to the BIS-led model, the bank also works with intermediary banks such as the Jasper-Ubin project of the Bank of Singapore and the Bank of Canada and the Jura project of the Franco-Swiss bank. National Bank and BIS.

The Bank of Canada and the Monetary Authority of Singapore completed a cross-border payment experiment using blockchain technology and a digital bank. The Jura project, sponsored by Accenture, also got involved with private organizations such as Credit Suisse, Natixis, R3, SIX Digital Exchange and UBS to test the digital euro merchandise developed by the French bank by switching to the Swiss franc. . The strength of central bank digital currencies in international settlement. The campaign also uses marketable distribution tools to achieve all-weather simultaneous settlement of central bank digital currency and cross-border contracts.

HSBC global researcher James Pomeroy pointed out in the paper that he believes most digital banking companies are now focused on home payments and have little impact on financial policy. The role of mid-sized banks will change.

A new model of monetary competition

Today, mid-sized banks in many countries have yet to announce digital bank transfers, but today in many parts of the world payments are coming.

For example, the proportion of young Africans using mobile payments is higher than the global average. Africa has become the “first mobile industry”. Many Africans do not have computers or bank accounts, but do have cell phones. M-Pesa East African mobile financial services have been in use for 15 years. Mobile payments have changed the way people use, send and lend money in East Africa. During a transaction, the user will receive a newsletter with the changed password rather than a copy of the payment number. All you need is a cell phone number and you can deposit money into your account with street vendors and vendors, and exchange money, deposits and withdrawals, and make purchases. do not link your debit card. .

How will the future monetary landscape evolve in the digital age? Are the digital advantages offered by midsize banks attractive?

In its annual report, the IMF noted that much depends on the ability and willingness of central banks to continue to generate large volumes. However, it is difficult to keep up with technological advancements, rapid changes in consumer demand and new business ventures. For digital banking to be on the cutting edge of technology and to become the preferred form and preference of digital banking among consumers, banks would have to be like Apple or Microsoft.

A digital currency bank is not just a currency, it is like a smartphone and its functions. Basically, it is a payment technology that knows how to store and exchange money just like exchanging data on cellphones, processors, memory, and cameras. However, not only in profit, but on another small scale, the average bank profit is similar to performance.

Yujin Gye, professor of economics at the London School of Business and Research, predicted that there will be some interesting changes in the competitive pricing environment in the future. In the past, currency competition was competition between countries, but in the age of digital currency, no one can predict the future situation in which competition from private currency and digital assets, including digital assets. , will emerge. Digital public benefits, even fiat money.

Blockchain technology has great potential

Distributed ledger technology undoubtedly plays an important role in digital finance, both at home and abroad.

Jacqueline Ong, an expert from the Monetary Authority of Singapore, told the newspaper that technology has become the cornerstone of the development, distribution and use of financial services. From risk management and market analysis to customer service, Singapore's financial services industry employs a variety of technologies. Singapore is now one of the strongest financial services providers in the world, supported by a strong financial ecosystem and strong digital infrastructure. There are also many examples showing that blockchain technology can reduce costs by improving performance. For example, the multi-step “Ubin Project” experiment conducted by MAS has shown that multiple cross-border payments and contracts can be concluded in a low-risk, low-cost timeframe. .

Bakong is a blockchain-based payment system in which the chain of authority links Bakong funds to existing funds, records transactions, distributes information and is approved by the "Yet Other Consensus" algorithm based on hash blocking to vote. We do your business in 5 seconds. Below. Point-to-point capability eliminates the inefficiencies of the exchange model in the medium, and users do not have to pay for the exchange.

Takemiya Makoto revealed that Soramitsu has also joined the Hyperledger Iroha blockchain platform currently used by the Central Bank of Cambodia, and that Japan is also working with Fukushima University to use the same technology on campus to take advantage of the benefits. digital.

The Financial Services Corporation of Cambodia said the Bakong project will encourage more Cambodians to pay using QR numbers and mobile apps. wallet. Over 80% of Cambodia's money is saved in US dollars. When the circulation of national currencies is weak, the effectiveness of fiscal policy affects the economy and prices by changing interest rates and weak currencies.

Wu Gongcheng pointed out that the digital bank design bank does not need to use blockchain and distribute information technology. There are many reasons for using this technology. There are many reasons to use blockchain to improve the reliability of a system, for example to improve its security. Indeed, when you want to trade via blockchain technology, it is distributed to each device and the exchange agreement is concluded. It is also a bit safer with other voting machines. It is a safe and reliable way to develop building materials for better results, especially in developed countries, which do not have good materials and childcare facilities.

Jacqueline It was also mentioned that there are risks associated with the use of equipment and that robust measures can be used to ensure that these risks are minimized and eliminated where appropriate. The same goes for blockchain technology. For example, privacy technologies such as Zero Knowledge Proof can help keep the distributed technology business secure.