China Urged to Assess Bitcoin ETF Impact Amid US Policy Shift, Lou Jiwei Warns

• China must carefully scrutinize cryptocurrency advancements, especially following the US policy shift on Bitcoin ETFs.
• The potential financial instability and risks associated with cryptocurrencies were emphasized by former Chinese finance minister Lou Jiwei.
• Lou noted the implications of the US SEC’s approval of Bitcoin exchange-traded funds and urged Chinese policymakers to study these changes closely.

China urged to reassess cryptocurrency advancements amid significant US policy shifts, emphasizing the need for vigilant risk management.

China Needs to Reevaluate Cryptocurrency in Light of US Bitcoin ETF Approvals

Former Chinese finance minister Lou Jiwei recently highlighted the urgency for China to reassess its stance on cryptocurrency developments. Speaking at the 2024 Tsinghua Wudaokou Chief Economists Forum in Beijing, Lou pointed out the critical nature of monitoring advancements in the digital currency space, particularly as global policies, like the US’s decision to approve Bitcoin ETFs, shift. This move by the US Securities and Exchange Commission (SEC) signals a significant change in the regulatory landscape.

Implications for Global Financial Stability

Lou Jiwei stressed the potential risks that cryptocurrencies impose on global financial stability, especially in terms of volatility and their use in illicit activities like money laundering. The ex-minister emphasized that the inherent volatility of digital currencies can lead to financial instability, impacting broader economic security. He suggested that these risks warrant a thorough examination to protect financial systems from potential disruptions.

US Crypto Policy Shift

The former finance minister underscored the major pivot by the United States regarding Bitcoin and its associated financial products. Historically, the US SEC had been resistant to approving Bitcoin ETFs. However, their recent approval signifies a recognized legitimacy and acceptance of cryptocurrencies within conventional financial markets. Lou urged Chinese policymakers to observe and analyze these international policy adjustments meticulously.

Developments in China’s Crypto Hashrate Dominance

Despite China’s stringent prohibition on cryptocurrency mining and trading instituted in 2021, the country still commands a significant share of the Bitcoin mining network. Over 55% of Bitcoin’s hashrate is controlled by Chinese mining pools. However, this dominance is gradually being challenged. Prominent figures like Ki Young Ju, CEO of CryptoQuant, have noted a shift towards US-based mining operations, which now manage approximately 40% of global BTC mining, primarily serving large-scale institutional miners.

Conclusion

In conclusion, Lou Jiwei’s call for a comprehensive reassessment of cryptocurrency by Chinese policymakers comes at a pivotal moment. The evolving global landscape, marked by significant policy changes like the US’s approval of Bitcoin ETFs, necessitates a vigilant and informed approach to managing the potential risks and seizing the opportunities within the digital economy. The shift in Bitcoin mining dynamics further underscores the importance of staying abreast of international developments to safeguard financial stability and guide future economic strategies.