According to a report recently released by UBS Asset Management, the RMB has become the third largest international trade financing currency after the US dollar and the euro, and the fifth largest foreign exchange trading currency after the US dollar, euro, pound sterling and yen.
There have been recent rumors in the cryptocurrency circle that China may relax restrictions on virtual currency mining and trading in the fourth quarter of this year.
First of all, the report of UBS Asset Management is definitely based on facts, including the results of our own surveys and statistics, which show that central banks of various countries are accelerating the reserve of RMB, and major international institutions are also quietly increasing their RMB positions. The reason is simple. One part is the US trade sanctions against other countries, which have resulted in countries such as Russia and Iran being unable to use the SWIFT system for international trade settlement. The assets priced in Western currencies such as the US dollar in reserve are at risk of being "confiscated". They can only passively use the RMB of non-hostile countries, China, to settle trade; another part is that the current US power is declining, debt is high, and economic and financial bubbles are serious. Based on the investment principle of risk diversification and controllable, sovereign countries and international institutions have reduced their positions in Western currencies such as the US dollar and increased their positions in the only powerful currency outside the West, the RMB, to hedge risks.
At this point, we have to mention a classic quote from Chairman Mao: Political power grows out of the barrel of a gun. This classic quote clearly and concisely explains that the essence of all political power is the embodiment of strength. Whoever has the bigger fist will be the one who gets everything! The same is true for international politics. Currency is an appendage of the state and naturally has state attributes.
More than a decade ago, China's GDP surpassed that of the United States in terms of purchasing power parity. If the evaluation was based on economic size, the RMB should have become one of the world's top sovereign currencies. But in fact, the progress of our RMB internationalization since then has been quite slow, which is seriously inconsistent with our international economic status.
In contrast, in the past two or three years, as our military power continues to grow, the United States has retreated from the first island chain to the second island chain around us. I believe that with the rise of our military strength and the decline of the United States' own comprehensive strength, it is only a matter of time before the United States retreats to the third island chain at its doorstep. In this way, the original doubts about whether we are able to defend the interests of the RMB will disappear, and it will be natural for the RMB to go international. The result of the accelerated internationalization of the RMB in the past two or three years is the best reflection of the rapid growth of our comprehensive strength, which is mainly military power. If you want people to trust you, fists are the most important.
Secondly, you may have a question: why is the RMB the world's third largest trade financing currency, but only the fifth largest foreign exchange trading currency? The two seem to be inconsistent. In fact, this is related to our internal foreign exchange control policy. In the process of opening up, we follow the principle of gradual and steady progress, and while learning from the failures of other countries in economic and trade opening up, we are exploring our own path of reform and opening up.
Monetary finance is the lifeblood of a country's economy. Exploring the opening up of monetary finance to the outside world has to be more cautious than other internal economic reforms. Only when there is a full understanding of the economy, currency, and finance from top to bottom in the country, and the hardware and software preparations such as talents, theories, organizations, and institutions are well prepared, and then combined with political, economic, military, diplomatic, and technological conditions, can we truly achieve full opening up to the outside world. In the absence of sufficient preparation, in order to ensure the smooth implementation of other reforms and opening up, our predecessors accurately grasped the biggest barrier of monetary and financial exchanges at home and abroad - the foreign exchange market, and strictly controlled it, avoiding using swords and spears to confront machine guns head-on, so as to protect the country's development achievements from overwhelming invasion and looting. Here we have to admire the vision and wisdom of our predecessors.
Finally, will virtual currency mining and trading be allowed in the fourth quarter? This is probably wishful thinking on the part of people in the currency circle, but the possibility of limited liberalization cannot be ruled out. After all, there is no smoke without fire.
The US presidential election is hot. Trump, who was once the president and is also a candidate this time, used to sneer at virtual currencies represented by Bitcoin and even publicly suppressed them. But this time, he suddenly changed his tone at the campaign rally and publicly supported Bitcoin. He also echoed Musk, a technology fanatic and virtual currency supporter, and even recently issued meme coins named after him and his company on Ethereum and Solana Chain. Is Trump behind the three coins TRUMPCOIN, TRUMP DJT? The truth is hard to say. But the importance of the virtual currency market is valued, which is beyond doubt.
The financial war between China and the United States is in full swing. The virtual currency market represented by Bitcoin now has a market value of more than 2 trillion US dollars. It should now be the largest financial trading market in the world besides the world's major stock markets.
In the financial war, if we do not face up to the huge financial trading market of virtual currency, it is obviously unreasonable, right? Whether from the perspective of developing energy (new energy, mining, etc.), technology (AI, blockchain, etc.), currency, trade, or even combating money laundering, the virtual currency market is also a very important place.
Turkey introduced the Turkish Lira digital currency into the virtual currency market as early as last year. Although the US dollar has not entered the virtual currency market openly, it has already entered the virtual currency market in the form of various tokens (USDT USDC, etc.). The RMB has also entered the virtual currency market in the form of tokens (CNY CNC, etc.), but later withdrew due to regulatory reasons. From the perspective of capital inflow and outflow, the virtual currency market is also a revolving door for currency changes in different countries. When your currency is issued too much, the virtual currency market is a reservoir, and the current US dollar is it; when you are short of foreign exchange, the virtual currency market may be the source of your foreign exchange (in fact, many Chinese currency holders have virtual currencies denominated in US dollars, which can be converted into foreign exchange once sold). As long as it is used properly at critical times, it may also turn decay into magic.
At present, the world is experiencing a major change that has not been seen in a century, and the world's political and economic landscape is about to be reconstructed. How to use the virtual currency market of such a large scale and involving a wide range of aspects in the game between major powers, especially the science and technology financial war, is probably an important topic that the top leaders of various countries need to pay attention to and cannot avoid. Therefore, it is reasonable and normal for a little bit of news to leak out and become a rumor in the currency circle to open up virtual currency mining and trading, isn't it? As for what specific actions or policies will be in the end, as spectators, we will just wait and see.