(Source: China Daily HK) Digital currency could help improve transaction efficiency among countries and regions involved in the Belt and Road Initiative, and Hong Kong is a good experimental field for that, said Li Shan, chief executive officer of Silk Road Finance Corporation.
“We should make the best use of modern technology to accelerate trading activities along the Silk Road. Digital finance and block chain technology are now the most advanced,” he said.
“Finance is the core of the B&R Initiative, and all the financial transactions need to be paid in currencies,” said Li. “Digital currency is believed to save the costs of trade settlement.”
He explained that the cost of the current international trade system is very high, as Belt and Road countries use different currencies. But, it’s impossible for them to adopt a single currency due to different levels of economic development. He proposed creating a certain kind of digital currency as a single currency when it comes to transactions between countries.
For the less-developed Belt and Road nations, their trading costs are higher, which means their need for a single digital currency is bigger. In this way, they’ll have a larger market that can attract more investors.
Li sees Hong Kong as a good place for digital finance investment with more advanced governance in the finance sector. He expected the SAR to participate actively in the innovation and technology field, such as smart-city development.
According to Hong Kong’s 2018-19 Budget, the SAR government will set aside HK$50 billion to support innovation and technology development. But, Li thought the focus should be on digital finance.
“As a financial center, Hong Kong could impact widely once it obtains great performance in the digital finance sector. The city has the ability to achieve it. As digital currency is quite new to the world, Hong Kong’s attempt to use it could also benefit the internationalization of renminbi,” he said.
As block chain technology is not mature enough and is still being developed, Li admitted that a single digital currency for the Belt and Road countries cannot be realized at this stage. And, he’s worried about the governance issue more than technology.
He saw it important to build a governance system for the Belt and Road countries’ single digital currency because it involves many countries. Such governance could prove that this single digital currency is recognized officially by the central government, as well as the governments of other nations.
The central government banned all forms of initial coin offerings and shut down all digital currency exchanges on the Chinese mainland last year. At the same time, the People’s Bank of China has created a research institute to look into digital fiat currencies – the only fiat currency issued by the central bank.
Li noted that China is guarding against risks arising from illegal activities, such as money laundering while striving to lead in the digital finance field.