PBOC Official: China to Step Up Scrutiny of Cryptocurrencies
Wang Xin, Director-General of the Currency Gold and Silver Bureau of PBOC, highlighted in a recent-published article that Chinese financial regulators should step up scrutiny of virtual currencies to safeguard the government authority to issue national currency. His statement means Chinese financial regulators will continue to crack down on illegal activities in the crypto world.
He believes virtual currency,issued by a private organization without endorsement from the central bank or a public institution, is a digital representation of value and can hardly replace the fiat currency in the foreseeable future. He gives two reasons :
From the perspective of currency functions, virtual coins act as a medium of exchange in some specific scenarios, but they lack national credit support, and are not guaranteed by any commodity production or trading. Virtual currency can hardly do like state-backed currency, considering that it has no value basis , and is circulated in a limited and unstable scope.
And from the perspective of the evolution of money, the process of money issuance in all countries evolves from distributed distribution by the private sector to the centralized and unified distribution by the state. Therefore, it is difficult for various cryptocurrencies to replace the legal tender in the foreseeable future.
Although China banned ICOs and crypto trading in September last year, some unscrupulous individuals still launch cryptocurrencies overseas , and lure Chinese to join the fund raising and token trading at present as Wang mentions in the article. This move which bypasses domestic supervision to conduct off-shore transactions and illegal fund-raising, has caused adverse impact.
Besides, he also claims that cryptocurrency has been a tool for speculative trading. Some criminals even create their own digital currency exchanges, issue their own valueless tokens, and by means of a rich variety of fundraising methods which lack the application scenarios, such as ICO, IFO, IMO, IEO, they are engaged in speculation and hype to lift the price of cryptocurrency.
Bitcoin and its cryptocurrency siblings have very limited use for real economy, and some scams in the name of digital economy and blockchain technology facilitate money laundering, terrorist financing and the avoidance of foreign exchange control. Some even take advantage of the so-called token to conduct illegal fund-raising and financial fraud.
“Without regulators’ interference, cryptocurrency would cause great harm to the the national currency circulation order, the legitimate rights and interests of financial consumers and even threaten the financial stability.” Wang says.
Thus he offers five suggestions for further strengthening supervision of crypto-related activities :
First, authorities should draft laws and rules over cryptocurrency as soon as possible on the basis of clarifying the applicability of related Law with respect to cryptos. Lawmakers should increase the level of punishment and the penalties to deter bad players in the crypto space;
Second, authorities should use technical means to strengthen information monitoring, to close or disband groups in many social media platforms and related Wechat official accounts which are involved in cryptocurrency trading , and hand over clues to law enforcement officers;
Third, step up the monitoring of cross-border payment, check and identify suspicious trading accounts and digital assets exchanges. Once suspicious behaviors are identified, regulators should intercept those transactions and close related accounts;
Fourth, educate the masses on cryptocurrency and the risks associated with cryptocurrency investment;
Fifth, since cryptocurrencies are global assets, international coordination are required to regulate them.