During a speech at the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing, Lou Jiwei, former finance minister of China, called for a deeper examination of the rapidly advancing cryptocurrency market. According to a report by Sina Finance, Lou emphasized the potential dangers associated with the rise of digital currencies, including their impact on financial stability, their volatility, and their use in illegal activities such as money laundering.
Risks Posed by Cryptocurrencies
Lou warned that cryptocurrencies could undermine global financial stability, especially due to their unpredictable price fluctuations. These swings in value, he explained, can have serious implications for financial systems, increasing the risk of market shocks. He highlighted how cryptocurrencies have long been viewed as a threat to financial security, with particular concern regarding their role in anti-terrorism financing and money laundering.
Lou argued that these risks cannot be ignored and must be studied thoroughly to protect financial systems. He urged Chinese policymakers to consider these dangers as they plan for the future of the digital economy. The former minister stressed that ignoring the rapid evolution of digital assets could leave China vulnerable to unforeseen financial crises.
Global Policy Shifts and China’s Response
Lou also noted a significant shift in the stance of the United States toward cryptocurrencies. He pointed out that the U.S. Securities and Exchange Commission (SEC), which had previously rejected applications for Bitcoin-based exchange-traded funds (ETFs), had recently approved them. This marks a major policy change and reflects the growing acceptance of digital currencies in U.S. financial markets.
Lou urged China to pay close attention to these international developments. He stressed the importance of staying informed about global trends and policy adjustments, particularly those related to the digital economy. China’s policymakers, according to Lou, must adapt to these changes to remain competitive in the global financial landscape.
While China has imposed a ban on Bitcoin mining and trading since 2021, Lou acknowledged that the country still plays a significant role in global Bitcoin mining through various mining pools. However, he noted a gradual shift in dominance toward the United States. U.S. mining firms are increasingly controlling a larger share of the Bitcoin network, while Chinese pools now cater mostly to smaller miners in Asia. This trend highlights the need for China to remain vigilant and responsive to the evolving global cryptocurrency market.
In conclusion, Lou Jiwei’s speech served as a reminder that cryptocurrencies, while offering innovation, pose significant risks that must be carefully evaluated. His call for China to study these risks and global policy changes underscores the importance of maintaining financial stability in the face of the growing digital economy.