Di Gang from the Data Research Institute of the Central Bank: Loading smart contracts with digital renminbi is an important practice in practicing integrity and innovation

Reported by Tang Jing, a 21st Century Economic Reporter, from Beijing

On November 10th, during the 2023 Financial Street Forum Annual Meeting, the "5th Chengdu Financial Technology Forum - Financial Technology Integrity Innovation Forum" was held. Di Gang, Deputy Director of the Digital Currency Research Institute of the People's Bank of China, delivered a speech on the theme of "Integrity Innovation Opening a New Future of Payment", focusing on the development status of digital RMB and smart contracts.

Digital RMB is a legal tender issued by the People's Bank of China in digital form, characterized by accounts, quasi accounts, value, no interest calculation, low cost, payment settlement, controllable anonymity, security, and programmability. Di Gang stated that smart contracts are one of the most important features of digital renminbi, and loading smart contracts into digital renminbi is an important practice of practicing integrity and innovation.

Di Gang emphasized the development and application of smart contracts. Digital RMB can achieve programmability by loading smart contracts that do not affect currency functionality, enabling automatic payment transactions based on agreed upon conditions and rules between both parties while ensuring security and compliance, promoting business model innovation.

For example, using digital RMB smart contract prepayment management can effectively solve the problem of dishonest merchants running away with their payments. Consumers' prepaid funds are stored in digital RMB wallets. After a consumer completes a consumption, the merchant initiates the execution of the smart contract, and the smart contract checks whether it meets the agreed execution conditions. Only those that meet the conditions can transfer the prepaid funds to the merchant. In addition, smart contracts can also play their potential in scenarios such as targeted payments, financial subsidies, research funding, targeted poverty alleviation, marketing and retail, consumption red envelopes, cross-border trade, and fund settlement.

The digital RMB smart contract has five characteristics: consistency, observability, verifiability, privacy, and self enforcement. At the same time, it has three major advantages: trust advantage, interoperability advantage, and latecomer advantage. Di Gang believes that "there are five design concepts for smart contracts of digital RMB: firstly, adhering to a neutral management and dual layer operation architecture; secondly, ensuring the legality and effectiveness of contract templates; thirdly, adhering to open source; fourthly, continuously upgrading technology to prevent technical risks; and fifthly, paying attention to institutional linkage and remaining risk prevention

Di Gang pointed out that there are five main development directions for smart contracts towards the future. Firstly, we are committed to establishing a comprehensive, autonomous and controllable smart contract technology support system; Secondly, it is necessary to study the development language of autonomous and controllable smart contract fields; Thirdly, we need to construct a legal analysis framework for digital financial smart contracts; Fourthly, build an integrated software and hardware privacy protection capability; Fifth, establish a multi-level technology ecosystem and build a safe, efficient, and commercially sustainable ecosystem.