On January 15th, at the "Breakthrough • Fusion Blockchain and Digital Finance Summit Forum" co-sponsored by eBay Finance, a blockchain, and Financial Finance magazine, the China Internet Finance Association Blockchain Working Group Mr. Li Lihui, former president of the Bank of China, and the former president of Bank of China delivered a speech. He shared three aspects of the digital technology reform and reconstruction of the financial model, specifically explained the impact of legal digital currency, virtual currency and global digital currency, and gave 3 points Suggest.
The following is the full text of Li Lihui's speech, organized and released by Babbitt.
Looking back over the past year, we see that the changes in digital technology are restructuring the financial model. I share three aspects in detail.
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First, digital interaction may create a zero-distance, weakly intermediary economic structure. To a large extent, the commercial society that everyone is familiar with is largely independent, interactive and interactive. There are more links between economic entities, the efficiency is lower, and the cost is higher. Now digital technology is creating a world of three-dimensional interaction, especially blockchain technology. It has distributed, end-to-end, open-source, and multi-center features, which help the operation and transmission of information, realize the contribution of information, and control. Crossover in parallel, it is possible to restructure the technical architecture and rebuild the business model. Especially in scenarios where there are many counterparties, many transaction links, long management chains, and high degree of discreteness, it is possible to build a space-time-folding, three-dimensional interactive business architecture to improve cooperation efficiency and operational efficiency.
The bright spot here is direct and reliable digital interaction, especially suitable for high-concurrency, multi-platform financial transaction scenarios; the dark spot is end-to-end, weak intermediary digital interaction, which may impact the intermediary status of the financial industry. As we all know, it is the economic structure of plane interaction that gives the financial industry vital intermediary status, including credit intermediary, transaction intermediary, and payment intermediary. Intermediary is the source of the financial industry and the source of finance of the financial industry. In the digital financial market, if we use the smart contract mechanism of the blockchain and the intelligent pricing and intelligent matching mechanism of artificial intelligence, it is possible to establish a fair, peer-to-peer, direct peer-to-peer transaction mechanism, thereby diluting the intermediary. The core of finance lies in the intermediary, so in the digital market, the efficiency of such an intermediary may impact the traditional financial model. If the economic functions of financial intermediaries are downplayed, the space for financial intermediary business may be compressed. Therefore, in the digital age, the financial industry must innovate the positioning of its own intermediary functions.
Second, digital credit has the potential to promote efficient and low-cost credit inclusion. The application of digital technology has made preliminary progress in the field of digital credit. The first is the use of digital technology to identify characteristics of people or things and locate space-time, so that identity can be authenticated, and end-to-end control, command, and adjustment can be confirmed. Rights can also be used to authenticate property rights, verify items, and confirm the value of property rights and their ownership.
The second is to solve the credit problem through mathematical methods. The application of blockchain consensus algorithms and natural contracts can express rules through algorithmic procedures, which can determine and automatically implement the commercial terms agreed by the parties to the transaction. Legal rules and nodes of supervision and control, we can build mutual trust as long as we trust common algorithmic procedures. At the same time, we can use the technology of big data to judge the credit status of an enterprise or natural legal person through data mining, to discover the value of credit and to discover credit. For our society, digital trust has the value that it can establish zero-lag and zero-distance authentication tools in a wide-area high-speed network to improve the actual efficiency and reliability of the Internet of Things. Form a trustworthy bond in a weak environment of trust, save the time and cost required for trust formation, and increase business credit.
The main advantages of digital credit are high cost, high efficiency, and low cost inclusiveness. This will be the bright spot of innovative finance, but it will also be the dark spot of conservative finance. Those who grasp the core digital technology and application capabilities may significantly reduce costs and obtain core competitiveness that is superior to their peers. However, if the internal cost of a financial institution is always higher than the average cost of the market, its corresponding business may be eliminated, and the financial institution may lose its core competitiveness, which will reconstruct the model of financial services and financial management.
Third, digital currencies may lead to financial disruption of super-sovereign and super-banks.
Regarding fiat digital currency, I think its bright spot is. It can strengthen the public attributes of the payment system, save the cost of cash flow, promote inclusive finance, and provide end-to-end reliable payment tools for digital asset transactions. But it also has dark spots, especially for commercial banks. Under the issuance mechanism of legal digital currency, public deposits may shift from commercial banks to these central banks, which will weaken the initial credit capacity of commercial banks and its Profitability.
Regarding virtual currency, I will say two points here. One is its technical flaws. In the decentralized public blockchain architecture, the entire network verification requires large-scale data synchronization, so this virtual currency has not been Measures to solve the problems of transaction efficiency and large-scale application. The second is that virtual currency also has economic defects. This defect is that its value is unstable and its speculation is too heavy. For example, in 2018, the lowest price of Bitcoin dropped to 31.5 million US dollars, which is 84% lower than the highest price of more than 19,000 U.S. dollars, so I think that for the moment, it is difficult for virtual currencies to enter the popular transaction and payment scene.
Regarding global digital currency, we should be more vigilant, because it may lead to financial disruption. First, supra-sovereignty. The status of currency as a general equivalent essentially depends on the trust of the public. Therefore, if a weak country encounters particularly significant economic difficulties, its sovereign currency may lose the trust of its citizens and may be used by global digital currencies. Was replaced. The sovereign currencies of advanced economies may become the anchor of global digital currencies, but the primary and secondary status of currencies will be replaced. There may be several supersovereign digital currency systems around the world, and global digital currencies may no longer have clear country labels. The most important thing is publicly recognized global business credit and global digital trust.
The second is super-banks, such as Libra launched by Facebook. His goal is to provide a point-to-point, end-to-end transaction and transfer platform that can cover every corner of the world, and form a financial infrastructure that can cover every corner of the world and cover billions of people worldwide. This may start with payment and settlement, and gradually enter the fields of savings, financing, investment, insurance, asset transactions, etc., and penetrate the economic life of the civilian population. At this time, there may be no longer any need for commercial banks and third-party payment institutions. They have sufficient capacity to compete and gain market access to the financial industry.
To sum up, digital interaction, digital trust, and digital currency on digital technology will reconstruct our financial model. China will be the world's largest digital financial market, and it will also be the market with the most intense technological and commercial competition.
What do we do in the future? Here are some suggestions:
First, we must master the dominance of digital technology. The state should further clarify the policies of the digital industry, encourage the development and application of digital technology, and vigorously train our own data scientists, algorithm scientists, artificial intelligence experts, and network security experts. Key areas of technology, mastering independent and controllable intellectual property rights, and establishing our global competitive advantage in key areas of digital economy and digital finance.
Second, promote the integration and contribution of public data resources. Data is a resource, data is wealth, and data is also competitive. The higher the consistency and scalability of the data, the higher the professional value and economic value of the data. Therefore, we should penetrate administrative data islands and realize the contribution of public data. We should also penetrate local data islands and build professional databases.
Third, encourage corporate innovation. The core competitiveness of an enterprise is mainly manifested in its ability to acquire customers in the market and its ability to control costs. Large-scale operations can create competitive effects, and the successful application of new technologies can also create them. The technological innovation of enterprises should be more efficient, lower in cost, able to create economic scale with commercial value, and have socially recognized reliability. If we can truly promote the integration of resources such as technology, capital, data, and markets, and take efficiency as the center to restructure our business cooperation model, this can improve the efficiency and effectiveness of technological innovation.