The Third Series of Digital RMB Conjecture by Fang Hongjin: Can You Bring the Digital RMB Out of the Country?

Abstract : If I hold a certain amount of digital RMB and want to save it in my own digital wallet then bring it abroad, or directly transfer a digital RMB to a digital wallet held by a foreign friend via the Internet, is this illegal? Will anyone supervise or manage it? Or, will anyone know?


Nov 10

Fang Hongjin was the leading host of CCTV "Oriental Time and Space" and "Focus Interview” and the previous general manager of Dragon TV. Beginning in 2016, he started to study the blockchain theory, focusing on the top-level design of the token projects. In June 2018, he designed the world's first stable digital currency anchored offshore RMB, with complete operational experience on the top-level design and supervision of stable currency. At present, he majorly focuses on the application of digital vouchers for the development of offshore RMB deposits in international settlement, the application of RMB deposit digital vouchers in supply chain finance, the application of mass spectrometry detection and blockchain technology in food traceability, and other blockchain application solutions .

The purpose of this paper is to proceed from the application characteristics of digital currency, strictly refer to the information disclosed in a series of speeches and articles published by central bank officials recently, and make inferential conjecture on the application of digital RMB and its social impact.

10. Can you bring the digital RMB out of the country?

If I hold a certain amount of digital RMB and want to save it in my own digital wallet then bring it abroad, or directly transfer a digital RMB to a digital wallet held by a foreign friend via the Internet, is this illegal? Will anyone supervise or manage it? Or, will anyone know?

This is one of the most confusing issues in the series of guesses about the application of digital RMB.

It is well known that China's entry and exit of funds are regulated. Unless specifically permitted, the average person can only carry a maximum of 20,000 yuan or a foreign currency equivalent to 5,000 US dollars for entry and exit. If the excess is found by the customs, it may be fined.

There is a way to bypass the bank account supervision and cash entry and exit supervision to achieve cross-border flow of funds. It can still operate normally, which is the trading of cryptocurrencies such as Bitcoin that began to appear in recent years.

If you want to buy bitcoin in the country, you should first go to the digital currency exchanges that claim to have moved abroad for registration, and then ask how many yuan to buy bitcoin. They must recommend one person so-called OTC trader who they guarantee reliable to contact you. You transfer your RMB to a bank account in the OTC dealer. After a few minutes, he will deposit the USDT with the US dollar exchange rate into the account opened by the exchange. As long as each time the amount is not too big, this over-the-counter process can basically be completed smoothly.

Although the USDT was issued by the highly unreliable Tether company, it has basically kept its price almost the same as the dollar cash in the past few years. With USDT, this digital stable currency can buy other digital currencies such as Bitcoin.

In fact, if it is for the purpose of fund transfer, as long as you exchange RMB into USDT, whether it is placed on your account on the exchange or in your own digital wallet, your money is already out.

However, it is very inconvenient and unsafe to play with assets aborad by buying and selling encrypted digital currency. First, it is difficult to find over-the-counter traders to take over because of the large amount of money. Second, it is likely that there is fraud in the intermediate links. Third, the price of these unsteady tokens in Bitcoin jumps up and down, so it is normal to drop 20% in one night. Therefore, the cross-border transfer of this asset has not yet become an important target.

However, if the digital RMB comes, the situation will change dramatically. Will it become a new and important tool for cross-border capital transfer? Here we must fully consider the three characteristics of the digital RMB.

First, regardless of whether or not blockchain technology is fully adopted, the digital RMB must be digitized. In addition to the characteristics of several legal currency digital currencies such as the People’s Bank of China’s credit endorsement, price-locked RMB cash, issuance and regulatory centralization, it also will have most of the application features of other digital currencies, especially point-to-point payments, non-double spending, no tampering of transfer records, so it should be able to trade directly with other digital currencies or assets.

This feature determines that the digital RMB will be used in the same way as other digital currencies. In return to the problem we have to guess today, the digital RMB should be easily used to purchase other digital currencies or assets, and once it is transformed into other digital currencies or assets, how can existing regulatory measures continue to be implemented?

Second, when the central bank planned the digital RMB this time, special consideration was given to protecting the anonymity of users. Therefore, the term “loosely coupled” was adopted. It means that having a digital RMB does not necessarily depend on bank accounts, and individuals can put the money in their own digital wallet. You can finish transfer and payment process between the two digital wallets point to point, no need to register with a third party, or to entrust a third party to pay settlement.

This feature determines that the holders and users of the digital RMB are anonymous. Returning to the question we are guessing today, this means that since it is impossible to know who holds the RMB, so how do you judge whether it is out of the country when it is moved in different wallets?

Third, when the central bank officials publicly expounded the functions of the digital RMB, they emphasized that the digital RMB would not be attached with any smart contracts for use, just as a paper RMB noted only for buying green vegetables but not for rice is not allowed. The digital RMB must have a universally used value, which not only maintains its infinitely repayable credit, but also facilitates the internationalization of the RMB.

This feature determines that the central bank is unlikely to issue two kinds of digital RMB ---- one is digital RMB that exchange domestic RMB in China, and the other is digital RMB that exchange offshore RMB outside China.

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