ZOU Chuanwei, Director of Frontier Financial Research Center at the Shanghai Institution of Finance and Development; Chief Economist, Wanxiang Blockchain
Wholesale central bank digital currencies, as well as multilateral central bank digital currency bridges currently being tested around the world, may significantly improve cross-border payments and change the pattern of international reserve currencies. In particular, they may promote the emergence of super-sovereign digital currencies.
Starting in 2020, the G20 has compared various options for using stablecoins, retail central bank digital currencies, and wholesale central bank digital currencies in cross-border payments in a series of efforts to improve cross-border payments. The basic consensus is “Wholesale Central Bank Digital Currencies” + “Multilateral Central Bank Digital Currency Bridge”.
Wholesale Central Bank Digital Currency is a tokenized form of deposit reserve. The wholesale central bank digital currency system is essentially a new wholesale payment system. The Multilateral Central Bank Digital Currency Bridge is an interconnection system across multiple currencies that supports the programmability of smart contracts. Currencies from multiple countries can circulate and interact in the form of tokens on the multilateral central bank digital currency bridge according to the same set of standards. It provides a new set of financial infrastructure that supports currency, payment, and asset trading, clearing, and settlement functions.
On this basis, a super-sovereign digital currency based on a basket of currencies is very easy to implement through smart contracts. If participants lend and borrow super-sovereign digital currencies on a multilateral digital currency bridge, this will generate interest rates. Furthermore, bonds can be issued with super-sovereign digital currency as the unit of account, thus forming a complete framework from currency to lending market to bond market. In terms of issuance, it can be created like SDR, or purchased by member countries using their foreign exchange reserves.
