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▎wang yongli, senior researcher at taihe think tank, former vice president of bank of china, and general manager of china international futures co., ltd. source: taihe think tank

editor's note

why has the swift system become a tool for the united states to sanction other countries? what is the key to the brics countries to establish a new payment system? why does trump advocate cryptocurrency? phoenix reference compiled the speech of wang yongli, a senior researcher at taihe think tank, former vice president of bank of china, and general manager of china international futures co., ltd. at the international relations forum of the 8th taihe civilization forum for readers.

wang yongli believes that in recent years, the united states has frequently used the swift system to impose sanctions on other countries, and the international payment and settlement system is in urgent need of profound changes. it is not technically difficult to establish a new global interbank payment telecommunications organization based on swift, but the premise is to ensure neutrality, professionalism, security and efficiency. the brics countries are planning to establish a new payment system, and the key lies in an open mind and serving the world. wang yongli pointed out that the united states currently has different perceptions of cryptocurrencies, but trump particularly advocates it because much of his campaign funds come from crypto assets.

edited by qu gongze and li renkai

the following is the transcript of the speech and q&a session:

how does the united states use the swift system to suppress other countries?

wang yongli: hello everyone, today's global economic security and cooperation are facing many challenges, including geopolitical conflicts, economic blockades, financial sanctions, etc. one of them is the issue of global cross-border payment and settlement.when two countries are trading, if your money cannot be settled, the trade cannot actually take place, and we are facing this problem today.

we know that when cross-border trade is to be settled, it is not common to pay directly in cash. this method is inefficient and costly. today, most transactions are made through clearing institutions, using transfer payment and account settlement. the money in the deposit account of the payee is deducted and transferred to the bank account of the payee. of course, a clearing institution will be involved in the process.

however, the most important thing in the transfer process is that there must be a basis, which is the payment instruction. if different countries have different payment instructions, different languages, and different operating methods, the operating efficiency will be very poor.therefore, the most ideal option is to establish a global payment instruction processing system with unified standards and global coverage.

there is such a system at present.society for worldwide interbank financial telecommunication (swift)with the advent of swift, the efficiency of global payment and settlement has been greatly improved. but why has swift been able to develop rapidly and become a professional telecommunications organization covering more than 200 countries and more than 11,000 institutions around the world?

first of all, it should be emphasized that swift is not the entirety of a clearing system, because the most important thing in clearing is the account system. clearing is impossible without accounts and funds. swift is only a system for message management and transmission processing of payment instructions, in simple terms, a message system.this is because it has made its purpose clear from the beginning: neutrality, professionalism, efficiency and safety. it is apolitical. therefore, even when the soviet union and the united states are in conflict, it can still serve all members of the two camps.

however, after the september 11 terrorist attacks in 2001, the united states forced it to open the dollar data on swift to the united states because it had a database in the united states. after being forced to open it, the gap became wider and wider, and some countries were excluded.including countries like russia, after the outbreak of the russo-ukrainian conflict, many of its banks were excluded from swift. however, it did not completely exclude all russian institutions, because europe still needs to import a lot of natural gas from russia. if it is completely excluded, as long as you still have trade, your clearing will be affected, so some are still retained.

▎according to reuters, in march 2022, the eu kicked seven russian banks out of swift, but due to the eu's energy transactions with russia, the eu sanctions did not include gazprombank. source: russian satellite news agency

from this perspective, more and more countries are worried and uneasy. if our relationship with the united states and europe is not good one day, will we be excluded? if we are excluded, can foreign trade and investment still be carried out? therefore, global economic cooperation is facing great challenges.to solve this problem, it is necessary to reform the payment and clearing system for global trade, investment and financial transaction services.

first, we need to push swift to establish a reasonable management mechanism. since you serve the world, you should be managed by the international community to avoid it becoming a system controlled by a few countries. but this is easier said than done, especially today.

second, countries that have been sanctioned and those that have been excluded from swift must find a way to re-establish a similar organization.what i want to tell you is that swift has been running for a long time. many people are very familiar with swift. it is a standardized thing.therefore, using today's communication technology, it is not technically difficult to imitate it and re-establish an organization similar to swift.the difficulty lies in who will use it, and the difficulty lies in whether you want each country to establish and control it on its own, or whether we all need to work together to establish a truly neutral, secure, fair and just messaging organization like swift was at the beginning.

to date, many countries want to build a new system, but they all want to build a system that is led and controlled by themselves, which is a serious mistake. if each country wants to build a messaging system that is led and controlled by itself, it will be difficult for other countries to participate. if you do not participate, you will not have any advantages in maintaining such a system, and the efficiency will be very low.therefore, if we want to build it, we must work together to build a neutral, professional, efficient and secure system.not only for my own use, but also for the whole world, the united states and western countries, all open. if you want, you can come to me and use it. i think it is completely possible, but it is not so easy to establish in a short time.

looking further, one thing we can refer to is digital currency. today, stablecoins pegged to some sovereign currencies, such as usdt, usdc, gusd, etc., have begun to be used around the world, and their efficiency and cost of cross-border payment and settlement are advantageous. so is it possible for us to learn from such a model?because stablecoins that are pegged to the same value as sovereign currencies are essentially just tokens of sovereign currencies. since your tokens can operate in this way, can our sovereign currencies learn from it and build a similar system? i think this is worth our serious consideration.

of course, there will always be challenges and difficulties.the problem is that if our world governance system is facing division and global trade, investment and financial transactions cannot proceed smoothly, it will force the emergence of a new system or alliance group. we call this the law of extremes leading to the reverse.so we must realize that risks will force some new things to emerge. i am still full of hope and confidence in this.

wang yongli: the key to brics countries establishing a payment system lies in an open mindset

question:next month, the brics leaders' meeting will be held in kazan, russia. now the brics countries are considering whether to establish a payment system among the brics countries. i would like to hear president wang yongli's opinion on this issue. is it possible to establish such a payment system? thank you.

wang yongli:there is no technical problem in establishing a payment system among the brics countries.it just means that you need to have an open mindset. you can't say that this thing only serves me. my own view is that we need to establish a system like swift, which is neutral and serves the world. we welcome anyone who wants to join. we need to have this mindset.

▎according to tass, valentina matviyenko, speaker of the federation council of russia, said at a press conference on august 1 that the brics countries are currently discussing the creation of an independent cross-border payment platform, brics bridge. she hopes that this proposal will be reviewed at the brics summit in october, which will be an important progress in the brics countries' "de-dollarization".

because the fixed cost of maintaining a payment system is just like the fixed cost of maintaining an exchange. if the amount of money coming in is too small, it is worthless, so it must be open. i even suggest that the brics countries declare that we will not intervene.make it a purely neutral and impartial payment system that can serve the whole world.

why does trump promote cryptocurrency?

question:i would like to ask mr. wang about an economic issue involved in the us election. during the campaign, both harris and trump were friendly to cryptocurrencies, especially trump. many of the financiers are the bosses of cryptocurrencies. no matter who wins the next us government, it will adjust its policy on cryptocurrencies from the current situation. i would like to ask, if this policy adjustment, what impact will it have on the monetary system? on a deeper level, what impact will it have on china?

wang yongli：this is a very deep question.can pure chain-generated assets like bitcoin and ethereum become a real circulating currency? my own opinion is that it is difficult for it to become a circulating currency.

bitcoin, for example, is a highly closed system that is not controlled by any country and is a supranational thing.i have also been studying whether the bitcoin blockchain can be used as an intermediary for global cross-border payment settlement, because we need something that is not affected by politics. however, it is too closed.moreover, its currency is too limited, and it is not enough to meet our cross-border investment and trade payment and settlement needs. it is not enough in terms of cost, efficiency and quantity.

▎in september 2021, the people's bank of china and ten other departments issued the "notice on further preventing and dealing with the risks of virtual currency transaction speculation". the heads of relevant departments stated that virtual currencies that exist in digital form, such as bitcoin, ethereum, etc., including so-called stablecoins such as tether, do not have the same legal status as legal tender and cannot circulate as currency in the market.

now basically everyone positions it as a digital asset, a new type of asset. as a new type of asset, speculation and investment are all possible, whether it is spot, futures or etf. just like a casino, from the perspective of pure money making, it is a very good thing to make money. however, some countries may allow it to be opened, but they only allow foreigners to operate in it, not domestic people. you will see that many countries may have opened it now, but it also has some restrictions, and its own people may not allow it to enter casually.if it is not strictly regulated now, all large-scale financial transactions facing the public will be in serious problems.

therefore, various cryptocurrency exchanges have encountered many problems so far. if there is supervision, it requires joint supervision across countries. it is difficult for a single supervision to be in place because it is cross-border. the current problem is that the united states does not have a unified understanding of this thing. in the past period of time, the us icec has been continuously strengthening its supervision of crypto assets.but famous presidential candidate and former president trump particularly supports it because he himself has invested a lot, and a lot of his campaign funds come from crypto assets in the currency circle.

▎although trump was once a skeptic of bitcoin, he has repeatedly proposed to implement cryptocurrency-friendly policies this year, which has won the support of a large number of bitcoin enthusiasts. last week, trump announced his latest business project: world liberty financial, which is equivalent to creating a cryptocurrency stock exchange where loans and investments can be made.

some countries even say that bitcoin should be used as legal tender. those of us who really have enough knowledge about currency must know that this is a very dangerous choice.no matter who is elected president, he will know that it is not realistic to use bitcoin as a reserve asset or directly use it as a circulating currency. some people may also say that more than 40 states in the united states have legislated to allow gold and silver to be used as legal tender. however, it is only allowed, not to use gold and silver to replace the us dollar, because they do not have the power to directly create gold and silver to replace the us dollar. this power does not lie in their states.

but can gold and silver really replace the us dollar? even if it is allowed, perhaps it is just like many schools and units in china now have meal tickets and meal cards, and shopping malls have shopping coupons and shopping cards. they can only be tokens in a small range of applications in a certain environment, and the legal currency can only be the rmb.