The former head of one of China’s big four-state owned banks forecasts that the Chinese central bank digital currency (CBDC) is destined to have a profound impact upon the international monetary system, while also issuing caution about the implications of a rival digital greenback.
Li Lihui (李礼辉), formerly the head of Bank of China (BOC) and currently the chief of the blockchain work unit of the National Internet Finance Association (NIFA), wrote in a recent opinion piece that the CBDC will “change the payments market, competition in the banking sector, money market regulation and the global monetary system.”
“With regard to the global monetary system, digital currency will in future occupy a central place in the competition between global currencies.
“For nations that issue central bank digital currencies, the internationalisation of digital currency will pose a challenge for monetary policy design and liquidity controls.
“For those countries that see replacement by the digital currency of other countries, their sovereign currency status will face threat, and the guidance effects of monetary policy will be weakened…stability risks in finance are sure to expand.”
For this reason, Li called for China to “focus especially on the strategic decisions of the United States concerning a digital US dollar, as well as the development of Libra and other supranational currencies.”