 Hello, everyone. I'm really excited to introduce our next speaker. Mr. Mu Chengcheng is Director General of the Digital Currency Institute at the People's Bank of China, where he was appointed in July 2019. Mr. Mu joined the People's Bank of China in 1995. From 1995 to 2004, he worked for the International Department, and his responsibilities covered multilateral and bilateral cooperation with international organizations and foreign central banks. From 2004 to 2006, he was Senior Advisor to the Executive Director of the Constituency Office. In 2006, he rejoined the International Department. From 2010 to 2017, he served in a number of positions, including Assistant to the Governor and then the Deputy Director General of the Executive Office. In 2017, he was appointed as Deputy Director General of Payments and Settlements Department. Mr. Mu is a member of CPMI, a member of the FSB Financial Innovation Network, and also a member of the IMF's High-Level Advisory Group on Finance and Technology. Mr. Mu graduated from Renmin University of China with a BA in Economics in 1995, and earned his Master's Degree in Applied Finance from Macarena University in Australia in 2000. Please join me in welcoming Mr. Mu. Mr. Mu, welcome. Thank you so much for being here today. It's just a real delight to get to speak with you. Thank you. My pleasure. I know the world is watching with great interest. China is development of a central bank digital currency, and the People's Bank of China started researching CBDC six years ago, way back in 2014, very early in the process of global countries looking at this. Can you say a little bit about what motivated the PBOC to begin this work and then what is pushing you now to really foster the development of a new currency? Okay, thank you. Well, personally, I would rather to use the digital fair currency instead of CBDC because I think, personally, I think digital fair currency is more suitable for our digital version of RMB. So now we call it eCNY, and the eCNY is the digital version of RMB that is the digital fair currency of China, which is value-based, quality account-based and account-based hybrid legal tender with legally, with loosely coupled account linkage issued by the PPC operated and exchanged by the authorized operators, including commercial banks, payment service providers and telecom operators. So that's the brief introduction of our digital fair currency. And as you mentioned that we started our project back to six years ago. That's the top value cases and drivers for this project is firstly is to safeguard the monetary sovereignty because back to six years ago we have so many competitors that private digital or crypto assets came out. And that is definitely a threat to the monetary sovereignty or independence of our monetary policy of China. So in order to safeguard the monetary sovereignty, we have to start our own version of digital RMB, the eCNY. Secondly, is to provide a backup or redundancy for the retail system, retail payment system. As you may know, we have two big giants in terms of retail payment system sector, which include Alipay and Tempe. And people now go out to shopping without any credit cards, debit cards or the wallets with paper notes, paperback notes or coins. So those two have already taken almost 97 or 98% of the whole mobile payment markets. So they have already become the significant important financial infrastructure in China. But for those, I don't think we cannot let the private sector to run financial infrastructure, but the problem is all the private sectors that have their own life cycle. Just in case, if they have any problems with their financial issues or there's other operational issues or technical issues, then maybe the operational outage in some cases that will bring negative impact to the financial stability. So for that reason, as the public goods provider, the central bank have to step up and provide a backup or redundancy for the retail payment system. So that's the second reason we have to build our own digital world and our RMB as a payment instruments. And thirdly, is to improve the efficiency of the central bank payment system with a wider access and a stronger capacity. As you may know, internationally we have a trend that the central bank are obliged to provide a wider access and a stronger capacity for the payment systems. Before the introduction of digital currency to the general public, we have the central bank have already built up the wholesale payment system like RGGS, the BEPS, or the other retail payment systems like the credit cards, payment systems, or other fast payment systems. But recently all the central banks are trying to widen the access and improve the capacity of the central bank's payment systems. And one of the efforts, one part of the efforts is to provide access to the general public. So digital currency is definitely part of that effort. So that's the third reason. The last but not least is to improve the financial inclusion. Because in China we still, as you know, we always underscore that we are still a developing country. We have a large part in our country. We have remote areas and poor areas. A lot of population actually is still below, they are still in the poor shape, not very good shape in terms of the financial or economic conditions. So in order to improve the financial inclusion, especially those people without traditional banking accounts, for those people we have provide basic financial services. So in order to improve the financial inclusion, we have to build or develop our own digital currency. So that's the top value cases and drivers for our project. Thank you. Thank you. That is incredibly helpful and informative as people think about the development of the digital RMB. I wonder one of the other factors that people cite about the desire to move forward is about China's, the role of China's currency in the global economy. And do you think that the development of the digital RMB will also help China use its own currency in more global transactions to have the digital RMB become more prominent globally. Well, I personally I have to say I have a different view on that because the internationalization of a currency like, you know, Hank Paulson ever said in his article, that is, the technologies never the, the most important key for internationalization of the currency. The roots and the architecture or the whole financial system actually is the key factors or key elements for internationalization of a currency. So I personally I don't think the technologies that the key driver or key elements could improve the internationalization of a currency. Only the rules and the system. I mean, all the governance issues governance, the issues could be could be the key of it to improve the internationalization of a currency. So before the improvement of the whole system. The technology is never the answer is not a tendency for internet, the RMB internationalization. So that's my personal view on this on this issue. Thank you I think that's very helpful as well. I wonder for viewers if you could give people an update on the development of the digital RMB. I know you've been involved in a number of pilots, and that these are expanding. Do you anticipate a national rollout soon what can you what can you tell us about the status of the work that has been going on in the field. Well, PPC, you know, got the digital RMB or the ECNY as the important financial infrastructure for the future. So we have already actively carried out research and development and the pilot project. And we actually adopted adopted a rules or primaries of two tier operation to tier model and zero substitution and controllable anonymity. And we have already finished the completed the architecture standard formulation research and development of the ECNY functionality. And also we have finished the completed the joint debugging and testing of ECNY system. The, as you may know, the internal close pilots have been run in Shenzhen, Suzhou, Xinhuan, Chengdu, and also this will be conducted in the forthcoming Winter Olympics in Beijing. And at present, the pilots have made positive progress. And we have already created a series of use cases and a variety of safe and convenient payment functions. As of late September to 2020, more than 12,000 pilot use cases have been implemented covering bill payments, catering services, transportation, shopping, government services and others. And aggregates of 172 and 400 personal or individual data toilets and 16,000 corporate data toilets have been opened. In addition, more than 4.7 million transactions were processed with a total amount of RMB 2.3 billion. So, and we have already developed multiple payment methods such as QR codes, facial recognition, tap and go, such kind of functionality, such kind of payment functions. In addition, in order to show gratitude and respect to the medical and healthcare workers who have made significant contribution to the fight against the COVID-19, we have recently launched the Yixing-wide red packets pilot project in cooperation with the Luohu district of Shenzhen and some 5000 medical and healthcare workers received allowance in the format of Yixing-wide red packets provided by the fiscal support by the municipal government of Shenzhen. It could be used at designated merchants in Luohu district. In October 2020, we also launched another round of Yixing-wide red packets pilot, also supported by the fiscal funds of Luohu district of Shenzhen, some 50,000 lucky residents, the one the lottery received Yixing-wide red packets worth 200 yuan, that is 29.9 US dollars each. So that's the recent update, our development of the Yixing-wide pilot project. Thank you. There's an enormous amount of work going on in so many different strategies that you're pursuing at the same time. Do you foresee in the near future this going nationwide or do you think that you will continue to explore pilots for a period of time? Yeah, we so far we don't have very clear agenda or timetable for the rollout in the whole country, nationwide. We are going to, next stage, based on the previous results of the pilots, we may extend the pilots to more cities and more banks. Thank you. Thank you. I know a number of countries around the world are also considering central bank digital currencies or digital fiat currencies, as you said. And they're looking with interest at the different approaches that you've taken and that other countries have taken. There are different design features in the Chinese system that I think are quite important. I wonder if you could explain the basic design feature and maybe provide advice about why you believed that that design structure was appropriate for China? Well, thank you for that. That's a very good question. Firstly, I think we adopted a very important model, which is we call it two tier model. And maybe some people will call it hybrid model, but we call it two tier model, which is quite different from the other countries hybrid model. What is PBC and commercial institutions? Well, the PBC will work as the first layer or first tier of that model. And the commercial institutions will work as the second tier of that model. And that is the suitable approach to the E-SNY operation in China because that is different from the decentralized issuance of crypto assets, definitely. So that is an intermediate solution to providing for direct claims on the central bank while real time payments are handled by the intermediaries. The general public could exchange the E-SNY from the authorized operators as the second tier who could exchange the same amount of E-SNY from the central bank. And the consumers have a direct claim on the central bank. And this will not change the current creditor data relationship in currency circulation. And the E-SNY will not change the existing currency circulation system and the two tier account structure or create competition with commercial banks in the savings market. In other words, a two tier E-SNY will not increase banks with reliance on the interbank borrowing or affect their lending capacities. So this intermediation could be avoided. And since it will not affect the existing monetary policy transformation mechanism or intensify the pro-cyclicality, in different stress scenarios, issuance E-SNY will not lead to any negative impact on the way of the real economy operates. To avoid the crowding of the effect on bank deposits, arbitrage, trading and the rise in pro-cyclicality, the use of E-SNY will not be limited to small retail transactions by setting maximum daily and yearly limits and introducing policies that E-SNY conversions exceeding a certain amount can only be processed by appointment. If necessary, multi-tier charges may be introduced, especially in the time of stress for small and small and low frequency transactions can be processed free of charge. The service fees can be charged on large or high frequency transactions, especially during the background to increase the exchange cost and system friction to avoid any background or crowding out effect in terms of the bank savings market. So that's our key design of the two-tier model. That's the first design architecture of our E-SNY system. Secondly, our E-SNY will be positioned as M0, mainly as M0. So in that case, as M0, that is the back-nose encirculation and corn encirculation, mainly the corn encirculation and back-nose encirculation, also the required reserve in the central bank. So since it's a position to M0, that means the E-SNY will be limited to small retail transactions domestically. So we are going to focus on the domestic retail markets instead of the wholesale market and also internationally use cases. So it's not for we are going to focus on the domestic retail sector, not internationally, as you haven't mentioned that whether that will be a key driver for the internationalization or RMB. So firstly, I will focus on the domestic market. If in the future there is a demand for cross-border payments because definitely digital fee occurrences is born to be used for cross-border payments. But if there is demand requirements for us to be used for cross-border payments, firstly we have to talk to the local monetary authority or the local central banks before we can extend to the cross-border use, use cases. Because we have to respect the local supervision and we have to respect the independence or sovereignty of their monetary policy. So that's why that's the reason we develop our own E-SNY is also we cannot do that to other countries without a prepared coordination or well-coordinated mechanism, especially for the exchange mechanism. So that's the first implication of the position as M0. Secondly, because it's a position as M0, we have to observe the same regulations as M0. So all the cash regulations, the rules, the laws will apply to the E-SNY. We have to comply with all the existing M0s and regulations. That also includes the ML and CFTE rules of the M0. So we have to comply with that with all those regulations and rules, the QSE rules. And thirdly, since it says it's positioned as M0, so there will be no interest to be paid to the holders of E-SNY. And since it's M0, so the exchange function will be carried out by the commercial banks. Because in the back-nose, in the era of paper back-nose and coins, it's the responsibility of the commercial banks who are going to exchange the back-nose and coins to the general public. So those PSPs, the payment service providers, the telecom operators, they are not the person, not the institution who are going to exchange the E-SNY to the general public. But the transactions, but the circulation services could be carried out by the commercial banks and the PSPs and the telecom operators and other financial institutions. So those are the implications of the M0 besides that the central bank will not charge any fees from the services providing to the general public that will not charge anything for exchange in the circulation of the E-SNY among the individuals of the general public. That's very helpful in understanding the path you're on. I wonder whether you could touch on an aspect of the design related to privacy. Some people prefer the anonymity of cash or maybe they want a private cryptocurrency like Bitcoin. How do you think about the privacy aspects of offering digital R&B? Well, definitely we have to respect the demands of the general public in terms of anonymity, in terms of payment services. And we adopted a policy that is we call it a controllable anonymity of the E-SNY. That's to, you know, the E-SNY transactions may jeopardize the personal, I mean the digital currency transactions may jeopardize the personal data and privacy. And so we have to have a better design to protect the personal privacy and data. And at the same time, you know, we have to strike a balance because a complete anonymity will encourage criminal activities such as tax evasion, terrorist financing and money laundering. So the only way to strike a balance between the two is to keep the degree of anonymity within a controllable range. Namely, that is for the large sum transactions we have to do the QIC completely. That means the large sum transaction has to be done with their real name, real identity. But for small sum daily use transactions, people could choose to remain anonymous. So that's the key design of our principle. Of course, and also the authorized operators, we call it the second tier is authorized operators. They will perform QIC responsibilities and store their own data locally. And they will submit all the data to the central bank via un-synchronized knowledge, the synchronized knowledge transmission on a timely basis. They will allow the central bank to keep track of necessary data to implement prudent regulation and combat on money laundering and other criminal offenses and illicit transactions. But at the same time, we have to respect the demand to remain anonymous for legitimate transactions. So that's the rules or our views on the privacy issue. Thank you. You know, a major theme of the conference we're having over the next few days is financial inclusion and the ways that central banks might advance financial inclusion in their own economies. You mentioned at the outset that you think that the digital RMB may help with financial inclusion. Others are worried that moving to digital currencies will leave more people out who are not technologically connected or don't have access to the financial system in different ways. How are you thinking about working on the digital RMB in such a way that financial inclusion is a central goal that the design features can help advance financial inclusion rather than leaving people out? Of course, as I said, it's the main driver of all the top value cases for us to develop the ECMY. So due to our ECMY's property characterization and the loosely coupled account linkage, the general public could apply for digital wallets without opening a banking account. Therefore, the issues of ECMY and offline payment function will enable the underbanked population in poor and remote areas with poor coverage of telecom networks to enjoy basic financial services. The ECMY could provide functions that you wallet cannot such as offline payment function due to offline payment function and smart contracts which serve currency functions such as conditional payment and schedule payment. So for those people, you know, we have a lot of population in remote areas, they don't have any traditional banking accounts. So traditionally, they are underbanked because bank cannot provide services for those people without a banking account. But since we are loosely coupled, it's decoupled from the traditional banking account. People can open a digital wallet without a banking account. That means those subsidy subsidies or allowances for those poor people could be sent to their digital wallet without a banking account support. So that people could enjoy some basic financial services and also physical support from the government. So definitely that will improve the financial inclusion. Beyond that, because ECMY is a value based quasi and full account based hybrid payment instrument that could be also is loosely coupled from the banking accounts. So it doesn't rely on the banking accounts for fund transfer. Therefore, for the perspective of settlement finality, the settlement will be completed as a very moment of the payment is completed. So if the financial finality confirmation by the RTGS is no more required for those small merchants, especially the small and medium enterprises, the working capital turnover efficiency could be improved. So that case, that also will provide some support to the financial inclusion. That's a very comprehensive approach to financial inclusion. I think there are many important lessons there that others around the world want to look to and examine and explore and see whether it works in their own systems. Obviously each each system is unique. And people will have to develop their own path. But I do think there are many important lessons there. We are almost done with our time. I wonder whether you have any final words you want to leave us with to convey to the participants in the conference. Okay, I know people are especially those media is exaggerated on the internationalization effect of ECNY, you know, to the to the R&B. But as I said, we need a international coordination. We need, we call for international cooperation in terms of the development of digital currency or digital currency. And so in that case, if we can cooperate together, we can improve the interoperability among the digital fair currency or CBDCs among different countries, and we can improve the efficiency. And we can improve the transparency. We can reduce the cost of the, the cross border payments. So can we can make the whole world better, and we can stimulate or improve the international tree to make people's lives better. So we are looking forward to have a better coordination, a better cooperation among different central banks and international organizations. Thank you. Thank you very much. We really appreciate your participation in the conference. Your remarks are quite insightful and I think will help our listeners really around the world understand the work that it China is we're proceeding on. On the digital R&B. And I know that we'll have many such issues to discuss in the coming years. So thank you so much for participating in the conference today. Thank you.