The former head of one of China’s big state-owned banks has highlighted the transformative impact of digital currencies upon the financial system.
In a speech delivered at the 2019 Financial Reform and Innovation High-level Forum (2019金融改革与创新高级论坛) on 19 October in Beijing, Li Lihui (李礼辉), former Bank of China president, said that digital currency will “reshape financial models and existing economic systems…this is the challenge and opportunity of the future.”
Li, who is currently a member of the finance and economics committee of China’s National Congress, highlighted three key areas where digital currency will have an impact:
- Digital currency can transcend central banks and national sovereignty to become “supra-sovereign currencies,” undermining the legitimacy of the statutory money of smaller nations or even replacing them.
- The reshaping of monetary hegemony. “If we permit the issuance of supra-sovereign currencies, ten years hence the world will have three to four supra-sovereign currencies which will no longer have a clear national label.”
- Digital currency will form a financial system which transcends commercial banks, with the potential to replace them across a range of areas including payments, deposits, investment, finance, insurance and asset management.
Li warned that failure to incorporate the renminbi into a system of supra-sovereign digital currencies will create challenges for the internationalisation of the Chinese yuan.