A study on the compulsory nature of virtual digital currency

2013 In 2016, five ministries and commissions of the central bank issued the "Notice on Preventing Bitcoin Risks", which has since confirmed that virtual currency-related business activities are illegal in the country. Since then, the "Announcement on Preventing Financing Risks of Token Issuance" and "Notice on Further Preventing and Dealing with Speculation Risks of Virtual Currency Transactions" have continued the policy spirit of prohibiting encrypted digital currency transactions, but in terms of the nature of virtual digital currencies. The expressions vary. For example, the newly issued "Notice on Further Preventing and Dealing with Speculation Risks of Virtual Currency Transactions" issued in 2021 is different from the previous announcement in that it removes the expression "virtual currencies are not monetary compulsory". Does the change have a deeper meaning? How have regulators’ understanding of virtual digital currencies changed? In view of the above situation, the author hereby writes an article to explore the profound meaning of currency compulsory not being mentioned.

1. Problem raised - the disappearance of the expression that virtual currency does not have "monetary compulsory"

The "Notice on Preventing Bitcoin Risks" document on December 5, 2013 clarified for the first time that "Although Bitcoin is called a 'currency', because it is not issued by a monetary authority, it does not have legal status." The currency attributes such as compensability and compulsory are not the true meaning of currency.” On September 4, 2017, the document “Announcement on Preventing Token Issuance Financing Risks” once again proposed that “tokens or ‘virtual currencies’ used in token issuance financing Currency is not issued by the monetary authority, does not have monetary attributes such as legality and compulsory nature, does not have the same legal status as currency, and cannot and should not be used as currency for circulation in the market." September 24, 2021 "About Further The "Notice on Preventing and Handling the Risks of Speculation in Virtual Currency Transactions" states that "virtual currencies do not have the same legal status as legal tender. Virtual currencies such as Bitcoin, Ethereum, and Tether are issued by non-monetary authorities, use encryption technology, and are distributed The main characteristics of accounts or similar technologies and their existence in digital form are not legally compensable and should not and cannot be used as currency for circulation in the market." It is obvious that the above-mentioned documents were issued by the People's Bank of China and all mentioned Virtual currency does not have monetary attributes, and the lack of legal compulsibility has always been emphasized. However, in the latest document in 2021, it gave up the claim that virtual currency does not have monetary compulsibility on the basis of emphasizing that virtual currency does not have legal characteristics. This change has attracted the attention of the author. After searching the literature and consulting the information, the author tried to interpret this change.

2.The basic attributes of credit currency - legal compensation and compulsory

Money is a fixed, universal property that serves as a medium of exchange. For a long time in human history, countries used metal currencies. However, with the expansion of economic scale, metal currency has limitations such as high cost and inconvenience to carry. Therefore, metal currency gradually gives way to credit currency. All currencies in the credit-based era, whether they are tangible banknotes or other forms of currency, have no value in themselves. The reason why people are willing to accept them is that such currency forms are guaranteed by national credit, and people believe that others are in the exchange. The currency will be accepted to settle the debt. Thus, the credit basis of credit currency is the overall credit of the issuing agency and the country. This credit is manifested in the legality and compulsory nature of the currency.

(1) Interpretation of the credit system of currency

High school politics textbook once As mentioned before, currency is produced in the process of commodity exchange, and its basic function is to serve as a medium to facilitate the exchange of different properties. In short, without the intervention of legal force, different media of exchange will compete for the most popular currency. In the long process of historical evolution, precious metals stood out among many forms of exchange media due to their scarcity, stability, portability and other characteristics, and occupied the throne of "currency" for a long time until the United States in 1971. It was announced that the U.S. dollar would no longer be convertible into gold, and the era of the metal currency standard system was over. The continuous increase in the demand for money and the limitation of the supply of monetary metals have led to the collapse of the metal currency system. Countries have invariably chosen to issue banknotes that serve as a fixed measure of value, a means of circulation, and a means of payment based on the legal tender issuing authority and the overall credit of society. , the credit currency standard system was born, and its obvious manifestation is the legality and compulsory nature of currency.

(2) Analysis of the basic concept of legal compensation

The legal compensation of currency is It refers to the legally recognized currency that has the legal solvency for a specific range of debts. Currency with legal repayability is called "legally repayable currency". For modern countries, giving the national currency the legal payment attribute is a manifestation of the country's exercise of minting power and regulating the value of currency. If both national currency and non-state currency are given legal liability, or only non-state currency is given legal legality, then the hierarchical currency payment system will no longer exist, and there will be a lack of lenders of last resort in the financial market to provide the highest level of credit. . Legal currency has absolute payment effect. Creditors may not refuse to accept legal currency to settle debts unless the payment object is specifically agreed upon. Otherwise, it will be considered an illegal act. Article 16 of the "People's Bank of China Law" stipulates: "The legal currency of the People's Republic of China is RMB. All public and private debts within the territory of the People's Republic of China shall be paid in RMB, and no unit or individual may refuse to accept it." This article is considered It is a direct reflection of the legal compensability of RMB in my country.

(3) Analysis of the basic concept of compulsory

In the credit currency system, currency The circulation reflects strong state coercion. The acceptance of currency is no longer just a voluntary matter between businessmen, but reflects the will of the country, and the rules of currency issuance and circulation have become national legal norms. However, in addition to the normative documents issued by the central bank, the author found that many academic documents rarely mention the mandatory nature of currency. It is generally believed that the mandatory nature of currency is reflected in the second half of Article 16 of the "Law of the People's Bank of China". Units and individuals are not allowed to reject it," and scholars seem to mostly classify it as a concept of legal compensation and elaborate on it. An article stated that Article 3 of the "RMB Management Regulations" requires "all public and private debts within the territory of the People's Republic of China to be paid in RMB." The "legality" and "mandatory" nature of the RMB are clarified, that is, the RMB is a "legal currency" and is endorsed by national credit and coercive power, thus giving the RMB a strong credit attribute and enabling it to gain the trust of the public. It also reflects that the compulsory nature of currency is mainly reflected in the fact that it cannot be refused when paying off debts. Because legal tender is required not to be rejected, the use of a country's currency is subject to geographical restrictions, generally within the scope of national management.

3.Virtual currency is not legal and mandatory

Virtual currency has the characteristics of decentralization, and whether it has monetary attributes is an enduring discussion proposition. Supporters believe that the virtual currency represented by Bitcoin actually has the five major monetary functions of value scale, circulation means, storage means, payment means and world currency, and has the ability to query transactions, is not restricted by time and space, and has a limited total amount. And limit inflation and other advantages. Opponents believe that Bitcoin lacks national credit support and is difficult to perform as a standard currency as a commodity exchange medium; the quantity and scale have set an upper limit, making it difficult to adapt to the needs of modern economic development; it lacks a central regulatory mechanism and is incompatible with the modern credit currency system. and other defects. It is a virtual commodity but does not have monetary attributes. At present, my country's laws and regulations do not recognize the monetary attributes of virtual currencies. This is also the consistent position of the three documents in the virtual currency field mentioned above.

(1) Reasons for denying the monetary attributes of virtual currencies

The author summarized several denials Perspectives on the Properties of Virtual Currency. First of all, although virtual currencies represented by Bitcoin are called currencies, they do not have all the functions of currencies. Its essence is electronic data, and it innovates an accounting method, that is, because all nodes completely record transactions, the ledger cannot be tampered with. Secondly, due to the anonymity, confidentiality, and global circulation of virtual currency, and the lack of effective regulatory measures, it has gradually become a new tool for illegal crimes such as money laundering, fraud, and bribery, and is highly harmful to society. Finally, the circulation scope of virtual currency is limited and unstable. Whether it is Bitcoin or other virtual currencies, it is possible to exchange for goods or complete payment within a certain range, but not all goods can be exchanged for currency. For example, in the history of our country, food stamps, cloth stamps, etc. have been used in a long period of time. Daily necessities are exchanged openly or semi-openly on a large scale, but no one has ever defined food stamps and cloth stamps as currency. The basic condition for currency to become a medium of commodity exchange is its universal acceptability. Based on this, although virtual currency is becoming increasingly important in the field of blockchain, its essence is still data. There is no guarantee of national credit and its monetary attributes are not recognized.

(2) National policies restrict virtual currencies

Some scholars believe that private digital currencies All forms of currency have not been recognized by national powers, and have not been accepted by the market as currency. Therefore, they do not have all the characteristics of currency. At this stage, they mainly exist as financial investment tools. At the national level, in addition to the departmental normative documents cited above that clearly deny the monetary attributes of virtual currencies, Article 19 of the "Law of the People's Republic of China on the People's Bank of China (Revised Draft for Comments)" is also intended to stipulate: "RMB includes physical forms and digital form; in order to prevent virtual currency risks, it is clearly prohibited for any unit or individual to produce and sell digital tokens." While providing a legal basis for the promotion of digital renminbi, this move denies the legality of privately issued virtual currencies. There is a logical contradiction here. The People's Bank of China and other ministries and commissions have denied the monetary attributes of virtual currencies in their documents, but based on the functional attributes of virtual currencies, they have regarded virtual currencies as the object of illegal financial activities such as illegal fund-raising. Indirectly recognizes the financial attributes of virtual currency. At present, my country’s denial of the monetary attributes of virtual digital currencies is mostly based on policy reasons.

4. Analysis of reasons for canceling mandatory expression

According to the author's analysis above, legality and compulsoryness are the basic attributes of credit currency. Virtual currency does not have the characteristics of legal credit currency due to its own limitations and policy reasons. Currently, China identifies virtual currencies as virtual commodities and has adopted a prohibitive regulatory stance. However, this stance cannot effectively protect the legitimate rights and interests of digital token holders. Due to the anonymity of blockchain, although relevant regulatory agencies can restrict virtual currency transactions through technical means, they cannot completely prohibit the existence of non-public virtual currency transactions. Under this circumstance, if overseas digital currency exchanges or other domestic entities commit illegal acts against domestic digital token holders, regulatory agencies will not be able to provide them with sufficient legal protection. A closer look at the prohibitive regulatory documents issued by the central bank and other ministries shows that the prohibitive stance on virtual digital currency has not changed, except that the mandatory expression has been canceled in the latest document. Combined with the central bank's attitude towards digital renminbi, the following possibilities are speculated.

(1) Monetary coercion itself is inseparable from legal compensation

As mentioned in the previous article Moreover, except for central bank policy documents, many financial scholars do not deliberately distinguish between currency legality and compulsory nature, but focus on using compulsory to uniformly express the characteristics of currency. In the long historical evolution of the legal compensation system, by continuously strengthening the status of the national currency, a stable legal consciousness has been formed in people's minds, making it a common understanding of society, and it is generally accepted that the currency issued by the state is circulated domestically and used as debt. A fixed means of repayment. The "mandatory" nature of legal currency has rarely been deliberately emphasized. Legal currency issued by the state is more like a public service, paving the way for the rapid development of bank deposits and other payment instruments. Therefore, when discussing the legality of currency, "no rejection" already contains mandatory features, and there is no need to make a deliberate distinction. Here, the author speculates that one of the possibilities for the deletion of the "mandatory" expression in the 2021 document is that the issuing authority took into account the accuracy and simplicity of the legislative language and unified the expression of currency attributes in terms of legal compensation. It can also be seen from the fact that the legislative language has changed but the attitude towards the prohibition of virtual currencies has not changed. The deletion of the "mandatory" expression has not affected the consistent basic spirit of the previous and later policies.

(2) Paving the way for digital currency

Legal digital currency, that is, central bank digital currency, It refers to "legal currency issued by the central bank and expressed in the form of an encrypted digital string representing a specific amount." Under the wave of new technologies such as electronic payment and blockchain, my country is also developing legal digital currency. The People's Bank of China launched a research project on digital currency as early as 2014, and obtained approval from the State Council in 2017. By 2018, the People's Bank of China had applied for a total of 63 patents on digital renminbi, and finally experimentally launched it in April 2020. A digital renminbi was issued locally. Legality is the basic characteristic of currency and the legal payment capacity of currency. At present, because digital RMB essentially relies on information data, its characteristics are different from banknotes. The implementation of digital RMB has made a breakthrough in the traditional currency compulsory. Therefore, in order to adapt to the needs of the popularization of digital RMB, the traditional "no rejection" of RMB has been implemented. Mandatory requirements will also need to change. Therefore, the author speculates that the change in legislative language is a change made by the People's Bank of China to adapt to the breakthrough in currency compulsory promotion of digital renminbi.

1. Digital currency is a mandatory breakthrough for payment tools

As mentioned above, Article 16 of the "Law of the People's Bank of China" stipulates that legal tender shall not be rejected. For cash, the currency holder can achieve complete control and use without the help of other entities or equipment, so the currency payee can also accept it completely through his own ability. According to the Tenth Law of the People's Bank of China It is fully realistic to bear the consequences of non-rejection in Article 6. However, for digital renminbi, currency holders must resort to external payment tools and rely on the robust operation of the corresponding payment system to achieve effective control and use of the currency. Therefore, digital renminbi cannot have the same unlimited legal effect as cash, especially in special situations where the payee is unable to receive digital renminbi due to lack of power on the device, etc. Emphasizing that the payee must receive digital renminbi is too harsh on him . If future laws stipulate that digital renminbi stored in any medium will have unlimited legal effect, payees, especially commercial operators, will have to bear greater payment costs and undermine the original intention of digital renminbi to promote financial inclusion. Customers need a certain terminal device to store and use legal digital currencies. Therefore, legal digital currencies do not have unlimited legal compensation properties, but limited legal compensation properties. Therefore, a breakthrough has been achieved in the mandatory "no rejection", and subsequent The supporting legislation for digital renminbi should consider specifying the limited mandatory nature of digital renminbi under special circumstances.

2. The mandatory breakthrough of digital currency in the payment space

Has been analyzed in the previous article, Under the credit currency system, the circulation of a country's currency depends on the credibility of the country's government, so the compulsory requirements of currency laws are often limited to a country's territory. However, digital renminbi relies on the Internet, making the convenient cross-border circulation of funds a reality. The original stipulation that the renminbi is mandatory only within the country no longer meets the needs of legislation. Article 16 of the "Law of the People's Bank of China" stipulates that the legal compensability of RMB is limited to the domestic territory, and does not provide for the legal compensability of RMB beyond the territory of China. As digital renminbi continues to gain popularity, cross-border use of renminbi becomes possible, and voluntary overseas use of digital renminbi should be recognized. Therefore, some scholars suggest that the second half of Article 16 should be modified to read: "All public and private debts within China shall be paid in RMB, and no unit or individual may refuse to accept them. All public and private debts outside China shall be paid in digital RMB Debt, the payment behavior is valid.

It can be seen that in the context of the central bank vigorously promoting digital renminbi and advocating amendments to the law, it is considered that the payment of digital renminbi is limited to electronic devices and geographical restrictions, a breakthrough should be made in the mandatory non-rejection of goods, which may also be clarified in the future revision of the law. In order to achieve the continuity of the policy and the consistency of the legislative language, on the premise of a breakthrough in mandatory currency, a new The normative documents restricting virtual currencies no longer mention currency compulsory, which is also in line with the relevant policies and laws of the future digital renminbi.

5. Conclusion