China’s Central Bank Governors Believe Cryptocurrencies Should be Used as Investment Assets
For the better part of the last year, China has been putting most of its efforts into developing and testing its upcoming digital yuan. After banning the use of cryptocurrencies as a means of payment years back, the country has spent very little time discussing cryptocurrencies aside from an occasional warning to investors.
Now, all of that is set to change according to the latest comments made by Zhou Xiaochuan, the former governor of China’s central bank, and Li Bo, the current deputy governor of the People’s Bank of China. The two spoke at the Boao Forum for Asia on April 18th and discussed China’s current views on cryptocurrencies such as Bitcoin and Ethereum.
The current deputy governor of the country’s central bank said that he believes cryptocurrencies will “play a major role” in the future. Their use, however, won’t be as a means of payment, but either as an investment tool or an alternative investment. He said that many countries alongside China have been “studying” cryptocurrencies as investment tools and are looking into what kind of regulatory environment they should instate for these kinds of investments.
When asked whether China will continue to remain rough on cryptocurrency trading as it was in the past few years, Li said that the country will most likely loosen its approach. However, he noted that while he was advocating for minimal restrictions, certain regulatory rules still must be in place for the industry to thrive. He also noted that it was important to make sure that speculation on such assets doesn’t create serious financial risks for investors.
“With that said, until we figure out what regulatory rules are needed, we will continue with the current initiatives and practices,” he said during the forum.
Li, however, made a clear distinction between cryptocurrencies such as Bitcoin and stablecoins, which he believes could be used as a payment solution. For that to happen, China needs to regulate stablecoins much more than cryptocurrencies and apply legislation similar to its current banking rules.
Former governor Zhou Xiaochuan echoes Li’s statements, saying that the country should, indeed, differentiate between digital assets and digital currencies.
“Finance exists to serve the real economy. So whether it’s a digital currency or a digital asset—it should be closely integrated with and used to serve the real economy,” he explained.
After acknowledging the benefits of both digital assets and digital currencies, Zhou noted that he still had doubts about how to integrate them into the Chinese economy. He compared cryptocurrencies to the highly volatile and complex financial derivatives that led to the global financial crisis in 2008, saying that the country needed to be careful with risky products like that.