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Former Bank of China President:Not Bullish on Cryptocurrency but Legal Digital Currency

Li Lihui, the former president of the Bank of China and leader of a research team to study blockchain created by The National Internet Finance Association of China accepted an exclusive interview with Ifeng Finance. He said that he didn’t agree with the investment in some cryptocurrencies like bitcoin, because it’s too risky, more like a speculative tool without prospect.

Li believes that there are three major types of digital currency, the first is the legal digital currency, the second is the cryptocurrency, and the third is digital currency endorsed by trusted institutions. Comparing the three types of currency, he prefers legal digital currency or digital currency of financial institutions.

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He claims that China is leading in the research and development of legal digital currency.

“China has the largest retail market all over the world, and all our financial transactions must meet the requirements of high concurrent, large-scale and reliable profits. As digital currency may limit the initial credit ability of commercial banks so it is necessary to maintain the existing operating mechanism and adopt the indirect issuance mode to maintain the stability of the market.”

He pointed out two major defects of cryptocurrency, the first one is technical defect: cryptocurrency’s operation speed is relatively slow as it is a decentralized platform based on public blockchain which is controlled by technical institutions, so it can’t meet high concurrent needs. If this defect cannot be solved, it is impossible to put it into large-scale applications. He thinks cryptocurrency also has economic defects, cryptocurrencies like bitcoin are speculative which does not have enough endorsement and real assets to support them.

When it comes to the upcoming risks after digital currency issuance. Li believes that the emergence of digital currency is definitely a trend. For example, issuing cost of digital currency is lower, and it is easier for the central bank to regulate the currency market; in addition, digital currency can realize controllable anonymous payment, which is also beneficial to consumers; at the same time, it is traceable, especially for central bank, which can prevent illegal application such as anti-money laundering.

China might maintain the existing operation mechanism and adopt the indirect issuance mode to keep the stability of the market if it wants to issue a large legal digital currency. Moreover, the traditional currency can’t be completely replaced.

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