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Li Lihui, the former president of the Bank of China, believes that the offline operation of the digital renminbi may have a cross-border spillover effect and develop into a global digital currency.
Original Title: “Li Lihui: Digital Currency May Reconstruct the Global Currency System”
Speech: Li Lihui, Former President of Bank of China Source: Sina Finance
According to news on October 22, Li Lihui, former president of the Bank of China and member of the 12th National People’s Congress Finance and Economic Committee, said today in a speech at the “2020 Financial Street (6.800, -0.01, -0.15%) Forum Annual Meeting” that digital currencies may be heavy Construct a global monetary system.
Li Lihui said that our legal digital currency can be operated offline, which may cause cross-border spillover effects and develop into a global digital currency. Therefore, our country’s legal digital currency has received high attention from the world.
Li Lihui, Former President of Bank of China
The following is a record of the guests’ speeches:
Distinguished guests, friends, good afternoon! The topic I shared with you today is “Digital currency may reconstruct the global monetary system.”
Digital currency can be called digital currency. Digital currency has different forms, such as virtual currency represented by Bitcoin, legal digital currency or digital currency called Bank of China digital currency and trusted institution.
According to a survey conducted by the Bank for International Settlements, the central banks of almost 80% of the world’s central banks have launched digital currency research and development. Not long ago, the Bank for International Settlements issued a report with the central banks of the United States, the European Union, Japan, the United Kingdom, Canada, Switzerland, and Sweden. A report on the basic guidelines and core features of the central bank’s digital currency.
The legal digital currency in our national pilot uses a centralized management and indirect issuance model, and uses a deep coupling of accounts + digital wallets. It has the advantages of administrative authority and offline transactions. Therefore, the legal system in our national pilot Digital currency should be able to provide the public with a safe and liquid payment tool to replace cash in circulation, making daily life easier.
In fact, what we should pay more attention to is that even though it is our legal digital currency, because it can be operated offline, I think it may have that kind of cross-border spillover effect and develop into a global digital currency. I think also For this reason, our country’s legal digital currency has received a high degree of global attention.
I recently proposed the concept of a trusted institution digital currency. It is mainly based on such considerations. I think that a digital currency that can become a climate must be trusted. The legal digital currency can be trusted because of its legal status and the endorsement of the sovereignty of the country. Others To be trustworthy, any institution’s digital currency must have such qualities, as mentioned in my PPT:
First, it must have the trust endorsement of the public trust organization, the scale of customers with commercial value, the efficient and reliable financial transaction and payment platform, the support of auditable financial assets, and of course the market standards of administrative license. Into. In the past few years, we have seen that financial institutions such as Goldman Sachs, JP Morgan Chase, and UBS have introduced digital currencies to enter the financial market one after another, of course, only for limited financial transactions.
Second, I think what we should actually pay attention to is the digital currency Libra planned by Facebook. At the beginning, Facebook’s Libra had to become a financial and nuclear operating infrastructure that was not controlled by the central bank and covered billions of people worldwide. So It has caused financial regulatory concerns and capital panic. Why is this happening?
Let’s take a look at the three key points he put forward in version 1.0 of the Libra white paper:
First, the industry giants jointly founded, covering a huge customer base. Most of their 21 co-founded institutions are international service platforms that can provide sufficient trust and endorsement. The most important thing is that they have a global sales network and a customer base of more than 2 billion.
Second, apply digital technology to build an independent financial infrastructure. They use the distributed architecture of the alliance block chain, use privacy computing technology to protect data privacy and data security, and use digital wallets to provide a peer-to-peer, end-to-end transaction platform that can cover all corners of the world. Commercial banks are no longer needed. A third-party payment institution is required.
Third, use hard assets as support to maintain the value of independent digital currencies. The investment of members of the association and the funds purchased by users of Libra will become reserves for low-risk, low-return investments, which will be bundled with low-volatility physical assets to maintain the stability of Libra’s value.
Of course, in order for the digital currency of Facebook to reach the market access threshold of Western countries, three major problems must be solved: one is the efficiency and reliability of the technology platform; the other is the feasibility and transparency of the business operation model; and the third is The realization path and credibility of financial integration regulation and control.
Over the past year, Facebook has made significant progress in this regard:
First, strengthen the currency copyright status of the US dollar. The Libra network will add a new type of data currency, which is a digital currency that rivets a single legal tender, such as Libra U.S. Dollars, Libra Euros, and so on. At the same time, they issued a global digital currency Libra as claimed in last year’s white paper, and formed a currency basket according to fixed weights, a bit like the IMF’s special drawing rights.
Facebook believes that for countries that do not have a single digital currency on the Libra network, this Libra or Libra is a neutral and low-volatility alternative and can be used as a payment and settlement tool.
We know that the actual Libra digital currency is mainly based on the US dollar, so I think Libra may become a tool for the United States to continue to promote US dollar hegemony in the digital economy.
The second is to strengthen financial compliance standards. In June last year, their white paper 1.0 declared that a centralized consortium blockchain architecture was applied, but they stated that a decentralized architecture would be adopted in 5 years. The situation has changed this year. The White Paper 2.0 published in April this year stated that they will maintain a centralized technical architecture, and the Libra Association promised to develop a comprehensive framework for financial compliance and financial risk management across the network to establish anti-money laundering, anti-terrorism, and Comply with strict standards for sanctions and prevention of illegal activities, and combat various criminal activities.
The association promises to strictly implement the market access system, and is responsible for conducting a full-scale net worth survey of association members and designated dealers. Moreover, the association should also act as a financial institution IFIU, run the functions of a financial intelligence agency, and monitor Libra 24/7. Activities, if suspicious activities are detected, they will submit information and reports to the competent authorities in accordance with the law.
A few days ago, the G7 finance ministers and central bank governors made a video conference statement that global digital currencies must meet all relevant legal and regulatory requirements before they can start operations. Therefore, it remains to be seen whether Facebook’s Libra can meet the standards, but I think if Once Libra is approved by the United States, it can gain market access from Western countries and may rapidly develop into a super-sovereign digital currency. What we need to pay attention to is that the super-sovereign digital currency may subvert and reconstruct the global monetary system and traditions. Financial model. One is to surpass national sovereignty, the second is to overstep the central bank, and the third is to cross over commercial banks.
It may surpass the status of monetary sovereignty, which essentially depends on the trust of the public. Statutory only strengthens the public’s information. In the past, shells became the original currency not because of statutory, but the equivalent attributes recognized by the public. The sovereign currency may lose the trust of its citizens and may be replaced by a super-sovereign digital currency. Sovereign currencies of developed economies generally will not withdraw from the stage of history, and may also become targets of super-sovereign digital currencies, but the status of currencies may change from primary to secondary.
Second, it may reshape the position of currency hegemony. The hegemony of super-sovereign digital currency will be determined by the coverage, scale, and scale of physical assets. There may be several evenly matched super-sovereign digital currency systems around the world. Globally circulating super-sovereign digital currencies may no longer have clear national standards, and more importantly, global commercial trust and global digital trust recognized by the public.
Third, it is possible to form a financial system that spans commercial banks. Once Libra has formed a financial infrastructure that can cover all corners of the world, it may start with payment and settlement, and gradually enter the fields of savings, financing, investment, insurance, asset trading, etc., and penetrate the civilian population. I think this is a real challenge and an opportunity for the future.
First, digital currency will become the basic tool for the digital transformation of the financial industry. We should speed up the construction of the financial system and step up the development of digital currency supervision, digital asset market supervision, and legal digital currency issuance.
Second, digital currency will occupy the core position in the future global digital economy competition. Both the strong legal digital currency and the super-sovereign digital currency will have an impact on the current international monetary system. Our country should further optimize and optimize on the basis of pilot projects. Improve the technical structure of my country’s legal digital currency, and at the same time study and explore feasible paths and implementation plans for issuing China-led global digital currencies.
Third, digital finance is bound to further strengthen the globalization of finance. In the construction of global standards for digital finance, our country should actively participate in and strive for the right to speak, strengthen international regulatory coordination, promote regulatory consensus, and establish unified standards for international regulation of digital finance.
Thank you all!