Charles Li, former Chief Executive of Hong Kong Exchanges and Clearing Limited (HKEX), stated in an exclusive interview that the possibility of virtual currencies replacing sovereign fiat currencies is zero for major economies like China and the US. He argues that the core status of sovereign currency is unshakable, as it is fundamental to maintaining national economic security and social stability. Only under an extreme scenario of a complete collapse of the sovereign credit system and global order could a new monetary form potentially emerge.
Li highlighted the distinct challenges faced by China and the United States. China's challenge lies in balancing its strategic goal of internationalizing the Renminbi with the necessity of maintaining capital controls to safeguard financial security. The US, however, faces a structural dilemma. Its elite and multinational corporations have captured the benefits of globalization, but these gains are not fully captured in the US tax base, leading to persistent government deficits. While global demand for US Treasury bonds has historically supported this model, its sustainability is now a critical issue.
Li described the US's exploration of virtual currencies as a potential "short-term antidote" to find new sources of demand for its debt. The idea is that countries lacking independent currency issuance capability might adopt dollar-pegged stablecoins, seemingly reinforcing dollar hegemony. However, Li warns this is a "long-term poison." The core support for the US dollar comes from Wall Street and the traditional financial ecosystem, which is centralized. Virtual currencies are inherently decentralized. If a significant portion of dollar-based activity shifts to a decentralized virtual realm, the traditional safeguards would become ineffective. A loss of confidence in the virtual world could trigger massive capital flight that the US would be powerless to stop, potentially leading to an irreversible crisis for dollar dominance.
Regarding virtual assets, Li categorizes them into two types. The first, like Bitcoin, has a basis in mathematical provability and limited supply, making it a potential asset for diversification. The second category consists of various tokens, essentially "air coins" with no intrinsic value or revenue source, existing solely on shared belief. Li asserts that both types primarily facilitate "value transfer" rather than "value creation," merely redistributing existing wealth among participants, which aligns with the concept of speculation.
Li classified virtual currency investors into five groups: 1. Early entrants who acquired assets at negligible cost and have accumulated vast wealth. 2. Mid-term entrants who entered when prices were established; some profited, especially from Bitcoin, while others lost heavily on "air coins." 3. Institutional investors who treat assets like Bitcoin as a small, long-term, buy-and-hold allocation for diversification, adding market scale but not liquidity. 4. Rational investors who believe in blockchain technology and invest logically, avoiding "air coins." They are interested in the tokenization of real-world assets (RWA). 5. Follow-the-trend investors, or "retail lambs." This group enters with little knowledge, driven by get-rich-quick stories, lacking risk awareness and承受能力. Li noted they are the "priority for regulatory protection" to prevent widespread participation that could lead to social issues.
On Real-World Asset (RWA) tokenization, Li expressed skepticism about the value of tokenizing traditional securities like stocks, as the centralization costs remain, and liquidity is still predominantly in traditional markets. He sees more potential in tokenizing assets like solar panels or charging piles, where technology can track revenue streams, lowering the cost of building trust. However, he emphasized that blockchain cannot solve the trust problem at the source; the authenticity of the asset before it is tokenized still relies on real-world, centralized legal and regulatory frameworks.
Finally, Li discussed his current venture, MicroConnect, which focuses on financing for small and micro enterprises (SMEs) in China through a novel "cash flow right" model. He explained that traditional equity or debt financing is unsuitable for these businesses due to their short lifecycles and small scale. However, they generate stable cash flows during their operation. MicroConnect's "Real World Cash (RWC)" model involves creating a large, diversified pool of cash flows from numerous SMEs. This pool is then securitized into standardized investment products with different risk-return tranches, similar to a "central kitchen" producing "meal boxes" for investors. The firm leverages technology and AI to select, monitor, and manage these micro-investments, aiming to build a new financial infrastructure for SME financing, shifting from traditional equity/debt models to a "cash flow right" approach.