China Should Keep Alert to the Approval of Libra, Says Former President of the Bank of China
Li Lihui, the former president of the bank of China summarized the issuing mode, technical route and prospect of China’s fiat digital currency in detail in the recent interview. In addition, he expressed his views on the economic reasons for the growth of cryptocurrency and the relevant advantages of Libra.
“Under the framework of fiat digital currency, the central bank has more direct power or more absolute position in the regulation of currency market. In the case of fiat digital currency, the balance sheet of the central bank is likely to expand substantially. What I mentioned above is basically a relatively consistent understanding of the central banks of various countries. Chinese experts need to further discuss and study these issues.”
Digital currency is more important to China as the country’s market is far larger than other countries, and. Li believes that the issuance of China’s fiat digital currency may be transitional. It may inherit the current operation mechanism of the monetary market and transmission mechanism of monetary policy, and gradually replace the traditional monetary tools and payment tools.
“As China is a large country. The fiat digital currency China will issue can’t adopt a decentralized or multi-centered management mode. We should keep the current centralized management mode. The main goal is to ensure the reliability of monetary transmission mechanism and the efficiency of monetary regulation. As the current blockchain technology I just mentioned cannot meet the high concurrent demand of the retail business in the super market, we must keep the technology-neutral, not rely on a single blockchain technology. There is a greater possibility, for example, to adopt the mechanism of horse racing, appointing some designated institutions to judge what the market needs more and which technical route can go smoothly.”
“Although China’s WeChat payment and Alipay have more than 1 billion users, it is not an independent monetary system. Alipay and WeChat payment clients are basically domestic and few overseas. At present, there are few global customers for China’s payment-related things, but Facebook dominates global customers, which is a very large advantage for them.”
“I think that if the US tries to maintain its financial hegemony, it is possible for it to impose restrictions on Libra’s administration and access. For example, it is required to increase the proportion of the US dollar in the sovereign currency anchored by Libra by about 70%, so as to conform to the US dollar’s global hegemony to follow the US regulations on anti-tax evasion and anti-money laundering.”
Li believes there may be several balanced super sovereign currency systems in the world. In addition, the super sovereign currency circulating in the world may not have a clear country label. For example, Libra is hosted in Switzerland, not in China. What’s important is the global business application and digital trust recognized by the public.