Former Chinese Finance Minister Calls for Crypto Study in Response to US Bitcoin ETF Shift

Lou Jiwei, the former finance minister of China, has called for a deeper analysis of cryptocurrency developments, particularly in light of the US's recent shift in policy toward Bitcoin ETFs.

During his speech at the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing, Lou emphasized the need for China to closely monitor global advancements in cryptocurrency. He pointed out the potential risks that digital currencies pose to financial stability, including their volatility and potential use in illegal activities like money laundering.

Lou underscored the significance of the United States' changing stance on cryptocurrencies, referencing the US Securities and Exchange Commission’s (SEC) approval of spot Bitcoin (BTC) exchange-traded funds (ETFs). He warned that these developments could have far-reaching implications for global financial stability, and China should take them seriously.

Concerns Over Global Financial Stability

Lou expressed concerns about the impact of cryptocurrencies on global markets, particularly due to the potential for price volatility to create financial instability. He pointed out that digital currencies have long been considered a threat to financial security, especially in areas related to Anti-Money Laundering (AML) and counter-terrorism financing.

He urged Chinese policymakers to carefully evaluate these risks to safeguard the nation’s financial system against potential disruptions caused by the growing adoption of cryptocurrencies worldwide.

US Crypto Policy Shift

Lou noted that the US has undergone a significant shift in its approach to cryptocurrencies, moving toward acceptance, particularly with the approval of Bitcoin ETFs. He stressed that China must pay close attention to these changes in global financial markets and consider the implications for its own economic policies.

According to Lou, it is crucial for China to study both the risks and innovations of the digital economy as cryptocurrencies become more integrated into international financial systems.

China's Continued Crypto Influence Despite Ban

Despite China's 2021 ban on Bitcoin mining and trading, Lou highlighted that the country still plays a dominant role in the global BTC mining network. As of now, Chinese mining pools control over 55% of Bitcoin’s hash rate, though this dominance is gradually shifting.

In a recent post by Ki Young Ju, founder and CEO of CryptoQuant, it was noted that US-based mining firms are slowly increasing their share, now managing around 40% of the BTC mining network. These US pools primarily serve institutional miners, while Chinese pools continue to support smaller miners in Asia.

Lou's comments come as China grapples with balancing its strict stance on cryptocurrency with the ongoing developments in the global digital economy.