August 14, Bai Shuo, former chief engineer of Shanghai Stock Exchange (SSE) indicated that a central bank-issued digital currency (CBDC) should be programmable and a new blockchain payment ecosystem will be formed in the next decade.

“What is the most important thing that will enable us to add new elements to the value transfer and trust services in the digital world of the future? It’s programmable. If one day the CBDC becomes programmable, the imaginary space in this field will be huge.” said Bai Shuo in a blockchain technology application seminar.

It is generally acknowledged that Bitcoin is the first generation blockchain technology, and Ethereum represents the second generation blockchain technology which supports programmable smart contracts.

Bai Shuo said that, Bitcoin is a “wild” virtual currency that has no legal status. It could be used as a means of payment, however, when it is used as a means of exchange and goes back to the centralized digital asset trading platform, besides security issue there are also problems with misappropriation.

He further added that, there is also anther type of digital currency: tokens anchoring a fiat money. This kind of digital currencies have over-issuance problems which is difficult to regulate.

Nevertheless, the CBDC based on blockchain technology  may have the same legal effect as the fiat money once issued, which draws attention from the central banks all over the world. The financial authorities may monitor the whole trading process in real-time that is also helpful for anti-money laundering.

Bai Shuo believes that CBDC should be positioned at M0, which has reached a consensus. In the first stage, CBDC will conduct large amounts of fund flow between the central bank and commercial banks instead of directly enter the public market. In the second stage, CBDC may enter the public market, but does not given programmable functions. In the finial stage, the CBDC will be given programmable functions.

“The central bank has carried out researches on CBDC and the technology reserve is adequate, in the previous years the central bank retains cautious attitude towards CBDC, but they may accelerate their CBDC plan in the next few years,” he concluded.