Caution Advised: China's Ex-Finance Minister Sounds Alarm on Cryptocurrency Risks

Caution on Cryptocurrency Development

At the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing, Lou Jiwei, the former finance minister of China, urged caution regarding the development of cryptocurrencies. He highlighted the potential dangers that digital currencies pose to financial stability, particularly due to their high volatility and association with illegal activities.

Lou's comments came at a time when the cryptocurrency landscape is rapidly evolving. He referenced the changing attitudes in the United States towards digital assets, particularly following the SEC's approval of Bitcoin and Ethereum exchange-traded funds. Lou emphasized that this shift in policy demands careful attention from Chinese policymakers.

He was clear about the adverse impacts cryptocurrencies could have on global markets, asserting that the volatility of these assets could lead to significant financial fragility. Furthermore, he raised concerns about the instrumentalization of digital currencies for money laundering and terrorism financing, stressing the need for thorough consideration of these risks to safeguard financial systems.

Lou stated, "We should study the international changes and policy adjustments because it is a very important topic for the development of the digital economy." He called for a deeper understanding of the risks and innovations surrounding cryptocurrencies.

Despite China's 2021 ban on Bitcoin mining and trading, the country remains a dominant force in the mining sector, controlling over 55% of the Bitcoin mining network, although this dominance is slowly shifting towards the United States.