Study On Risk And Regulation Of Digital Currency

The development of modern cryptography has created a way of transferring cash through encryption and decryption,which is the theoretical basis on which digital currencies can be created.The creative use of hash algorithms and distributed ledger technology(DLT)on modern cryptography have earned bitcoin the trust of investors around the world.Different types of digital currencies are created on the basis of Bitcoin,and created various functions of digital currency such as substitution of real currency,financial asset transaction,fund raising,etc.Governments of all countries need to pay attention to the risks brought by digital currency to the economic order and take regulatory measures in line with the information technology revolution and the development of financial industry oriented by digital currency.Under the situation of global financial integration,China should also establish our own digital currency supervision system,actively participate in national cooperation,and have a say in the international supervision of digital currency.This paper is divided into four parts.The first part introduces the theory,definition and classification of digital currency.Digital currency is the result of combination of modern cryptography and DLT.Asymmetric encryption technology and hash algorithm can make accurate transfer between point and point come true,while DLT can promise the tamperability of information.The theory and nature of digital currency are fundamentally different from that of electronic currency based on legal tender and virtual currency based on online game application.Due to different issuing entities,different stabilization mechanisms and different centralization mechanisms,digital currency can be divided into several categories,which play their respective roles in use.The second part studies the characteristics of different types of digital currencies and expounds the their significance and possible risks.As far as the non-sovereign digital currency,both advantages and risks of Bitcoin as decentralized digital currency come from its decentralized management model and anonymous trading environment,while the stable centralized currency can also bypass the commercial Banks.Further more,its price stability will help it run as a currency.However,centralized trust mechanism is faced with credit risk.As far as the sovereign digital currency is concerned,its centralized management mode is beneficial for the country to control the information of digital currency and enhance the competitiveness of legal tender,which is an ideal type of digital currency for the country.Meanwhile,it also poses new challenges to the regulating systems.Under financial globalization,super-sovereign digital currency is the currency in the future that can make the currency circulation between countries more convenient and help countries control cross-border transactions.However,super-sovereign digital currency challenges the monetary power of countries.The third part studies the international experience of digital currency regulation.Different applications of digital currency mean that digital currency has different nature.Countries generally agree on the monetary nature of digital currency as a payment tool,and the securities nature as an investment tool.China,which does not recognize the currency nature and securities nature,only treats digital currency as a virtual commodity.Attitudes to digital currencies vary from country to country.Some countries completely prohibit the issuance,trading and holding of digital currency,but at the same time prevent the progress of information technology and the development of financial innovation.Some countries actively involved in the digital currency business have yet to regulate it,but promise regulatory policies are on the way.Some countries have managed to keep the digital currency industry under control by banning certain institutions from offering digital currency services,registering authorized dealers in digital currency issuance,or allowing transactions in digital currency issuance within pilot scope.Comparing with foreign regulatory experience,China's legal nature division of digital currency is rigid,and its regulatory attitude towards digital currency is too passive.The fourth part expounds the necessity of digital currency supervision and the regulatory status in China.In conclusion,our policy of digital currency leave the basic concept unclear,the regulatory attitude negative.It is suggested that China can change the regulatory attitude of digital currency,make use of regulatory technology and international experience to improve the supervision of existing types of digital currency,and actively participate in international cooperation to make preparations for the super-sovereignty of digital currency.