The impact of digital currency on monetary policy tools

1. The future world will be a digital world, and money will develop from paper money in the past to digital money in the future, which is a trend. Because in order to adapt to the digital world, the future currency must also be digital. It can be predicted that digital currency will be safer, faster and more convenient in the future. Now many blockchain technology procts, although its name is what currency, but in fact it is not currency. Under the guise of digital currency investment, it is a Ponzi scheme. Even some of them don't even have blockchain technology, which is just a fake number to cheat people.

2. The digital currency issued by the central bank is only a substitute for banknotes and coins. In fact, it is a kind of electronic cash, which has little impact on monetary policy and commercial banks. In the traditional currency issuance, the cash in circulation is actually the direct debt of the central bank to the public, only because of technical constraints and cost considerations, the central bank issues cash through commercial banks. With the progress of technology, it is possible for the central bank to issue money directly to indivial and enterprise accounts in the form of digital currency. E-cash flow is still through the central bank and financial institutions, and then to enterprises and indivials. In terms of money manufacturing channels, circulation links and functions, e-cash flow is exactly the same as paper money

e-cash flow still flows through the central bank and financial institutions to enterprises and indivials, which is identical with paper money in terms of money creation channels, circulation links and functions, and does not break away from the scope of traditional monetary policy regulation. The main function of e-cash is to facilitate transaction payment
considering that the development of non cash payment methods such as third-party payment has greatly facilitated transaction payment in recent years, the impact of e-cash on money transaction demand is limited, and the overall impact on monetary policy is not significant. The extent to which e-cash is accepted by the public depends on its convenience and security.

3. The ultimate goal is a long-term goal and a non quantitative goal. Therefore, it is a long process from the application of monetary policy tools to the realization of monetary policy goals (the time lag of monetary policy effect). In order to realize the process control, we need to know whether the monetary policy tools are effective and estimate whether the target can be achieved in time, so we need intermediary target. Intermediate targets can also be divided into short-term targets (close to the instrument and far from the final target), including excess reserves, base money, and long-term targets, including money supply and interest rate.

4. The main tools of monetary policy include deposit reserve rate, discount rate and open market operation
deposit reserve ratio means that commercial banks should put a part of cash into the central bank as margin according to the amount of deposits they absorb, so as to avoid payment risk; Discount rate means that enterprises can exchange cash with commercial banks and pay a certain amount of interest at the same time, which is called discount rate. Open market operation means that the central bank carries out securities and foreign exchange transactions with designated dealers. The common way is to buy and sell treasury bonds. Through these three tools, the amount of money in circulation can be controlled.

5. Monetary policy tools refer to the means adopted by the central bank to achieve the goal of monetary policy. According to Article 3 of this law, the goal of China's monetary policy is "to maintain the stability of the value of the currency and thereby promote economic growth.". In order to achieve the goal of monetary policy, the central bank should control the credit activities of general commercial banks and other financial institutions, so as to control the money supply and affect the whole national economic activities. In order to regulate finance and stabilize currency, the central bank should use economic means, supplemented by administrative means, to control and regulate the amount of credit in the market< (1) financial institutions in the banking instry are required to deposit the deposit reserve in accordance with the prescribed ratio, It is also a system to indirectly control the social money supply. The amount withdrawn is called deposit reserve, and the ratio of reserve to total deposit is called deposit reserve ratio or deposit reserve ratio

the deposit reserve system consists of two parts: one is the legal reserve; the other is the legal reserve; Second, excess reserves. The legal reserve refers to the deposit reserve required by law to be deposited with the central bank. The principle of its operation is that the people's Bank of China can expand or contract the credit capacity of commercial banks by adjusting the ratio of deposit reserve paid by commercial banks, so as to achieve the established monetary policy objectives. For example, if the ratio of legal reserve is raised, the scale of deposits and loans supported by a certain monetary base will be reced, thus recing the money supply in circulation; On the contrary, it will increase the money supply. Excess reserve is the reserve arranged by banks to cope with possible withdrawals in addition to the statutory reserve. It is part of the assets of commercial banks in the central bank. China's excess reserve includes two parts: one is the reserve deposited in the central bank; The second is the cash reserve in the working capital of commercial banks. The former is mainly used for inter-bank settlement and clearing, as well as for supplementary cash reserves, while the latter is used to meet the cash needs of customers.

6. General monetary policy tools include open market operation, deposit reserve and rediscount
1. Open market operation. Open market operation (open market business) is the main monetary policy tool for the central bank to handle the base currency and regulate the market liquidity. Through the central bank and designated dealers to carry out securities and foreign exchange transactions, the goal of monetary policy regulation can be achieved. When the economy is overheated, the central bank sells government bonds to collect money, which reces the circulation of money, increases the interest rate, reces investment, and achieves the purpose of recing the total social demand. When the economy is in a state of slow growth and depressed investment, the central bank will buy government bonds and put money on the market, which will increase the circulation of money and rece the interest rate, thus stimulating the growth of investment and expanding the aggregate demand
2. Deposit reserve. Deposit reserve refers to the deposit in the central bank prepared by financial institutions to ensure the withdrawal of customers' deposits and the clearing of funds. The ratio of deposit reserve required by the central bank to its total deposits is the deposit reserve ratio. Raise the reserve ratio and the money supply will decrease. On the contrary, money supply will increase
3. Rediscount. Rediscount is a kind of behavior that the central bank provides financial support to commercial banks by buying the discounted but not yet mature commercial bills held by commercial banks. The central bank implements tightening monetary policy by increasing the rediscount rate. On the contrary, it is loose monetary policy.

7. Three monetary policy tools: legal deposit reserve; Rediscount (refinancing); and; Open market business.

8. 1. Strictly speaking, there is no "monetary instrument", at least no formal definition

2. Monetary policy tools are the means adopted by the central bank to achieve the goal of monetary policy, including the statutory deposit reserve policy, rediscount rate policy and open market operation. The object of its function is currency circulation

3. Money market instruments, in fact, are "financial instruments" in the money market. They refer to debt instruments with a maturity of less than or equal to one year. They have high liquidity and are part of fixed income securities. Its essence is short-term debt securities

purely speaking from the connotation, monetary policy tools and money market tools will influence each other (especially the implementation of the former affects the market price and trend of the latter), but they are totally different,

9. Monetary policy tool is the policy means adopted by the central bank to achieve the goal of monetary policy. General monetary policy tools refer to statutory deposit reserve rate, rediscount policy and open market business, which are called "three magic weapons"< (1) statutory deposit reserve ratio: it refers to the ratio that commercial banks and other financial institutions are required by law to turn over part of their deposits to the central bank as reserve. Adjusting the legal deposit reserve rate can quickly change the deposit expansion multiple and money multiplier of commercial banks, so as to regulate the money supply. However, the effect of this tool is too violent to be used frequently
effects: 1) even if the adjustment of reserve rate is small, it will cause a huge fluctuation of money supply
2. Other monetary policy instruments are based on deposit reserve
③ even if commercial banks and other financial institutions hold excess reserves for various reasons, the adjustment of legal deposit reserves will have an effect< (4) even if the deposit reserve remains unchanged, it also limits the ability of the commercial banking system to create derivative deposits to a great extent. The limitations are as follows: 1) the effect of the adjustment of the statutory deposit reserve rate is relatively strong, which leads to its tendency of being fixed; ② The impact of deposit reserve on various types of financial institutions and deposits is inconsistent, so the effect of monetary policy may be difficult to grasp because of these complex situations< (2) rediscount policy: it refers to the policy and regulation made by the central bank when commercial banks apply to the central bank for rediscount of unexpired bills. It includes two aspects: the determination and adjustment of the one-time rediscount rate; The second is to stipulate the qualification of applying for rediscount from the central bank. Adjust the rediscount rate: → the cost of borrowing funds by commercial banks → the amount of credit provided by commercial banks to the society → the total amount of money supply; Change the conditions of rediscount qualification → change the flow of funds → restrain or support the sector economy< The results are as follows:

① the adjustment of rediscount rate can change the total amount of money supply
2. The regulation of rediscount qualification conditions can restrain or support, and change the flow of funds
limitations:
① the initiative is not only in the central bank, even the change of the market may go against its policy will
2. The moderating effect of rediscount rate is limited< (3) the rediscount rate is easy to adjust, but the adjustment at any time leads to frequent fluctuation of market interest rate, which makes commercial banks at a loss< (3) open market business: refers to the central bank's policy behavior of trading securities in the financial market to regulate the amount of money in the market. Buying and selling securities through open market business: → directly increasing or decreasing base money → regulating money supply
→ influencing securities price → regulating social credit
effect: 1) it has strong initiative and can operate according to the policy purpose
2. High flexibility, the quantity and direction of business can be controlled flexibly
③ the regulation effect is gentle and the vibration is small
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limitations:
1. The central bank must have strong financial strength to intervene and control the whole financial market
2. There should be a developed and perfect financial market, and the market must be national, with a complete range of securities and a certain scale
3. Other policy tools must be used.