Li Lihui, head of the blockchain working group of China Internet Finance Association and former president of Bank of China, pointed out at the 2018 International Monetary Forum held by the People’s University of China on Sunday that one of the characteristics of the opening of the financial industry is the synchronization with financial technology innovation. He pointed out that it is necessary for the government to take control of the risks in the development of financial technology and prevent it from becoming a systemic financial risk.
He also said that the new technology is constructing a multi-dimensional direct interaction mechanism and a new trust bond. The flat space between the economic subject and the social subject is folded. Weak trust has become trustworthy. Distance is shortened the brokers are replaced by disintermediation.
Virtual financial instruments based on mathematical technology may be scaled up, and virtual currency may become a payment tool for digital financial assets. Algorithms and hashing power may constitute pricing power in digital financial markets.
Li Lihui said that in order to maintain financial security, it is necessary to build a multi-level financial market, forming a differentiated, full-series product line to match the risk preferences and financial needs of different investors, and expand the choice of market entities in the allocation of RMB assets.
“Virtual finance is expanding rapidly.”
Li said, tokens like Bitcoin has become tools of incentive in blockchain communities and means of payment in underground economic activities.
However, he believes that the decentralized financial network has deviated from traditional regulatory system and constitutes serious challenge to the regulators.
In September last year, the authority stopped ICO and relevant exchnges. It’s a correct step towards maintaining the stability of the financial market and protecting the interests of investors. It is the responsibility of the government to prevent financial crisis from happening.
“Financial technology changes the format of finance, but it does not change the nature of finance,”
Li Lihui mentioned that Fintech (financial technology) promotes innovation and progress, but it is also associated with risks and hidden dangers. He pointed out that the core technology of blockchain and big data is in the hands of a very small number of people, which may lead to technical monopoly risk and moral hazard.
Li Lihui believes that for virtual finance, international coordination and supervision should be strengthened. International regulatory consensus and standards should be established regarding virtual finance. Actions should be taken to effectively control the illegal cross-border flow of funds and maintain financial order.