China's Former Finance Minister Lou Jiwei Calls for Reassessment of Cryptocurrency at 2024 Tsinghua Wudaokou Chief Economists Forum
At the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing, Lou Jiwei, China's former finance minister, emphasized the growing need to reevaluate the country's approach to cryptocurrency. His remarks came at a pivotal time, especially considering the changing landscape in the United States regarding Bitcoin exchange-traded funds (ETFs). Lou's speech was a call to action for Chinese policymakers to keep a close eye on the crypto sector, underscoring the risks and potential impacts on China's financial stability.
Lou’s concerns centered around the volatility of cryptocurrencies and the possible threats they pose to financial security. He pointed out that, despite China's heavy regulations on cryptocurrency trading and mining, these digital assets could still disrupt financial systems. Citing a report from Sina Finance, Lou warned about how easily cryptocurrencies can be used for illicit activities such as money laundering and emphasized the importance of remaining vigilant.
One of the key points in Lou's address was the significant shift in the U.S. stance on cryptocurrency, particularly the approval by the U.S. Securities and Exchange Commission (SEC) of spot Bitcoin ETFs. This policy shift, according to Lou, could have far-reaching effects on global financial markets, potentially creating ripple effects that China cannot afford to ignore.
Lou further underscored that digital currencies have long been recognized as a threat to financial security, especially in areas like anti-terrorism financing and Anti-Money Laundering (AML) efforts. His call to action was clear: China must thoroughly study the risks associated with cryptocurrencies to safeguard its financial systems from any future shocks.
Despite China’s 2021 blanket ban on Bitcoin mining and trading, Lou acknowledged that the country still maintains a significant presence in the global Bitcoin mining network. Chinese mining pools control over 55% of the network, but this dominance is gradually diminishing. Lou highlighted a recent post by Ki Young Ju, CEO of CryptoQuant, which pointed out that U.S.-based mining firms now control around 40% of global Bitcoin mining operations. These firms largely serve institutional miners, while Chinese pools are more focused on supporting smaller miners in Asia.
Lou Jiwei’s comments remind policymakers that even though China has taken a hard line on cryptocurrencies, the global landscape is shifting rapidly. With the rise of institutional investments in Bitcoin and the development of financial products like Bitcoin ETFs, China’s regulatory bodies must stay informed and flexible in their approach to these emerging challenges.