On September 17, at the fifth global summit of blockchain sponsored by Wanxiang Blockchain Lab, Li Lihui, former president of Bank of China, delivered a keynote speech entitled "Digital Technology Reform Will Reconstruct Economic Model."
Li Lihui mentioned that although the application of blockchain technology is not large and has not yet formed a scale effect, such as digital trust that can enhance commercial credit, digital links that can penetrate financial intermediaries, digital currency that can surpass national sovereignty, etc. The up-and-coming structural innovations are bearing the power of change. In particular, the emergence of Libra caused a global sensation and set off a wave of discussion on digital currency.
Li Lihui believes that Libra is expected to become a digital currency of trustworthy institutions. Its superiority over national sovereignty, surpassing the central bank and transcending the characteristics of commercial banks poses an unprecedented challenge to the monetary system. However, Libra can get the approval and permission of the financial regulatory authorities of all countries in the world, whether it can gain the trust of the financial system and achieve a safe and reliable integration with the existing financial system. There is no clear answer yet.
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Behind the challenge is the opportunity. Li Lihui believes that digital trust, digital links and digital currency based on blockchain technology are likely to reconstruct economic and financial models, and call on all sectors of China to actively encourage and support technological innovation and master digital technology and digital The leading role of the economy, vigorously promote and standardize institutional innovation, and accelerate the construction of the digital financial system.
The following is the full text of the speech, Babbitt did not change the original intention of finishing:
Today we are hosting the 5th Global Blockchain Summit, which coincides with the blockchain for 10 years. In 2009, bitcoin based on blockchain technology was almost silent. In 2019, the emergence of the digital currency Libra, which applied the block-chain distributed peer-to-peer architecture, caused a global shock.
In the past 10 years, digital technology innovation has advanced by leaps and bounds, blending applications, improving production efficiency and resource allocation efficiency, and more importantly, changing people's lifestyles and changing social business models. We need to answer the question: Is the “change” of the evolution of the new generation of technology to economic structure just improvement and optimization, or change and reconstruction?
The application of blockchain technology is currently not large, and has not yet formed a scale effect, but the up-and-coming structural innovation seems to contain the power of change.
First, you can increase the digital trust of commercial credit.
In the traditional commercial credit model, information asymmetry is the norm. Trust needs to accumulate, and it takes a long period of time to establish credit; trust requires a central node, and daily economic behavior is difficult to become a social credit record. Therefore, credit accessibility and credit coverage are small, and credit formation costs and credit risk costs are high.
Big data discovers credit through data mining and discovers credit value. The blockchain solves the trust problem through mathematical methods, and expresses the rules by algorithm program. As long as the common algorithm program is trusted, mutual trust can be established and a trust mechanism of "technical endorsement" can be constructed. Its value is that it can form a trusted bond in an environment where trust is unknown or weak in trust, saving the time and cost required for credit formation. Digital trust can replace commercial credit to a certain extent and to a certain extent, and can increase commercial credit.
Further analysis, compared with traditional commercial credit, the main advantage of digital trust is that it can build low-cost credit benefits. This will restructure the credit model and require a change in the credit system. The structure of the credit system, the criteria for credit evaluation, and the model of credit pricing all need to be recreated.
Second, you can penetrate the digital links of financial intermediaries.
"The world is flat". The modern economic system generally belongs to the plane interaction structure. This kind of flat architecture gives the financial industry a crucial intermediary position, including credit intermediaries, transaction intermediaries, and payment intermediaries. Intermediary is the source of the financial industry, the source of finance for the financial industry, and the foundation for the survival of the financial industry.
The high-value financial industry first became an experimental scenario for the application of blockchain technology. What deserves attention is the "multi-dimensional direct interaction architecture." In the multi-party and high-complexity financial transaction scenarios, the blockchain can construct a multi-dimensional direct interaction architecture and an encrypted data network, realizing zero-distance and zero-day traffic between many participants, and achieving coordinated management and sharing. Information, merging verification, streamlining processes, improving efficiency, and saving costs.
Blockchain technology is more and more widely used in finance, but it may increasingly impact the intermediary position of finance. For example, using the consensus algorithm of blockchain, intelligent contract mechanism and intelligent pricing and intelligent matching mechanism of artificial intelligence, it is possible for digital financial market to establish a fair-to-peer, peer-to-peer direct trading mechanism, thereby diluting the intermediary and even canceling the intermediary. In the "distributed business" experimental model based on the public chain, all commercial intermediaries, trust intermediaries, and credit intermediaries can be replaced by mathematical algorithms, no need to centralize the organization, no need for intermediary costs, commercial scalability Can become infinity.
Third, the digital currency can transcend national sovereignty.
The form of currency using digital technology can be called digital currency, including legal digital currency, virtual currency, and trusted institution digital currency.
I refer to the credible institutions, including the digital currency issued by financial institutions, as the trusted institution digital currency. The concept of “trustworthy institution digital currency” is based on the consideration that the digital currency that can become a climate must be trusted, and the legal digital currency can be trusted because of legal status and national sovereign endorsement. The digital currency of any other institution must be To "trustworthy", you must have such qualities:
Credit endorsement with public trust institutions;
Customer size with commercial value;
Efficient and reliable financial transaction and payment platform;
With auditable financial asset support;
Market access with administrative licenses.
Financial institutions that have obtained administrative licenses to issue digital currencies include multinational banks such as Goldman Sachs, JPMorgan Chase, and UBS. On June 18, 2019, Facebook launched the digital currency Libra, hoping Libra became an infrastructure for a new financial system that was not controlled by Wall Street and was not controlled by the central bank.
If it is possible to obtain regulatory approval, Libra seems to have all the features of becoming a trusted institution's digital currency:
First, the industry giants jointly initiated and covered a large customer base. Libra is led by Facebook and has 28 big-scale founding organizations, including credit card clearing, online payment, online travel, e-commerce platform, streaming music platform, and telecom operators. It can provide Libra with sufficient credit endorsement and huge The global customer base, combined to calculate at least 2 billion.
The second is to apply digital technology to build an independent financial infrastructure. Libra applies the distributed peer-to-peer architecture of the constellation blockchain, applying privacy computing technology to protect data privacy and data security, and applying Calibra e-wallet to provide trading and transfer platforms that cover all corners of the world, eliminating the need for banks.
The third is to support the "hard assets" and maintain a stable value . The investment of Libra Association members and the purchase of Libra's legal currency will be a reserve to support the value of Libra. Libra uses a reserve fund for low-risk, low-return investments that are tied to low-volatility physical assets to keep value stable.
Whether Libra can be recognized and licensed by the government's financial regulatory authorities, whether it can gain the trust of the financial system and achieve a safe and reliable integration with the existing financial system, there is no clear answer.
Libra poses an unprecedented challenge to the existing monetary system: transcending national sovereignty, surpassing central banks and crossing commercial banks. Super-sovereign digital currencies have the potential to fundamentally reconstruct the global monetary system.
First, it may affect the status of sovereign currency.
The status of money as a general equivalent depends essentially on the trust of the public, and “legal” only strengthens public trust. The shell becomes the original currency not because of “legal” but the equivalent property recognized by the public. If a backward country or a small or weak country encounters major economic difficulties, the sovereign currency may lose the trust of the nationals and may be replaced by the digital currency of the trustworthy institution. The sovereign currency of a prosperous country or alliance generally does not withdraw from the monetary system, but the monetary status may be replaced by primary and secondary, and become the anchor of the digital currency of the global trustworthy institution.
Second, it is possible to reshape the currency hegemony.
The hegemonic status of digital currency will be determined by the coverage of the digital currency of the trusted institution, the size of the user and the size of the physical assets. There may be several digital currency systems that are evenly matched in the world. The globally circulated super-sovereign digital currency may no longer have a clear country label, the most important being the publicly recognized global commercial credit and digital trust.
Third, it is possible to form a financial system that spans commercial banks.
The digital currency system of trustworthy institutions such as Libra, once formed a financial infrastructure covering all corners of the world, may start with payment and liquidation, and gradually enter the fields of savings, financing, investment, insurance, asset trading, etc., and penetrate the economic life of the civilian population. , fully compete for the market of the financial industry.
In summary, digital trust, digital links, and digital currency based on blockchain technology are likely to reconstruct economic and financial models. This is a real challenge and an opportunity for the future:
First, we should actively encourage and support technological innovation and master the dominance of digital technology and the digital economy. Implement digital technology and national strategy for digital economy, clarify industrial policies, give tax and fee concessions to digital technology R&D enterprises and professionals, encourage digital technology research and development and application, national team plus private team, big and medium plus small micro, the key in digital technology The field has independent intellectual property rights and establishes global competitive advantages in key areas of digital economy and digital finance. Digital currency is at the core of the future global digital economy competition. It is necessary to study the feasible path and implementation plan of issuing China-dominated global digital currency.
Second, we should vigorously promote and standardize institutional innovation and accelerate the construction of digital financial systems. Based on ensuring the sustainable development of digital finance, we should promptly establish a digital trust mechanism and formulate digital financial systems such as legal digital currency issuance, digital financial market supervision, digital currency supervision of trusted institutions, and virtual currency supervision. We should promptly develop national standards for digital financial technology and establish a professional digital financial technology application review and verification system. It is necessary to establish a digital financial innovation sandbox test system, actively explore new modes and new regulations for digital financial business supervision, and appropriately relax digital financial market access. In the construction of the global system of digital finance, China should actively participate in and strive for the right to speak.