A kind of fiber optical current transformer which employs a novel method on modulation and demodulation is proposed. The system controls the phase modulator with a return- to-zero square wave, and implements the analog coherent demodulation with a sine wave which acts as the local oscillator signal, and fulfills the current closed loop measurement by digital signal processing (finite impulse response filter, moving average filter) of acquired data to generate step wave. The result of the experiment suggests that the method can realize the closed loop measurement of large current, meet 0.2 level of IEC 60044-8:2002 standard when rated current is 1000 A at room temperature, and has the practical application value.