The idea of lifting the ban on cryptocurrencies has begun to float in China as a former central bank official called on the country to review its strict restrictions on cryptocurrencies.
Huang Yiping, a former member of the Monetary Policy Committee of the People’s Bank of China (PBoC), believes that the Chinese government should reconsider whether the ban on cryptocurrency trading is sustainable in the long term.
Huang expressed his concerns about the future of fintech in China in a speech in December, according to a transcript published by local financial website Sina Finance on January 29.
The former official argued that a permanent ban on cryptocurrencies could result in many missed opportunities for the formal financial system, including those related to blockchain and tokenization. Crypto-related technologies are “very valuable” to regulated financial systems, he stated, adding:
“Banning cryptocurrencies may be practical in the short term, but whether it is sustainable in the long term deserves in-depth analysis,” Huang said. He also highlighted the importance of developing an appropriate regulatory framework for crypto, although he admitted that this will not be an easy task. Huang said:
“There is no particularly good way to ensure stability and functioning in terms of how cryptocurrencies should be regulated, especially for developing countries, but ultimately an effective approach still needs to be found.”
Despite calling for an in-depth analysis of the potential long-term benefits of cryptocurrencies for China, Huang still emphasized that there are many risks associated with cryptocurrencies like Bitcoin (BTC). Huang argued that Bitcoin is more like a digital asset than a currency because it lacks intrinsic value. Echoing the usual anti-crypto narrative, he also claimed that a significant proportion of Bitcoin transactions are linked to illegal transactions.
Huang, now a professor of economics at Peking University’s National Development School, also acknowledged that China’s central bank’s digital currency has failed to achieve widespread adoption despite being launched years ago. He added that allowing private institutions to issue stablecoins based on the digital yuan remains a “very sensitive” issue, but the pros and cons are worth considering.
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China has long been known for its “blockchain, not Bitcoin” stance, with Chinese President Xi Jinping urging the country to accelerate adoption of blockchain as a foundation for innovation in 2019. At the same time, the Chinese government has shown some hostility to crypto, with time banning almost all crypto transactions in 2021.
Despite the ban, China is still the second largest Bitcoin miner in the world as of January 2022, indicating a large crypto community that still exists in the country. According to official figures, Mainland Chinese buyers accounted for 8% of the failed crypto exchange FTX despite the ban on crypto trading in the country.
Some local crypto enthusiasts even believe that China has never really banned individuals from owning or trading crypto.