The development of digital currency has entered a fast lane, and this industry chain is expected to lead and benefit from it

On October 17th, the concept of digital currency saw a significant increase. As of the press release, Huafeng Super Fiber and Chutianlong had raised their limit, while Kelan Software had risen by over 15%, with Gaoweida, Advanced Data Communication and other companies leading the way in terms of growth.

According to China Securities News, Lu Lei, Deputy Director of the State Administration of Foreign Exchange, recently stated at the 2023 China (Beijing) Digital Finance Forum that the programmability of the central bank's digital currency provides innovative space for enriching the central bank's monetary policy tools. At present, China's deep participation in the Multi CBDCBridge project, a multilateral central bank digital currency bridge, has made good progress.

In terms of currency digitization, Lu Lei believes that this is the most difficult and challenging area. The essence of all financial activities is intertemporal trading, with currency and interest rates at the core. Under the current model, Central Bank Digital Currency (CBDC) is mainly positioned as cash payment vouchers (M0), which are interest free and high-energy currencies. Assuming that based on the programmability of digital currency, a smart contract about interest rates is loaded onto the central bank's digital currency, which will have the opportunity to become a generalized currency (M2).

Another challenge lies in the field of cross-border payments, "Lu Lei said. In the past, cross-border payments based on the bilateral agency model still had problems such as insufficient efficiency, high cost of fees, opacity, and insufficient coverage. Building a flat cross-border payment network based on the digital currency of the central bank can achieve secure, convenient, and inclusive payments.

In addition, Zhou Xiaochuan, Vice Chairman of the Boao Forum for Asia, pointed out that currently, the development of digital currencies, including the digital renminbi, is mainly based on account based digital currencies. Token based digital currencies are also a potential path for development, but the mainstream is still account based digital currencies. Technically speaking, digital currencies and payment systems heavily use internet technology, so internet technology itself and upgrades will have a significant impact on digital finance and digital currencies. At the same time, payment terminals, including hardware media such as desktop terminals, mobile terminals, and prepaid cards, can also integrate and complement digital payment systems, "he said.

Caitong Securities pointed out that central banks around the world have reached a consensus on the development of CBDC. China's digital currency project has been launched for nine years and will continue to be piloted in 2023. As of August 2023, over a hundred central banks have started the research and development of digital currencies, with developing countries leading the way.

The institution stated that the operation end of midstream commercial banks is the core link of digital RMB, and bank IT system suppliers are most stimulated by digital RMB. Banks with "one card multi-purpose" hard wallet production technology are expected to lead and benefit. In addition, the implementation and promotion of digital RMB will bring a large demand for software system and hardware equipment replacement and transformation. It is recommended to pay attention to bank IT system providers.