Former PBoC executive: US crypto hegemony threatens China's financial security, but the bursting of the bitcoin bubble "will hit the US hard"

Chen Yulu, former deputy governor of the People's Bank of China and president of Nankai University, recently warned that the US-led crypto asset hegemony strategy poses multiple threats to China's financial security, but he also said that crypto assets represented by bitcoin are currently in a serious market bubble state, and once the bubble bursts, it will be a huge blow to the US crypto asset hegemony strategy. (Synopsis: Dr. Po Ge Rujun: Taiwan has Ready Bitcoin reserves!) Cryptocurrency law "it's better not to be good") (Background supplement: Trump builds crypto strategic reserves" poll: 51% of US voters "oppose the government spending money to buy coins"! Why don't taxpayers buy it? Chen Yulu, former deputy governor of the People's Bank of China and president of Nankai University, delivered a keynote speech entitled "The Rise and Challenges of Cryptocurrencies" when attending the Annual Conference on the Development and Governance of China's Digital Economy on February 22, pointing out that the cryptocurrency market is experiencing breakthroughs. Chen Yulu pointed out that the total market value of crypto assets to the liquidity ratio of the world's six major central banks (G6) has risen rapidly from less than 1% in 2009 to 12% at the end of 2024. The U.S. shift has its strategic intentions Chen Yulu believes that since the second half of 2023, the U.S. government's regulatory stance on the cryptocurrency space has shifted significantly, and its strategic intention is likely to be to try to extend the traditional financial hegemony of the United States to the digital financial field: In the context of high US government debt and high inflation, this strategy of the US side can not only ensure the centralized position of the US dollar in the wave of digital financial transformation, but also reverse support and alleviate its increasingly severe federal debt situation. This strategy may contain short, medium and long-term objectives: Short-term: The U.S. government is trying to build a preliminary framework for global digital currency hegemony through three major means: strategic reserves of cryptocurrencies, encouraging the expansion of dollar stablecoins, and controlling the core infrastructure of crypto asset trading Medium-term: Through a loose regulatory environment, tax incentives and long-arm financial sanctions, it will continue to attract (or coerce) the world's leading crypto companies to migrate to the United States or be included in the US government regulatory system, promoting industrial agglomeration, employment and economic growth. It can also maintain the leading position of the United States in the research and development of blockchain technology Long-term: The United States will ensure that the United States always holds centralized power in the wave of digital economy decentralization by leading the formulation of global digital financial infrastructure and rules, and ensure that the dollar always maintains a centralized position in global investment and transactions in the digital economy era. U.S. Crypto Strategy Threatens China's Financial Security In Chen Yulu's view, the US-led crypto asset hegemony strategy poses multiple threats to China's financial security. First, capital outflow and exchange rate pressure: the long-term appreciation trend of crypto assets represented by Bitcoin against international currencies such as the US dollar, as well as the rapid expansion of the transaction scale of US dollar stablecoins, further strengthen the dominance of the US dollar in the global monetary system through cross-border payment convenience and value storage functions, which will undoubtedly squeeze the valuation and international space of the RMB. In addition, the dollar-dominated crypto channel has become a new path for capital flight. In recent years, the large-scale financing wave of large-scale configuration of bitcoin and on-exchange cryptocurrency ETFs by leading US companies has produced a strong demonstration effect, which may attract some Chinese capital to flow out through gray channels. Second, DeFi regulatory arbitrage forms a cumulative industrial competitive advantage: the relatively loose regulatory and tax policies in the United States attract the inflow of global DeFi innovation resources, and then reap more full-chain technology dividends from the underlying standard to the application layer. After long-term accumulation, it will form a competitive advantage in China's digital financial infrastructure technology in the future. The third is the competition for underlying technical standards and innovation ability resources: on the one hand, the United States is currently in a leading position in innovation in ZKP, Layer2 and other fields, while the European Union is also obtaining the network effect of a unified large market after integrating supervision through MiCA, while setting technical barriers. China needs to be vigilant and guard against the risk of bypassing the right to formulate standards for the crypto asset industry. On the other hand, China is facing the pressure of relocating innovation resources from the blockchain industry: the EU carbon emission policy for the crypto industry and tax incentives for mining farms in the United States have made Chinese mining enterprises and blockchain venture capital enterprises have a tendency to transfer to Central Asia, the Middle East and the United States, which is objectively not conducive to the innovation ability and computing power security of the domestic blockchain industry. Fourth, the threat of US crypto asset hegemony: First, the United States is accelerating the gradual integration of mainstream cryptocurrency assets into its financial hegemony system, and once this trend is established, it is bound to squeeze China's strategic development space in the field of digital finance in the future. Secondly, after the Russian-Ukrainian conflict, the US government, together with the United Kingdom, the UAE and other countries, imposed large-scale long-arm financial sanctions on the Russian government, institutions and individuals in the field of cryptocurrency, seized and confiscated a large number of cryptocurrency assets, and arrested relevant practitioners, and the power of its digital financial hegemony is initially emerging. Finally, the Trump administration's promotion of the Bitcoin strategic reserve plan and boycott foreign sovereign digital currencies have also intensified the confrontation between China and the United States in the field of digital currencies. Will the bursting of the bubble hit the United States hard? However, Chen Yulu finally said that the crypto assets represented by Bitcoin are currently in a serious market bubble state, and the continuous appreciation is difficult to sustain, once the bubble bursts, it will be a huge blow to the US crypto asset hegemony strategy: We must maintain a clear understanding and strategic determination, adhere to the value concept of the real economy of financial services without wavering, and firmly follow the road of financial power with Chinese characteristics. Related reports The U.S. Treasury Department promotes "bitcoin reserves" rumors have met with 3 custodian companies, and the Democratic Party presses to stop: it's all Trump's conspiracy The "new version" of the U.S. Reserve 1 million bitcoin bill focuses on: allowing the use of gold and exchange funds to buy BTC, banning the sale for 20 years... Shouting to buy $500 million in Bitcoin reserves every year, can Texas take the lead in building a crypto utopia? "Former PBOC of China: US Crypto Hegemony Threatens China's Financial Security, but Bitcoin Bubble Burst "Will Hit the US Hard"" This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".