Governor of PBoC : Bitcoin is Not Accepted in China while National Digital Currency is Welcomed

March 9, People’s Bank of China (PBoC) governor Zhou Xiaochuan, vice governor Yi Gang, vice president and the head of State Administration of Foreign Exchange Pan Gongsheng discussed issues on “financial innovation and financial development” in the “two sessions”. When asked digital currency related questions, Governor Zhou Xiaochuan stated that bitcoin and other cryptocurrencies haven’t been recognized as a legitimate retail payment instrument yet, related financial services also cannot be accepted or recognized by PBoC at present. However, the central bank shows its interested in issuing a national digital currency.

Wan Zhe, chief economist of the National Development and Reform Commission’s (NDRC) International Cooperation Center, commented that bitcoin’s issuance has no national credit endorsement and it will disrupte the original currency system. Although the original intention of launching bitcoin may be to use it as a currency, however, no central bank has accepted   bitcoin circulation at the moment.

Liu Dongmin, director of the International Finance Research Office of the Chinese Academy of Social Sciences(CASS), pointed out that, unlike electronic payments such as Alipay, cryptocurrency is a brand new digital credit currency which is different from traditional credit currency. There are two types of digital currency, one is private digital currency, represented by bitcoin, and the other is a digital fiat currency which is issued by the Central Bank and backed by the state credit, that’s also the digital currency mentioned by Zhou Xiaochuan that China’s central bank is reaching on.

However, Liu Dongmin also emphasized that the national digital currency cannot be issued comprehensively in quantity in the near future. There are two reasons: Firstly, the technologies  required behind the digital currencies, such as the blockchain are not mature enough. Secondly, a currency need to be gradually promoted, conduct tests and go through in-depth assessments. Although PBoC has promoted a digital clearinghouse platform based on blockchain in the bill market. There are still many problems that need to be solved before promoting digital currency to the general population.

Zhou Xiaochuan also pointed out that digital currency may have some unpredictable effects on financial stability and monetary policy transmission. “Lots of cryptocurrencies have seen explosive growth which can bring significant negative impact on consumers and retail investors,”Thus, it requires dynamic regulatory measures.

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