CSRC Director: The global "new currency war" triggered by Bitcoin has just begun

This article is from Science and Technology Finance Online.

Yao Qian, Director of the Technology Supervision Bureau of the China Securities Regulatory Commission, stated that with the rise of the modern information technology revolution, the impact of technology on currency is reaching an unprecedented state, and Bitcoin has triggered large-scale global digital currency experiments. The digital age has arrived, and the era of digital currency is bound to come.

Recently, Yao Qian wrote an article in the magazine "Comparative," elaborating on the development of central bank digital currencies and the theoretical logic behind them.

The impact of technology on currency substitution is reaching an unprecedented state

In the article, Yao Qian reviewed the changes in the forms of currency, which have evolved from commodity money, metallic money, paper money to electronic money due to technological advancements. Currently, it has extended to credit money, highly liquid financial assets, and other broader levels of currency.

With the rapid development of digital technologies such as blockchain, big data, cloud computing, and artificial intelligence, the impact of technology on the evolution of currency has deepened further.

This impact has attracted widespread attention from central banks, industry, and academia around the world.

Yao Qian mentioned in the article that, in addition to the function of transaction and transfer, currency often moves due to value; wherever the value is more stable and yields higher, currency flows there. This flow leads to currency substitution. Such currency substitution can trigger various tragedies and comedies in the world, and on a larger scale, it can lead to "wars" for currency dominance, such as exchange rate wars, various trade/currency alliances, and reforms and games in the international monetary system.

Past currency substitutions were due to changes in the intrinsic value of currency, which can be called "classical currency wars," while the current currency substitutions caused by technology can be termed "new currency wars."

Moreover, with the rise of the modern information technology revolution, the impact of technology on currency is reaching an unprecedented state and will continue to evolve, expand, and deepen. It may even trigger a transformation of the entire monetary and financial system, thus attracting widespread attention from all sectors globally.

The "new currency war" triggered by Bitcoin has just begun

Yao Qian believes that this "new currency war" can be traced back to the global financial crisis of 2008. The outbreak of the financial crisis has led to widespread questioning of the reputation of central banks and the credit intermediation function of the entire financial system, with a resurgence of Austrian school thought and an increasing number of supporters for the "de-nationalization" of currency. Against this backdrop, decentralized programmable currency, represented by Bitcoin, emerged without relying on the credit of sovereign states.

The Libra white paper states: "The mission of Libra is to establish a simple, borderless currency and financial infrastructure to serve billions of people." Looking back now, its grand mission may not necessarily succeed, but we should respond positively to such a vision. At least in terms of technology or models, it provides us with new references and options, which are beneficial for social progress.

Bitcoin has triggered large-scale global digital currency experiments.

Yao Qian believes that the rise of "decentralized" digital currency is more like an alarm clock, awakening central banks to pay attention to the stability of fiat currency value, reminding them not to ignore the unavoidable technological wave of digital cryptocurrencies, and urging them to focus on the integration and innovation of central bank currency and digital technology.

As early as 2014, the People's Bank of China officially launched research on legal digital currency to demonstrate its feasibility; in 2015, it continued to strengthen its efforts to conduct research on nine major topics; in 2016, it established the Digital Currency Research Institute of the People's Bank of China.

After 2016, central banks in various countries also began to take action, conducting experiments on central bank cryptocurrencies based on blockchain technology, such as Canada's Jasper project, Singapore's Ubin project, the European Central Bank and the Bank of Japan's Stella project, Thailand's Inthanon project, and Hong Kong's LionRock project.

This is a brand new track, with participants from the private sector, public sector, sovereign states, international organizations, financial institutions, technology companies, industry alliances, geeks, and economists… Overall, this "new currency war" has just begun.

The progress of central bank digital currency experiments based on blockchain technology is rapid

Unlike private digital currencies like Bitcoin, legal digital currencies or central bank digital currencies are "rooted and well-founded," with no issues of price instability and compliance.

Some economies have chosen a cryptocurrency technology route represented by blockchain technology, such as Canada's Jasper project, Singapore's Ubin project, the European Central Bank and the Bank of Japan's Stella project, Hong Kong's LionRock project, and Thailand's Inthanon project, while some economies remain indecisive and still have disputes over whether to adopt blockchain technology.

Blockchain technology has advantages such as being difficult to tamper with, traceable, secure and reliable, heterogeneous multi-active, and smart execution. It is the prototype of the new generation of information infrastructure and the foundation of new value exchange technology, distributed collaborative production mechanisms, and new algorithmic economic models. Currently, the progress of central bank digital currency experiments based on blockchain technology in various countries is rapid, covering a wide range of topics including privacy protection, data security, transaction performance, identity authentication, payment settlement, and fund redemption.

Yao Qian believes that as a brand new technology, blockchain certainly has various shortcomings and deficiencies, but this precisely indicates that the technology has enormous room for improvement and development.

Yao Qian finally stated that although countries have "drawn their bows but have not released arrows," and there has not yet been a truly meaningful central bank digital currency, both the digital dollar proposal and the digital dollar plan white paper indicate that the United States has officially joined the "heated central bank digital currency battlefield."

The digital age has arrived, and the era of digital currency is bound to come.