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Former VP of PBoC Says Bitcoin is the Most Commercial Application of Blockchain

China has been at the forefront of blockchain development in the past few years, pouring billions of yuan into the development of the new technology. Aside from wanting to apply blockchain technology to almost every segment of the government infrastructure, China also put a heavy focus on its government-issued digital yuan as the future of payments in the country.

But, China’s efforts have almost exclusively been focused on utilizing the benefits of blockchain technology, with cryptocurrencies themselves often being left out of the conversation.

In a rare bout of public discussion around cryptocurrencies, the former vice president of China’s national bank, the People’s Bank of China, shared her views on the first and largest digital currency there is—Bitcoin.

Wu Xiaoling, who currently serves as the chairman of the Wudaokou School of Finance at the Tsinghua University, said Bitcoin was “the most successful commercial application of blockchain technology.”

In the introduction to her newly released book “Talking with Leading Cadre about Blockchain,” the former vice president of the People’s Bank of China called Bitcoin a “private currency” which had its own value to the market as it catered to a specific user base.

However, as such, Bitcoin is also limited only to the field of private cryptocurrencies, which Wu believes is its biggest drawback.

The existence of Bitcoin cannot go hand in hand with the existence of a sovereign state, she said in her address, as Bitcoin’s properties mean that it could never replace fiat currency that is issued by the state.

Even when focusing solely on the realm of what Wu calls “private cryptocurrencies,” Bitcoin is still extremely flawed. For something to be used in the same capacity a currency is used, it needs to have stable value. Bitcoin, according to Wu, doesn’t fit that criterium—its price is extremely volatile and prone to fluctuations.

“Bitcoin, even as a private currency, has fatal weaknesses,” she wrote.

She claimed that isn’t solely her view—even in 2020, financial regulators in most countries almost unanimously agree in the fact that Bitcoin isn’t a currency. Instead, the world’s largest coin is treated as a digital asset, devoid of any currency-specific properties.

That isn’t to say that government-issued cryptocurrencies don’t come with their own sets of problems.

Wu also pointed out that in order for a country to digitize its national currency, or issue a new digital currency parallel to fiat, there needs to be a clear need for such an endeavor. Whether it’s the speed and efficiency of transactions or large-scale investments, the existence of central bank-issued digital currencies must be necessary. 

A digital yuan would need to follow the same financial regulation any other payment instrument does, she explained. 

“The innovative format should not be a subversion of all financial laws and rules.”

The 73-year-old Wu called on the country and its regulatory bodies to get a “prudent and objective” understanding of what cryptocurrencies are and how they work, as she believes it’s the only way they can be seamlessly integrated into society in the future. 

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