The classification of digital renminbi into cash management is in line with the development trend of payment
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Starting from December 2022, the People’s Bank of China will count digital renminbi and physical renminbi together, that is, “currency in circulation (M0)” includes digital renminbi in circulation.
With reference to the division caliber of the International Monetary Fund, my country’s money supply is divided into three levels: money in circulation (M0), money in a narrow sense (M1) and money in a broad sense (M2). Among them, M0 refers to the sum of the cash on hand of various units outside the banking system and the cash on hand of residents. In our country, due to the limitations in the use of checks and bank cards issued on the basis of demand deposits, cash in the hands of residents is the most convenient financial tool for payment. Therefore, our country lists cash in circulation as the currency supply first level.
In 2014, the People’s Bank of China launched the research and development of digital currency, and in 2017, it began to organize commercial institutions to jointly carry out the legal digital RMB (e-CNY) research and development test. The initial development of the digital renminbi is mainly based on the modernization of the domestic payment system, fully meeting the daily payment needs of the public, improving the efficiency and reducing costs for the retail payment system. The digital renminbi is essentially supported by national credit and issued in electronic form. It has the same payment, accounting and value storage functions as banknotes. It is a highly secure financial instrument. The digital renminbi is the digital form of the renminbi, and it will coexist with the physical renminbi and traditional electronic payment tools for a long time.
M0 digitalization is in line with the development trend of my country’s payment. Globally, central bank digital currencies are divided into retail and wholesale. The digital renminbi is mainly positioned as a cash-type payment voucher, which has the same legal status and economic value as the physical renminbi, and forms part of the basic money supply. It is mainly used to meet domestic retail payment needs and belongs to the retail central bank digital currency. In other words, the digital renminbi is mainly used to serve the common people, and is used in wholesale and retail, catering, cultural tourism, education and medical care, public transportation, government payment, tax collection, subsidy distribution and other fields. Salaries are sent to personal digital RMB wallets.
The analysis of the policy implications of digital renminbi being included in M0 mainly includes the following aspects.
First of all, it clarified the positioning of the retail central bank digital currency of the digital renminbi, and declared the goal and vision of the digital renminbi with practical actions to create a digital form of renminbi aimed at meeting the public cash needs under the digital economy.
Secondly, it is a rational choice in line with the current national conditions of my country’s payment development. my country has always supported the healthy development of electronic payment, and mobile payment has become an important innovation in my country’s financial system, and has successfully cultivated the habit of mobile payment among the people. Therefore, the development of retail digital renminbi will help increase the acceptance of digital renminbi by domestic consumers.
Again, it is the best choice for weighing retail and wholesale digital currencies. my country’s exploration of digital currency is relatively ahead of other major economies. It is necessary to accelerate the expansion of the application scenarios of digital renminbi in an orderly manner, and to take into account the legal norms in the process of building the ecological structure of digital renminbi. The issuance and circulation of digital renminbi are regulated and managed in accordance with cash, which better meets the needs of economic development and balances the relationship between all parties. Of course, the positioning of the digital renminbi will also be adjusted with the times as it continues to promote and operate.
Some studies have pointed out that it is necessary to clarify the positioning of the digital renminbi as cash as soon as possible, restore its essence as a deposit, actively replace the existing renminbi (including cash and deposits, etc.), and expand the supply through the central bank’s re-loan and bank credit. The authority of the digital renminbi as a legal tender can promote profound changes in financial business and currency management. However, considering the complexity of the stakeholders involved in the digital renminbi, system design, technical support and ecological construction will not be achieved overnight. The current idea and arrangement of “cash first, then deposit, retail first, then wholesale” may increase some design and operation investment, but this gradual system change is conducive to reducing friction costs and avoiding excessive impact on the current financial system in the short term. To promote the financial system to more effectively support the development of the digital economy, which is conducive to improving the acceptance of digital renminbi by domestic and foreign organizations and the public.
The basic functions of legal tender are value measure, value storage, and exchange medium. Improving the efficiency of currency circulation, effectively reducing transaction costs and promoting economic development are the main goals of the evolution of currency forms. In the long run, from the perspective of supporting the development of the digital economy and serving the national strategy, the positioning of the digital renminbi should be to improve the existing payment system, and the business of financial institutions (including deposit formation, payment settlement, tax payment, loan issuance, etc.) Accept digital renminbi, explore effective paths for digital renminbi cross-border payments, and meet the needs of the international community. The comprehensive promotion and operation of digital renminbi will have a profound impact on my country’s economy and financial markets. When revising the People’s Bank of China Law and the RMB management regulations in the future, it is necessary to clarify that RMB includes both physical and digital forms.
Digital renminbi is a new thing. Since the launch of the pilot, the application scenarios have been continuously enriched, the transaction amount and stock have continued to increase, which has enhanced the public’s understanding of digital renminbi, and verified the theoretical reliability, system stability, functional availability and convenient process of digital renminbi. adaptability, scenario applicability and risk controllability. In the future, my country will continue to make efforts to improve infrastructure and related systems and rules, continuously optimize the design of the digital renminbi system, promote the digital renminbi pilot program in an orderly manner, further expand the application scenarios, and improve the digital renminbi ecology.
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