Why should we reform digital currency (Why should we implement digital currency)?

Why should we reform digital currency? It has a significant impact on monetary theory and financial management. Under the current monetary system, monetary policy mainly relies on sovereign countries for control. However, in the process of technological development, the primary role of monetary policy is to obtain certain advantages through market competition between governments, commercial banks, and central banks.

With the development of the digital economy, China’s economic structure has undergone profound changes. In order to cope with the challenges brought by the changing global economic landscape in the future, the People’s Bank of China must take the following measures: first, fully promote the research on legal digital currency. Second, on the basis of improving existing laws and regulations, establish corresponding rules, regulations, and mechanisms to provide legal basis and guarantee for the issuance of legal digital assets, ensuring that the central bank-issued sovereign currency does not encounter any problems or interference. Third, strictly implement the obligations stipulated in the current Civil Code of the People’s Republic of China. Fourth, adhere to the regulations on anti-money laundering and counter-terrorism financing activities in accordance with the law, and take effective measures to ensure the smooth operation of the internationalization process of the renminbi. (China Daily)

Why should we implement digital currency

Editor’s note: This article is from China Business News, written by Liu Quankai and Chen Xiaohua, reprinted with permission from Odaily Star Daily.

Since 2009, China has officially implemented digital currency (DCEP), which has now developed into a mainstream society worldwide. As one of the foundations of national economic operation, central banks and financial institutions such as commercial banks must establish a digital currency system to support the stability, security, reliability, and efficiency of the payment system, thereby promoting economic development and social progress. “Digital currency” is currently the most popular form of encrypted digital currency in the world. “Central Bank Digital Currency” (CBDC) is a statutory currency issued and controlled by the People’s Bank of China, which can easily transfer various types of assets in the network, realize various transaction or settlement functions, and even become a means of value storage with irreplaceable roles, and so on.

Nevertheless, why should we promote digital currency? First, we need to realize that in order to solve the circulation problem in the existing legal currency system, a brand-new technological framework should be introduced to manage this emerging technological ecosystem, so that it can meet the future market demand and provide new infrastructure support for the operation of the entire human society. Secondly, we should also see that the emergence of blockchain technology has brought about some disruptive changes to the existing traditional internet platforms. Third, with the development of mobile communication devices and smartphones, people are increasingly using applications based on smartphones. Fourth, if blockchain technology is not adopted, many service providers that are unrelated to the internet and service providers are prohibited from using their services, such as telecommunications companies and website hosting service providers. These service operators are mostly located overseas, and these services may involve illegal activities. Fifth, due to information asymmetry, effective monitoring is impossible, resulting in a lack of trust among users. In addition, since digital RMB does not involve a third party, it is difficult to ensure that it will be influenced by other entities; unless there is sufficient information source, no one can possess this data, and once theft occurs, it will result in huge losses. Finally, digital currency should also ensure that all parties fulfill their responsibilities and comply with legal requirements. Additionally, necessary economic measures are needed to prevent hacking attacks.