Li Lihui is former president of the Bank of China and leader of a research team to study blockchain created by The National Internet Finance Association of China on June 15th, 2016. Here is the full interview with Li Lihui at the Boao Asia Forum Annual Conference 2017 on March 25th.

How do you define blockchain?

You can just Google it.

What are some advantages of blockchain tech?

First, peer-to peer transaction. It helps cut out the middleman and improve trade efficiency. Second, self-regulation. It provides a foundation to make social contracts based on the principle of consensus. Most importantly, it is secure. Data could be traced and verified, but irreversible.

The very mentioning of blockchain reminds people of decentralization, do you think blockchain must be decentralized?

Admittedly, it is technically feasible and costly effective to use blockchain for better financial services. But the nature of finance is doing business with other people’s money, so it must be regulated by government if blockchain, Internet or other tech innovations are to be used in financial markets.

As the backbone technology of digital currency, what is the essence of blockchain tech?

Consensus algorithm, encryption algorithm and smart contract. Blockchain enthusiasts believe that the application possibilities are endless, but I think it is so not ready to change the world for better like the Internet did in the 1990s. R3 consortium hasn’t released its code. IBM and Linux hasn’t released a detailed Hyperledger solution. Another one or three years are needed to break technology bottlenecks slowing the blockchain application and at least another five years to make it a mature technology.

Globally, financial sector has been a pioneer in exploring the uses of blockchain tech. What have China done in this area?

We have been tapping into the potential of blockchain tech in sectors like supply chain finance, identity verification, auditing supervision, data sharing, asset custody, cross-border payment, clearing and settlement. And we are not just saying this, we are taking actions to work with our international counterparts. For instance, Postal Savings Bank of China (PSBC) together with IBM launched a blockchain-based asset custody system on January. WeBank (a pilot private bank) and Shanghai Huarui bank launched an interbank clearing and settlement system. Ant Financial is introducing blockchain technology to the Alipay donation application. And Ping An Bank is using blockchain in its financial asset trading platform. But we must remain clear that all these financial innovations have not been tested for their security, reliability and confidentiality.

What do you think should be done to scale blockchain application?

There are some significant obstacles for blockchain to overcome before it could change the world for better, one of which is permanency. As data recorded on blockchain could not be reversed, so theoretically, any mistake made could not be corrected, which could be disastrous, especially in the financial services industry. Another salient problem is lack of talent. Blockchain tech is currently so specialized and unavailable to most people, even to technical ones.

Is there any risk entailing this tech innovation?

The biggest risk would be cybersecurity. Last summer, blockchain has proven itself vulnerable to security issues, with cybercriminals able to attack Ethereum’s DAO draining over $60 million. And last August witnessed theft of $72 million at Bitfinex, a Hong Kong-based digital currency exchange.

PBOC is working on its own digital currency, do you think it is realistic? What are the possible impact of it?

Digital currency must be legally backed and be issued by the government. China is now joining England, Canada, Holland and Australia to digitize paper currency. Printing money, managing circulation and transactions is expensive for a country of 1.4 billion people. Adding digital currency to cash in circulation can improve the speed, convenience and transparency of transactions.

What do you think of bitcoin?