China Should Formalize Blockchain Standard to Curb Underground Flow of Tokenized Capital
November 29, Beijing- Li Lihui, ex-President of the Bank of China and now the director of Blockchain working group of China Internet Finance Association, delivered a speech on the annual meeting of Caijing. He suggests that the certain technology should be adopted commonly to “prevent underground flow of tokenized capital”.
“Technological innovation is changing the financial landscape in three ways: big data promotes inclusive finance, artificial intelligence spawns smart finance and blockchain promotes 3-D financial system. But generally speaking, innovation of financial regulations lags behind technological innovation. Some common technologies should be adopted to prevent the underground flow of tokenized funds.”
On November 29, Li Lihui, former governor of the Bank of China and leader of the blockchain working group of China Internet Finance Association, said in the annual meeting of Caijing Media.
Li Lihui believes that building trust in traditional financial system is very costly due to information gap. The big data applications help solve the problem and achieve inclusive finance. For example, Alibaba’s Ant Financial has released more than 800 billion microfinance loans by using big data technologies last year.
Secondly, the integration of AI and big data system can improve the accuracy of credit evaluation and risk evaluation. Intelligent account registration and intelligent underwriting can lower the threshold of financial transactions, expand the scope of financial transactions and achieve financial fairness.
Thirdly, the underlying core technologies of blockchain, such as smart contract, have prominent technical advantages in financial products involving multiple participants and high complexity. They can make rules, coordinate management, avoid duplication, improve efficiency and reduce costs. For the time being, blockchain technology has outstanding advantages in financial scenarios with low frequency and high complexity.
Li Lihui also said that the innovation of the financial system lags behind that of technological innovation. Among them, the innovation of the trust system lags behind in three aspects: lack of consistency of data, lack of reliability and lack of compliance.
For example, the credit rating data concerning profit-making corporations are stored separately in banks, industrial and commercial administration, tax administration, customs administration and so on. Their credit rating standards are various and the caliber is different. Most small and micro businesses do not have the trust mark and therefore cannot accumulate credit. In addition, the inadequate protection of privacy information has greatly affected the development of inclusive finance. The lack of financial regulations on blockchain and virtual finance should be caught up as soon as possible.
Finally, Li Lihui mentioned changes on financial institutions’ innovation should be made in three aspects as follows:
Improve the application of big data laws and regulations.
- Establish a common shared big data system.
- Formulate a common system of prudent data financial regulation.
- Speed up the construction of the data financial system, speed up the development on formalizing blockchain finance, strengthen the coordination of international supervision, especially the supervision of blockchain, virtual finance and virtual currency among major countries.
Bitcoin and other cryptocurrencies are still considered an option for money laundry due to its peer-to-peer and censor-resistant nature. From the regulator’s point of view, the unregulated money flow through bitcoin has developed too fast to be monitored.