The idea of lifting the cryptocurrency ban has started floating in China as a former central bank official has called the country to review its stringent crypto restrictions.
Huang Yiping, a former member of the monetary policy committee at the People’s Bank of China (PBoC), believes that the Chinese government should think again about whether the ban on cryptocurrency trading is sustainable in the long run.
Huang voiced his concerns about the future of fintech in China in a speech in December, according to a transcript published by the local financial website Sina Finance on Jan. 29.
The former official argued that a permanent ban on crypto 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 run deserves an in-depth analysis,” Huang stated. He also highlighted the importance of developing a proper regulatory framework for crypto, though admitting that it won’t be an easy task. Huang said:
“There is no particularly good way to ensure stability and function as to how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.”
Despite calling for an in-depth analysis of the potential long-term benefits of crypto 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 rather than a currency because it lacks intrinsic value. Echoing a common anti-crypto narrative, he also claimed that a significant share of Bitcoin transactions is related to illegal transactions.
Huang, now an economics professor at Peking University’s National School of Development, also admitted that China’s central bank digital currency (CBDC) has failed to reach wide adoption despite being launched many years ago. He added that the possibility of allowing private institutions to issue stablecoins based on the digital yuan remains a “very sensitive” question, but the pros and cons are worth considering.
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China has been long known for its “blockchain, not Bitcoin” stance, with Chinese President Xi Jinping calling the country to accelerate the adoption of blockchain as a core for innovation in 2019. At the same time, the Chinese government has shown some hostility to crypto, eventually banning virtually all crypto transactions in 2021.
Despite the ban, China has continued to be the second largest Bitcoin miner in the world as of January 2022, hinting at a large crypto community still existing in the country. According to official data, mainland China customers accounted for 8% of the collapsed crypto exchange FTX despite the country’s ban on crypto trading.
Some local crypto enthusiasts even believe that China has never really banned individuals from possessing or trading crypto.