Former BOC President: Scaling Is The Major Hurdle For Mass Adoption Of Blockchain Applications
3 November.2017 Hangzhou-“The major hurdle to large-scale application of the blockchain is technical obstacles, which are more serious than regulatory constraints. The priority is to improve the scalability of the blockchain and more and more systems will be called blockchain in the future. ” Li Lihui, former president of the Bank of China and head of the blockchain working group of China Internet Finance Association, said in the “Hangzhou Bay Forum 2017 – A New Economy”. He then proposed 3 regulations to impose more control on virtual currency, one of which is to curb the anonymous transactions and illegal cross-border payment.
Li Lihui, former president of the Bank of China and head of the blockchain working group of China Internet Finance Association. (photocredit: Caijing)
He also points out the difference between digital currency and blockchain-based tokens.
Digital currency is fiat money in digital form with legal position and sovereign endorsement. The concept of digital currency should be dedicated to the legal tender like WeChat, Alipay and other payment methods.
Tokens that are based on blockchain technology are now accepted as accounting units in virtual communities. The tokens can be traded for fiats through exchanges and thus have the financial attribute, which can be defined as “virtual currency”. However, the transaction of tokens or virtual currency can be anonymous, cross-border and unrestricted. Therefore it may become a tool for illegal money flow and speculative trading.
He propose to implement three regulations on cryptocurrency:
- First of all is to control illegal fund-raising, including blockchain-based illegal fund-raising and illegal financial transactions through mobile Internet platform.
- Secondly, the international regulatory coordination mechanism must be strengthened to coordinate moves against anonymous transactions of virtual currencies and prevent funds from crossing border illegally. Meanwhile, development of shall be accelerated.
- Thirdly, we will speed up the development of digital fiats. We must study and formulate the issuance mechanism of legal digital currencies and regulatory system for virtual currency to establish the correct direction for digital finance. Following the “easy first, difficult later” principle, regulations should come before laws.
Scaling has not only become a pressing issue for cryptocurrency issue but also a vulnerability in the eyes of regulators. Li considers there were no real breakthrough in China regarding the consensus algorithm, the encryption algorithm. and the smart contract. Li Lihui said on Boao Forum on 24th March as per a local report.