Former PBoC Governor Says Cryptocurrencies Should Serve the Real Economy
Following weeks of speculations regarding China’s official policy regarding the use of cryptocurrencies, the former governor of the country’s central bank provided a brief glimpse into how China could approach the issue.
So far, all of the comments made by the People’s Bank of China regarding cryptocurrencies were focused mostly on the upcoming digital yuan and its impact on the global monetary system. However, the public has so far been dealing with a limited amount of information regarding the country’s view on other, decentralized cryptocurrencies.
Speaking at the Lujiazui Forum, Zhou Xiaochuan, the former governor of the People’s Bank of China, revealed that cryptocurrencies were something China was keeping a close eye on. He noted that the country has adopted a pragmatic attitude towards the new asset class and is currently focusing on determining how cryptocurrencies could be used to serve the real economy. Zhou said that if the ongoing research efforts show that cryptocurrencies can fulfill important roles in the real economy, the country would be willing to invest more resources to develop the necessary infrastructure.
His personal opinion is that cryptocurrencies could become very useful tools, especially if they can be applied to payments. There is currently a lack of blockchain protocols that can provide the throughput needed to facilitate quick and seamless payments required by the digital economy in China. Creating a network that could serve the economy will require a lot more resources and processing power, he explained. He also noted that the decentralization and lack of regulation also serve as a point of controversy for central governments, raising questions about whether or not China would be willing to make that big of a tradeoff.
But, despite all of the above-mentioned shortcomings, Zhou believes that the discussion around cryptocurrencies is one of the most important ones to have. With thousands of new cryptocurrencies emerging each day, many have already moved way past the payments industry and have become the definition of a digital asset. As digital assets are essentially a zero-sum game, it’s important to educate investors that the only way to earn money is to make it off of other investors.
Creating a clear distinction between cryptocurrencies used as a payment method and cryptocurrencies used as digital assets is hugely important, Zhou said during the forum. And while this is a lengthy process that requires a lot of abstract thinking, it will certainly help the country determine whether cryptocurrencies could be used to serve the real economy or will remain just a get-rich-quick scheme for investors.
He also warned about the way cryptocurrencies were being used and marketed in the United States, where the acts of a handful of powerful people have the potential to literally wipe out billions of dollars from the market.
Priyeshu is a software engineer who is passionate about machine learning and blockchain technology. He built his first digital marketing startup as a teenager and worked with multiple Fortune 500 companies. He's an alumni from mass-transit app Ola and holds a degree in computer science engineering.
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