Former Chinese Finance Minister Urges His Country to Be Wary of Cryptocurrencies

Lou Jiwei, the former Chinese Minister of Finance, who no longer makes policy himself, spoke at the Tsinghua Wudaokou Chief Economists Forum in Beijing last weekend. From there, he urged his country to closely monitor the situation of cryptocurrencies and the approach other nations, such as the US, are taking to their development.

Jiwei is certainly not enthusiastic about these new assets. On the contrary, according to him, cryptocurrencies pose a serious threat to financial stability. They would facilitate money laundering and could undermine the economic systems underpinning the operations of nations. In short, the politician's opinion is in line with that of the economists of his generation.

Cryptocurrencies in the World Financial System

Jiwei's reasoning was not a gratuitous attack on cryptocurrencies - in a framework in which, by the way, they were not just bad-mouthed - but a corollary to his reflection on the change in the US's stance on these payment systems. Now, in fact, the tokens seem to be well regarded by both parties that will be vying for the Oval Office seat in a month's time.

Following the Securities and Exchange Commission's (SEC) authorisation to deal in crypto also on traditional markets, such as Wall Street, Jiwei wanted to warn of the possible negative implications of this choice. Justifying his position, the former minister pointed out that cryptocurrencies pose a danger because of the ease with which they can evade anti-terrorism and anti-money laundering measures. These risks should always be kept in mind, in order to safeguard financial systems from potential shocks.

Statements and Contradictions

Chinese politicians, according to Jiwei, must pay close attention to international changes in the perception of crypto assets. Risks and innovations related to the digital economy must be studied because, in his words:

"The latest international changes and policy adjustments are crucial for the development of the digital economy."

China is aligned with the views of its former finance minister. Indeed, the Asian country has long since banned BTC trading and mining. The law making these two practices a criminal offence dates back to 2021 and, although it expressly talks about Bitcoin, the government has urged its law enforcement agencies not to tolerate the trading of other cryptocurrencies either.

The reality, however, is quite different. China controls more than 55% of the BTC mining network, and although US companies, on the strength of soft legislation, are increasingly gaining market share, the Asian tiger still holds the largest share of the global cryptocurrency hashrate.

It cannot be ruled out that the upper echelons of the Communist Party, in stark contrast to what they communicate in public, are pleased with this figure. After all, it is a national record that makes the country a leader in the production of a much sought-after financial asset.

Cryptocurrencies as Political Weapon?

As is often the case in China, government positions and factual reality are quite far apart. The government is well aware that it cannot curb the impulses and initiatives of every citizen in a country so large and so capable of processing stimuli from abroad. It therefore tends to turn a blind eye and not punish those who engage in mining, despite professing to want to do exactly the opposite. Jiwei's words are an underlining of the party's official position, but also a - not too veiled - dig at the actions of the United States.

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