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Zhou Xiaochuan and Li Bo Talk about Bitcoin and Digital RMB at Boao Forum
Date:04.21.2021 Author:Zhou Xiaochuan, Vice Chairman of the Boao Forum for Asia and former Governor of the People’s Bank of China; Li Bo, Deputy Governor, the People’s Bank of China

I. Three things to do before nationwide adoption of digital RMB

Li Bo said that there is no timetable for the official rollout of the digital renminbi yet. Three things need to be done before adopting digital RMB nationwide. The first is to continue with the various pilot programs and expand the testing scope. The second is to further develop the infrastructure for the digital currency, including the ecosystem, and to improve the safety and reliability of the system. The third is to establish a legal and regulatory framework to regulate the use of digital renminbi.

“We are considering expanding the pilot programs to more cities and more scenarios,” said Li Bo. At the 2022 Beijing Winter Olympics, digital renminbi could be used by domestic users as well as athletes and visitors from overseas. The People’s Bank of China will continue with the pilot programs, have them cover more scenarios, and enhance the ecosystem.

Li Bo highlighted that the key task at present is to promote the domestic use of digital RMB. Regarding RMB internationalization, he said it’s a natural process and the goal is not to replace the U.S. dollar or other international currencies. “Our goal is to let the market choose (which currency to use), to facilitate international trade and investment.”

Zhou Xiaochuan, Vice Chairman of the Boao Forum and former Governor of the People’s Bank of China, stated that the monetary sovereignty of central banks should be respected. Digital technology could be used to improve the convenience of use of various currencies, and no single currency should dominate the world.

Zhou Xiaochuan said that the intention of launching digital RMB is not to use it for cross-border payment which involves many complicated issues.

II. Crypto assets are not currencies

Speaking of Bitcoin, Li Bo said that Bitcoin and stablecoins are crypto assets. Crypto assets are not currencies, but investment alternatives. The main role that crypto assets should play in the future is as an investment tool or alternative investment tool.

“It is necessary to ensure that crypto assets do not cause serious financial risks." Li Bo said that many countries, including China, regard crypto assets as an investment tool, and are studying how to regulate such products. "Until corresponding regulatory rules are worked out, we will maintain current measures and practices."

Regarding stablecoins issued by private companies, Li said that if they become a payment tool in the future, the issuers must be subject to strict supervision like banks or quasi-bank financial institutions.

Talking about Bitcoin, Zhou Xiaochuan said that it is necessary to distinguish between digital currency and digital assets. For digital assets such as Bitcoin, it is not necessary to draw conclusions now, but people should be "cautious and careful" and figure out what benefits they can bring to the real economy.

Zhou emphasized that both digital currency and digital assets must serve the real economy. What are the benefits of digital assets to the real economy? People are cautious about the issue now. "During the global financial crisis in 2008, we found that finance was separated from the real economy. For example, shadow banking and derivatives transactions became purely speculative activities between financial institutions. When finance was detached from the real economy, risks easily rose. The transactions then were so complicated that the management and traders of major international banks could not understand them and failed to implement proper control."

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