Roundtable on Money and Finance•Summer 2016: Block Chain and Finance
2016-06-26 IMI
Cao Tong
Guo Qingwang
Ma Delun gave a keynote speech on the emergence of internet technology and its application in finance. He stated that the concept of currency is different from the past and paper currency may be replaced because of the development of block chain technology. By using the example of the establishment of Paypal, Tesla, SpaceX, he regarded internet as an essential part of modern life and thought there is no doubt that block chain technology and finance are parts of internet which bring about change and development in finance by the development and application of internet. He illustrated that the emergence and application of internet technology improved the efficiency of financial service, descended the cost of service and provided convenience to financial consumer. The development of digital currency creates both new opportunity and challenge for the central bank to issue currency and make monetary policy. If central bank issues digital currency, it will be more than a substitute of paper currency. The progress of distributed account that contributes to the emergence of digital currency offers a brand new way to trade and hold assets, which is closely related to the security and cost of currency transaction and macro-prudential financial policy, greatly influencing the fundamental financial structure. Eventually, he said all the things above are about to change the process of financial development as well as our lifestyle while deepening and widening human society.
Ding Jiang, CTO of Beijing Taiyi Yun Technology Co., Ltd., made a speech on block chain and asset digitalization. He held that block chain can operate at a low cost because it can execute automatically and control intelligently while serving for financial institutes in the security of transfer payment. He also mentioned the credit system of block chain must be a component of tradition al credit system. Currently, more than 10 billion dollar flows in the block chain, but these assets are out of tracking and supervision with no contribution to report credit condition, therefore, in the future, the application of digital App should be constructed on this.
Gao Ting, technology director of DTT’s block chain team in China, gave a keynote speech on block chain that changes the future of finance. He held that digital currency cannot be completely linked to Bitcoin which just leads to the naissance and development of digital currency. What differs block chain from traditional solution is the block chain technology makes it possible to pay without getting through centralized institute, eliminating the demand of the so-called traditional central institute. Block chain itself can replace the intermediary by computer algorithms while realizing real-time payment, which results in promoted efficiency. Currently, used by large financial institutes in limited application scenarios, block chain technology gradually starts to hit the ground, showing its bright future as well as development direction. In the end, he mentioned the revolutionary influence that will be caused by the direct application of block chain technology supporting real-time payment, which may conflict the structure of vested interests.
Shentu Qingchun, deputy executive secretary-general of Financial Block Chain Consortium and founder of BankLedger, gave a keynote speech on the underlying technology platform of block chain. He pointed out that because of the immature foundation, establishment of Consortium’s standard still has a long way to go. How to reasonably protect privacy remains a problem for the development of block chain technology. Now, unencrypted block chain cannot be used in financial institutes because whole amount of money and historical transaction can all be seen. If Bitcoin contract is unencrypted, the corresponding relation between its IP address and real address can be found by protocol analyzer and locate the real address of the payer when paying. Therefore, he considered protecting personal privacy in the development of block chain technology beneficial. Finally, he figured out, currently, the trend of completing the underlying technology platform is consistent with the development of internet. As long as we unify the standard and relate with each other according to certain contract, underlying technology platform can be linked with internet – this is the eventual trend of development.
Wang Liren, founder of Energy Block Chain Laboratory and vice director of America Factom, made a keynote speech on promotion of productivity by block chain, pointing out that currency actually is a systematic segment that composed by accounts and clearinghouse in the whole system and the bills and checks themselves are not currencies. Because of the existing structural deficiencies in current internet system, problems caused by the authenticity and reliability of internet information can not be resolved without block chain. Block chain, in first, can transfer the data effectively by settling the accounts. In addition, block chain enhances the safety of information transmission by adding tag on the data so as to track their movement. He also stated that the connation of block chain is new productivity that can be modified by every industry in order to use related idea and technology to bill, check, spilt, write off and audit the accounts. He thought it is safe, effective and cheap to use Bitcoin network to settle, suggesting the significant developing space. He ended the speech by concluding and foreseeing the risk of block chain technology.
Wen Xinxiang, deputy director-general of Monetary Policy Department of PBoC, delivered a keynote speech on the relationship between block chain and virtual currency. He briefly introduced the development of Bitcoin’s application as block chain and elaborated the key factor of virtual currency. He quoted EBA’s report to state the risks in the application of virtual currency: firstly, risks of financial credit, legal payments and other area existing in the application of virtual currency make it easily become the instruments of money laundering, terrorist financing and evasion of legal sanction, threating financial credit; additionally, avoided the control over capital flows, virtual currency may be used to help evading tax, increasing the difficulty of tax collection, threating financial stability, affecting the implement of monetary policy, weaken the consumer protections. He held the opinion that supervision institutions should be more flexible in order to response to the unceasing change of virtual currency. Supervision institutions should take the new business model of virtual currency fully into account while designing corresponding measures, give due consideration to the correlation between traditional financial system and virtual currency and carry out macro prudential supervision on intermediary institutes of virtual currency. Finally, he figured the unshakable and legally protected position of central bank on currency supple and final settlement is baseline for a nation.
Wu Zhifeng, senior research fellow of IMI, gave a keynote speech on the issuance of digital currency from the perspective of the nature of currency. He suggested making research on digital currency should start from the nature of currency, namely the transaction convenience. Different types of currencies will be used simultaneously in the future so that nations should accelerate in researching digital currency and its issuance. He said that digital currency can be possibly issued by the central banks using big account or by central banks together with commercial banks or mainly by market. Under the first model, the issuance of digital currency will reverse the accounts systems of commercial banks and the process of currency making and result in a huge influence on the whole banking system, making its feasibility remains open to questions. The second pattern of issuance will weaken the power of central bank and be economically aggressive while digital currency across the boarder, which leads to a long experimental period. Under the last condition, currencies issued by commercial banks need anchor. Therefore, if it can be linked with an institution’s stock price or shareholder’s interest, the issuance of digital currency will be feasible.
During the discussion session, participants discussed the application and market of block chain, the influence of FinTech to current regulations, real value and potential technology risk of Bitcoin, transaction principle and technology structure.
