ICBC President Liu Jun: Web3.0 Financial Innovation Cannot Deviate From Serving the Real Economy

21st Century Business Herald Reporter Zhang Xin

In the context of deep integration between digital technology and the financial industry, innovative topics such as Web3.0, decentralized finance (DeFi), and real-world asset tokenization (RWA) have attracted significant attention. How to encourage technological breakthroughs while maintaining the bottom line of finance and ensuring that efficiency improvements do not deviate from the original service purpose has become a major focus of the industry.

Recently, Liu Jun, President of the Industrial and Commercial Bank of China, authored an article titled “Fundamental Constraints and Value Considerations in Digital Financial Innovation,” which systematically explains the logical boundaries and value orientation of digital financial innovation based on the essence of finance and currency properties.

Liu Jun emphasizes that the specific forms of financial innovation can continuously evolve, but their fundamental function and value orientation—serving the real economy—should not deviate. Web3.0 finance should restore regulatory costs and strengthen risk prevention, so that virtual financial costs and benefits are comparable under the premise of equal costs in real financial sectors. This way, it can genuinely promote the real economy rather than engage in zero-sum competition. Only through this can Web3.0 financial innovation clarify concepts, define boundaries accurately, and truly do proper finance.

Liu Jun divides currency into two levels: fiat money (Fiat Money) led by governments and central banks, and the actual “money in circulation” within the economy. He points out that the commonly referred to “money” is not an abstract symbol but a specific transaction carrier and financial tool embedded in concrete credit relationships, transaction circulation, and institutional arrangements.

In the article, Liu Jun particularly clarifies the institutional logic of the core attributes of currency. The Bank for International Settlements, in its 2025 economic report, proposed that currency should possess singleness, elasticity, and integrity, which aligns with Holmstrom’s 2015 assertion of unquestionability, singleness, and resilience against bank runs.

However, Liu Jun believes that these attributes are not innate but must be supported and solidified through institutional design. For example, in reality, high-rated and low-rated bank accounts holding “one yuan” may have the same face value, but their credit quality and risk levels are not identical, and their value is not inherently equal. It is through institutional arrangements like deposit insurance that the currencies of different banks achieve equivalence in payment, circulation, and redemption processes. (Note: This is essentially an institutional guarantee of the currency’s “singleness,” which also endows it with “unquestionability” in transactions.)

Therefore, Liu Jun emphasizes that the essence of currency lies in credit, which must be backed by verifiable and sustainable real foundations such as national strength, economic scale, trade volume, payment capacity, and financial markets. Regardless of technological evolution, currency cannot be separated from credit and the real economy.

Liu Jun extends this logic of currency credit to the virtual currency field, concluding that its value core is not in algorithm design but in the support and realization of credit, and how rights, responsibilities, and benefits are aligned. If algorithms or linked assets lack transparent regulation, or trust is built on an opaque technological “black box,” the credit system of virtual currencies becomes unfeasible, and their value foundation becomes fragile. This is precisely why recent efforts by the People’s Bank of China and other departments to prevent and address risks related to virtual currency speculation are underway.

In February this year, eight departments including the People’s Bank of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, the State Administration for Market Regulation, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange jointly issued the “Notice on Further Preventing and Disposing of Risks Related to Virtual Currencies” (hereinafter referred to as the “Notice”). The Notice clearly states that virtual currency activities within China are strictly prohibited as illegal financial activities and must be banned and shut down according to law.

At the same time, the Notice clarifies the essential attributes of virtual currencies, real-world asset tokenization, and related activities. It reaffirms that virtual currencies do not have the same legal status as legal tender, and conducting virtual currency-related activities within China is illegal. Overseas entities and individuals are not allowed to provide virtual currency services to domestic subjects in any form.

Regarding the current hot topic of “decentralization” in finance, Liu Jun suggests that DeFi is not truly moving toward decentralization but is “re-centralizing” around algorithms, platforms, or technical architectures. In other words, “decentralization” should not be understood as negating the existing financial system but as a rational correction to unreasonable institutional frictions and cost structures under the premise of serving the real economy and meeting financial consumer needs. Its sustainability depends on further balancing market efficiency improvements with the fulfillment of public functions.

He further explains that the current discussion of “decentralization” is essentially an attempt to weaken or replace specific institutional intermediaries formed during the industrial economy era, such as sovereign currency issuance mechanisms centered on the central bank and financing structures led by traditional financial institutions. The core goal is not to deny the central authority itself but to reset the center through technological means, achieving functional concentration and efficiency enhancement at a higher or newer level. Therefore, it is more accurate to describe this as “re-mediation” rather than “decentralization.”

However, Liu Jun warns that if “re-mediation” focuses solely on technological efficiency while neglecting the safety of the financial system and public responsibilities, it may temporarily reduce visible costs but could weaken systemic stability and even amplify systemic risks in the long run.

Therefore, he advocates for comprehensive regulation of DeFi, including deposit insurance, infrastructure use, and public function costs. Ignoring the full-cost accounting consistent with mainstream financial institutions means that the immediate benefits of DeFi are essentially arbitrage opportunities. Once systemic risks materialize, the losses and rescue costs will be “unbearable.”

Regarding RWA tokenization (Note: Real World Assets-tokenization refers to using blockchain technology to create digital rights certificates representing ownership or related rights of real-world assets in the digital space), Liu Jun emphasizes the need to clarify its value realization path within a framework of virtual-real integration, recognizing that its essence is the securitization of assets in a virtual dimension.

He points out that a major research misconception is to simply incorporate virtual assets into traditional analysis frameworks, ignoring their unique operational logic in virtual space. RWA tokenization, combined with blockchain and smart contract technology, enables more efficient asset verification, finer segmentation, and more convenient trading, making structured transactions that are difficult in the physical world possible—for example, non-fungible tokens of art, sports events, or digital rights that can realize digital certification and circulation of specific experiences or emotions under compliant conditions, allowing individuals to “own” a unique fragment or experience in the virtual layer, thus creating endogenous value.

But Liu Jun emphasizes that this does not mean RWA can exist independently of the real economy. Its value realization must be based on legitimate and compliant institutional arrangements. Whether emotional or participatory value, its sustainability ultimately depends on real content supply, production capacity, and service systems. If tokenization merely involves repeated trading of virtual rights without positive feedback to real resource allocation and industrial operation, it risks falling into a self-reinforcing cycle of “virtual for virtual.” Only by integrating RWA into strict financial regulatory frameworks and ensuring that virtual-real interactions genuinely improve resource allocation and release both physical and virtual value can its technological potential be converted into real economic value.

He concludes by reiterating that understanding the properties of money, analyzing “decentralization,” and evaluating RWA tokenization paths must all be firmly rooted in the real economy.