Salary payments in digital currency? What can be said about this?

The Renminbi s DigitizationWhen Bitcoin first appeared in 2008, it sparked a massive global experiment with digital currency. The People s Bank of China officia...

Mar 17,2023 | Caroline

The Renminbi's Digitization

When Bitcoin first appeared in 2008, it sparked a massive global experiment with digital currency. The People's Bank of China officially launched a study on legal digital currency in 2014.

The emergence of digital currency isbitcoin mining app an unavoidable historical development, the result of the collaborative action of scientific and technological progress and economic development, and the natural choice to adapt to the development needs of human business society.

Technological advancements in cryptographic algorithms, mobile Internet, big data, cloud computing, block chain, terminal storage, artificial intelligence, and other areas have laid the technical groundwork for the emergence of digital currency.

From the standpoint of economic development, as various payment and settlement behaviors in economic activities become more common, the amount of currency required for economic operation grows. Gradually replacing paper money with the central bank's legal digital currency can effectively save the cost of design, printing, issuance, and repossession of paper money, thereby lowering currency operation costs. Simultaneously, the central bank's digital currency can solve the problems of carrying cash and being more easily counterfeited. In the context of the rapid development of the digital economy, the central bank actively promotes digital currency research and development, which is also an important component to deeply promote supply-side structural reform, improve financial infrastructure, and make finance better serve the real economy.

At the moment, digital currency research and experimentation are advancing quickly. In the case of China, some details about the legal digital currency are gradually emerging.

Fundamentally, the People's Bank's digital currency is a digitization of the RMB. The central bank's digital currency is designed to replace cash in circulation, M0, rather than narrow currency, M1, and broad currency, M2. This is because both the narrow currency, M1, and the broad currency, M2, have been heavily electronicized or digitized. It is also due to the fact that the central bank digital currency is primarily intended to replace the cash M0 in circulation, and thus no interest should be paid on the central bank digital currency.

Central bank digital currencies can effectively antminer a10proadvance retail payments while also contributing to anti-money laundering and other efforts by allowing the central bank to have information about currency counterparties and other information in a controlled and anonymous manner. In digital currency issuance, a two-tier operating system of the central bank and commercial banks is used, which means that the central bank digital currency is still placed through commercial banks rather than the central bank placing the digital currency directly to the public. This approach does not alter the existing currency placement path or system, assists in making full use of the advantages of the central bank and commercial banks, makes good use of commercial banks' resources, talents, and technology, and so on. It also effectively prevents competition between the central bank's digital currency issuance and commercial banks' deposit money, and has no effect on monetary policy regulation.

Long-term coexistence, gradual substitution

In the future, the promotion and application of digital currency will continue to face financial security, financial supervision, and other issues, but this will not halt the digital currency trend's development.

The central bank's digital currency is fundamentally a digitization of legal tender, which means that the paper currency form is converted into a digital currency form.

While digital currencies are intended to replace paper money, cash is unlikely to be completely eliminated in the near future. The more likely scenario is that paper and digital currencies will coexist for a long time, with digital currencies gradually replacing paper cash.

Given that the central regulating mechanism, with the monetary authority at its core, is the primary guarantee for the normal operation of modern credit money, the central bank's digital currency issuance and monetary policy are critical and irreplaceable for economic development. As a result, the effectiveness of both money supply and monetary policy will be significantly enhanced in the digital currency era.

Money is a medium of exchange and serves as a general equivalent in terms of money supply. Although digital money has lower issuance and management costs than paper money, it will not be issued in unlimited quantities; rather, the issuance quantity will be determined based on economic development needs to ensure the relative stability of the currency's value.

In terms of monetary policy, digital currency will assist central banks in using monetary policy tools more precisely and flexibly, monitoring the flow of funds, and facilitating policy transmission such as interest rates. Simultaneously, the central bank digital currency will implement a number of technical measures, mechanism design, and laws and regulations to ensure the safety of the digital currency operation system.

In short, money's most fundamental function is as a medium of exchange. National credit is the foundation of modern currency issuance in the credit currency environment, and the currency form is a concentrated reflection of the characteristics of economic and social development. The emergence of digital money is the result of the combined action of technological progress and economic development, and it only changes the bitcoin earncarrier of money without changing its essence. With a solid technical foundation, digital money gradually replaces cash money and is more adaptable to the needs of the digital economy's future development. The real sense of digital currency is issued by the central bank with legal compensation, and the practice of decentralization of currency issuance and denationalization of currency has no realistic feasibility. In the age of digital currency, monetary policy remains an important tool for the government to use to regulate the economy, and monetary policy implementation will be more efficient.