Author: Wang Yongli
With the advancement of information technology, currency and payment will undergo profound changes. The inevitable direction of currency development is to move towards a stage that is intangible, digital, and intelligent, where the total supply is sufficient and the unit can be infinitely refined. Utilizing advanced technology to maximize the expansion of payment and settlement platforms while reducing settlement intermediaries to achieve point-to-point direct payments between the payer and payee is the inevitable direction of payment and settlement development.
Currency Must Accelerate Its Move Towards Digitalization and Intelligence
The essential attribute of currency is the measure of value (unit of account), its core function is as a medium of exchange (payment tool), and its fundamental manifestation is the strongest liquidity (which needs the highest authority or highest credit endorsement or protection) of value tokens (transferable and circulating value rights). These are the three indispensable elements for understanding currency, which have remained unchanged from beginning to end (if they change, it ceases to be currency). However, the carrier or manifestation of currency (such as shells, coins, paper money, deposits, electronic wallets, digital currencies, etc.) and its operational methods need continuous improvement to enhance efficiency, reduce costs, and tighten risk control, thereby better fulfilling the role of currency in promoting exchange transactions and economic and social development. To this end, it is essential to have an accurate understanding of the essence and operational methods of currency.
First, as a measure of value, the most fundamental requirement for currency is to maintain the basic stability of its value. This requires that the total amount of currency must change in accordance with the changes in the total value of tradable wealth that is priced and settled in currency, maintaining a basic stability in the overall correspondence between the total amount of currency and the total value. From the perspective of society as a whole, the total amount of currency and the total value of tradable wealth overlap; among them, wealth value is the real foundation, and currency is merely a representation of wealth value (unit of measurement), representing the claim to wealth value; currency is not wealth itself. Therefore, the economic form represented by the generation and operation of wealth is referred to as the "real economy," while the economic form represented by the issuance and operation of currency (including derived financial activities) is referred to as the "virtual economy." Without the support of real wealth, currency would be worthless. Of course, for individuals in society, currency represents a claim to value and indeed belongs to their assets. This dual attribute of currency as "overall virtual but individual real" can indeed confuse people's understanding of currency, requiring careful explanation and accurate grasp.
To maintain the basic stability of currency value, all physical assets that serve as currency with limited supply (such as gold with limited reserves on Earth) or virtual assets (such as Bitcoin, whose total amount and phase additions are completely locked and unadjustable by the system) will severely constrain exchange transactions and economic and social development because their supply cannot keep up with the demand for the infinite growth of tradable wealth value, which does not meet the essential requirements of currency and must inevitably withdraw from the currency stage, returning to its original form as tradable wealth. Currency must completely withdraw from specific physical items, truly manifesting as a measure of value, a medium of exchange, and a value token, ensuring that its total amount can change in accordance with changes in tradable wealth value. Thus, it can be affirmed that currency has evolved from the initial natural physical currency, to regulated metal coins, to metal-backed paper currency, and further to pure credit currency that is detached from any specific physical items, constantly shedding physical forms, highlighting essential characteristics, and ultimately breaking free from any physical forms and quantity limitations, moving towards a stage that is intangible, digital, and intelligent, where the total amount can be fully supplied and the unit can be infinitely refined, is the inevitable direction of currency development. From this, we can conclude:
Credit currency no longer needs to be anchored to any specific asset, nor does it require specific reserves as value support. Currency is supported by the overall wealth value; gold reserves, foreign exchange reserves, etc., are relatively limited compared to the total amount of currency (total wealth value) and are merely tools for central banks to adjust market fluctuations beyond expectations, making it difficult to support the value of the entire currency total. The mindset of re-seeking an anchor for currency (specific anchoring objects) is erroneous and represents a regression rather than innovation.
Cash (paper money and coins), like the shells and coins that once served as currency, are merely carriers or manifestations of currency, not currency itself, and will ultimately have to withdraw from the currency stage. Now, the manifestation of currency is increasingly shifting to deposit accounts (electronic wallets also belong to a type of deposit account), and currency payments are increasingly transitioning from direct "cash payment settlement" to "transfer payments/accounting settlement" of deposit accounts. The proportion of cash and cash payments in the total amount of currency and total currency payments has become very low and will continue to decrease. Therefore, equating currency with cash, and equating currency payments with cash transactions, has completely deviated from the essence of currency and social reality, which is very erroneous.
Second, as a medium of exchange, the payment and settlement tools and methods of currency must be continuously improved to enhance efficiency, reduce costs, and tighten control. The methods of currency payment and settlement are increasingly transitioning from traditional cash transactions to "transfer payments/accounting settlements" of deposit accounts (including bank card accounts, electronic wallets, etc.), which is also the inevitable direction of currency development. Transfer payments/accounting settlements can replace cash payments, reduce cash demand, tighten payment monitoring, and move towards intelligent accounts, with deposit accounts becoming the new carriers or manifestations of currency. Deposit accounts can include essential information needed for management, such as account holder identity information, currency symbols, account passwords (public and private keys), and smart contracts, eliminating the need to encrypt cash (such as paper money) but rather encrypting the entire process of account and transfer payments, ensuring security while no longer relying on dedicated communication lines or local area networks for transfer payments, but instead utilizing public internet or blockchain platforms, even breaking through national borders, achieving the widest coverage of users worldwide, allowing users to register directly on the platform (registration equals account opening, and the registration address serves as the user account) without needing a clearing institution as an intermediary (de-intermediation), realizing point-to-point instant payment and settlement between the payer and payee on the same platform, thereby reducing intermediate links, significantly improving efficiency, lowering costs, and tightening risk control.
Furthermore, as the strongest liquidity value token, currency implies that there must be competition among different currency carriers or manifestations and their operational methods, and only the currency that receives the highest authority or credit protection can survive in competition. The highest credit protection has been needed since the birth of currency, becoming one of its main characteristics.
In today's world, where sovereign independent countries or regions are still the basic components, and the United Nations cannot replace national sovereignty, the highest authority or credit is national sovereignty and national credit. Therefore, currency ultimately manifests as national sovereign currency or legal tender, even if the world becomes highly unified, forming a single global village, the currency at that time will still be the world's sovereign currency.
In cross-border economic and trade exchanges, the first step is to determine which currency will be used as the currency for pricing and settlement. If the domestic currency is not an important international currency, it is also necessary to consider which currency to reserve for international payments. This inevitably leads to mutual comparison and competition among national currencies, with the most important standard being the comprehensive comparison results of "safety, liquidity, and profitability," which are underpinned by the global ranking of the comprehensive national strength of the currency-issuing country, especially its international influence. Only the currency of the country with the strongest comprehensive national strength and international influence can potentially become the world's central currency or the number one international currency.
Thus, in the case of national independence, promoting the denationalization or supranationalization of currency, including creating a supranational world currency structurally linked to multiple sovereign currencies (such as SDRs), is difficult to replace sovereign currency and is challenging to implement successfully. The euro is not a supranational currency but a type of "regional sovereign currency," because after the official launch of the euro, the original sovereign currencies of its member states completely withdrew (transferring monetary sovereignty), and the two cannot coexist.
Of course, in emerging or specific fields where legal (sovereign) currency cannot meet certain special needs, tokens can emerge that operate and redeem based on fixed ratios with legal currency as collateral. For example, in China, the renminbi is the legal currency, but there are still meal tickets/cards in schools and canteens, shopping vouchers/cards in malls, and points/tokens on e-commerce platforms (which can be exchanged for goods as agreed), which are essentially tokens of renminbi in specific fields and must be subject to the supervision of monetary authorities, not allowed to flow freely beyond the set range (otherwise it would impact the management of legal currency). At the same time, legal currency also needs to actively improve its operational methods, enhance efficiency, reduce costs, and meet various emerging or special payment needs as much as possible, replacing various tokens.
Payment and Settlement Will Move Towards De-Intermediation and Point-to-Point Transactions
Under the transfer payment/accounting settlement system, the payment and settlement between the payer and payee first require the establishment of real deposit accounts at payment and settlement institutions (such as banks) and maintaining sufficient deposits (currency stock) for payments. The traditional approach is:
In the case where a clearing account is established between the banks of the payer and payee, the payer sends a payment notification to their bank, specifying the payer's name, deposit account number, company seal or payment password, as well as the payee's name, bank, deposit account number, transaction contract number, and other elements. After the bank verifies that everything is correct, it deducts the corresponding amount from the payer's account according to the notification and sends a deduction notification to the payer (which becomes the payer's accounting basis). At the same time, it sends a transfer notification to the payee's bank and increases the payee's bank's deposit (or reduces its own deposit at the payee's bank). Once the payee's bank receives the transfer notification and verifies it is correct, it increases its deposit at the payer's bank (or reduces the payer's bank's deposit at its own bank), while also increasing the payee's deposit and sending a funds entry notification to the payee (which becomes the payee's accounting basis). Thus, through the adjustment records of the deposit accounts by the relevant parties, the payment and settlement of currency (funds) can be completed, thereby replacing the flow of cash with the transfer of currency ownership, significantly reducing the costs and risks associated with cash printing, issuance, receipt, payment, and management. In this process, banks and other clearing institutions must not only efficiently complete the transfer payment/accounting settlement but also meet regulatory requirements such as anti-money laundering, anti-bribery, and anti-terrorism financing, to curb the illegal use of currency.
If there is no clearing account established between the banks of the payer and payee, they will need to bridge through a bank that jointly establishes a clearing account, ensuring that the accounts can connect and complete the transfer of funds. For this reason, most countries implement a "centralized account opening system" among banks, where each bank opens an account at the clearing center, allowing for mutual account connectivity, thereby significantly reducing the number of clearing accounts established and the difficulty of management.
In cross-border payment and settlement, the situation becomes much more complex. It involves not only the issue of account establishment between clearing banks but also the sovereign nature of currency, making it difficult to implement a centralized account opening system internationally. Without directly established clearing accounts between banks, sometimes multiple clearing banks (clearing intermediaries) are needed to transfer funds to ultimately complete the transfer from the payer's account to the payee's account. Additionally, there are differences between countries in terms of language, customs, time zones, regulations, and efficiency, and if the payment notifications and their encryption methods are not sufficiently standardized and unified, processing will be very troublesome, requiring a long time and incurring high costs. Therefore, in situations where centralized account opening for clearing accounts is difficult, there is a need for an internationally professional, shared, neutral, and secure payment message management and processing system, such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT), which can significantly improve efficiency and reduce costs.
With the advancement of communication technology and encryption technology, payment and settlement have continuously shifted from the original paper message transmission and manual processing by relevant institutions to the use of telegrams, telecommunications, the internet (computer system connections), and mobile terminals for information transmission. The initiator of the transaction inputs payment information and passwords on terminal devices (including mobile phones), and after the receiving party's computer verifies the accuracy of the password, the processing is done automatically. The methods and approaches are constantly improving, thereby continuously enhancing efficiency, reducing costs, and tightening risk control. As long as both the payer and payee have accounts at the same bank, and all internal institutions of the bank are interconnected to form a unified clearing platform, the payment and settlement can basically achieve instant (second-level) crediting.
From the above, it can be seen that the payment and settlement of currency from the payer to the payee, apart from the direct cash transactions between the payer and payee, involve at least the following elements:
First, there must be real and accurate deposit accounts. To meet regulatory requirements such as KYC (Know Your Customer) and AML (Anti-Money Laundering), deposit accounts must have the account holder's real, accurate, and complete identity information. After a deposit account has a transaction, it should complete the entry and change the account balance as soon as possible.
Second, there needs to be a telecommunications channel or network platform for fund transfers, along with a unified and standardized encryption method and operational rules. The more this network platform can utilize open and shared infrastructure, the broader its coverage, the more registered users it has, and the lower its operational and maintenance costs, the stronger its advantages and competitiveness will be.
Third, it is necessary to promote asset securitization (standardization), digitalization, and tokenization (Tokenization, tokens should not be called "代币"), to achieve online global transactions and settlements with the highest efficiency 24/7.
Now, with the integration of blockchain and encryption technology, a single platform can achieve borderless global coverage, embedding the platform's operational rules within the system ("coding is the rule"), eliminating the need for platform controllers as operational intermediaries (decentralization). Users register and open accounts on a unified platform without needing to register with clearing institutions, and do not require clearing institutions as transfer intermediaries (de-intermediation). Instead, the payer performs the payment operation themselves, achieving point-to-point direct payments with the payee, with the platform system participating in distributed verification, storage, and accounting, ensuring that the entire process is open, transparent, traceable, and difficult to falsify. This can greatly improve efficiency and reduce costs (if cross-platform transfers are needed, or if platform currency needs to be converted into other currencies, additional operations and fees will be required), especially compared to the traditional cross-border payment and settlement system dominated by banks and SWIFT, where its advantages are very apparent, bringing a huge impact on the traditional payment and settlement system.
This brand new blockchain technology and platform can now promote blockchain-native encrypted assets (such as Bitcoin, Ethereum, etc.), as well as blockchain-derived encrypted assets issued through ICOs (various altcoins), various stablecoins (especially fiat stablecoins pegged to legal tender), non-fungible tokens (NFTs), real-world asset tokens (RWAs, including real data asset tokens RDA), and even tokenized stocks, tokenized bonds, tokenized money market funds, etc., achieving continuous trading and settlement 24/7 on public (permissionless) blockchain platforms, thereby giving rise to a new borderless "crypto world" and accelerating its development, which requires high attention.
Fourth, in the case where multiple trading and clearing platforms coexist, and the same product needs to operate on multiple trading and clearing platforms, it is necessary to achieve connectivity or bridging between different blockchain platforms to solve the issues of fund transfer settlement and information aggregation across platforms. Of course, this cross-platform processing will increase costs and reduce efficiency. If a single platform has a wide coverage, allowing users and products nationwide or even globally to register and operate on the same platform, then cross-platform connectivity or bridging is no longer needed. Therefore, having more trading and clearing platforms is not necessarily better; it should promote as much concentration, unification, professional sharing, and fairness as possible.
It is certain that utilizing advanced technology to maximize the expansion of payment and settlement platforms and reduce clearing intermediaries to achieve point-to-point direct payments between the payer and payee is the inevitable direction of payment and settlement development. Of course, de-intermediation should not equate to de-regulation. The blockchain platform, as an important financial infrastructure, must meet regulatory requirements such as anti-money laundering, anti-bribery, and anti-terrorism financing, and cannot simply pursue increased efficiency and reduced costs at the expense of financial regulation.
In summary, with the advancement of information technology, currency and payment will continue to undergo profound changes. However, the transformation must adhere to its essence and principles, aiming to promote the healthy and efficient operation of currency and play a better role. It should be particularly noted that currency is a very important and should be a quite rigorous concept; non-currency assets should not be casually labeled as "currency" or "coin". However, the current usage of "coin" is very chaotic and not serious, referring to various encrypted assets as cryptocurrencies or digital currencies, translating NFTs as "non-fungible tokens" (coins must be fungible, divisible, and aggregable; non-fungible items cannot be called coins at all), translating RWAs as "real-world asset tokens," as well as various tokenized securities, tokenized funds, tokenized deposits, etc., which are all very inaccurate and non-standard, and should be corrected to accurately define. "Token" can only be translated as "通证," which is an asset and not currency.
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