China’s Official Newspaper People’s Daily Defines Bitcoin as Digital Gold

Note: Last Friday, China’s official newspaper People’s Daily released an article Bitcoin, a New Form of Digital Gold by Yang Wang. Investors interpreted it as regulators’ positive attitude towards bitcoin. In this interview, the author Yang Wang, director of Beijing Branch of Guizhou Comprehensive Credit Service Network, talks about his thoughts about bitcoin and blockchain when be interviewed.

Why did you say bitcoin is digital gold?

Bitcoin is not a currency because it lacks the properties of a real currency. To begin with, a unit of account. I know some would argue that it was born as a unit of account and Laszlo Hanyecz ponied up 10,000 bitcoins in exchange for pizza. But the truth is that it cannot measure the value of all goods like RMB does. Plus, it’s far from being widely accepted as a currency by people all over the world. For instance, not all pizza shops accept bitcoin as payment.

Second, a store of value. Bitcoin’s extreme fluctuations make it perform poorly in the role. With RMB, people can hardly tell it is deflation or inflation, but with bitcoin, you can hardly sleep well worrying about its price all the time. In my article, I said that bitcoin is digital gold, but it is not as stable as gold. So investors must be aware of its inherent risks.

Cryptocurrency investors often dub bitcoin as gold and ETH as petroleum based on their rarity. They say the total number of bitcoin is fixed, but ETH is like an oilfield and when it is running out, you can always go find another oilfield.

What do you think will be the next move of the PBOC?

I’ve been connecting with people from the central government, and what’s how I made the conclusion that bitcoin is digital gold, or a commodity.

The American government defines bitcoin as commodity and only one US state recognizes bitcoin as a legal currency. Japan has officially recognized bitcoin as currency. And it’s reported that Russia will recognize bitcoin, but they never made it clear whether they would recognize it as commodity or currency. Germany claimed that bitcoin is legal, but it doesn’t say bitcoin would be used as a means of payment. It could only be applied in some special industries that is not subject to VAT. Britain is developing its own digital currency. Holland launched its digital currency in 2016 and there is not much market demand for bitcoin. When China launches its official digital currency, bitcoin will be labelled as commodity.

Certainly, I cannot speak on behalf of the central government. But based on my judgment, we will define bitcoin as commodity or futures which are more easy to be regulated. If bitcoin is widely used for payment in China, it will come into conflict with the current monetary system. And I believe China will give its priority to how to regulate bitcoin and how to use it as a means of macro-control.

People are eager to know what kind of policy will be released to regulate bitcoin. Actually, rules and regulations will be made to supervise all digital currencies, not just bitcoin.

The truth is that price fluctuation in the domestic bitcoin market is largely due to news media, not by policies of the government. Media have their own understanding of government policies and release news with titles like “the PBOC’ s new move on regulation.”  Without any exception, the price of bitcoin violates greatly whenever such news is released.

What do you think will be the future of digital currency and blockchain?

Since the beginning of 2017, the PBOC has started working to set a digital currency research center. And in the end of 2016 and the beginning of 2017, the spokesman of the PBOC claimed that they would soon launch its own digital currency. Cryptocurrency investors interpret this as the PBOC is increasing interest rates to attract customers. But the PBOC has not launched its digital currency and there is an upward trend in the price of bitcoin, probably three months to six months.

As of 2016, there were 656 kinds of cryptocurrencies in market and the market cap of Bitcoin, Ethereum and Ripple took up 91 percent of the total market cap. Though they look like stars shining in darkness, but it can be predicted that once the national digital currency is launched, those tokens would be obsoleted gradually.

Generally, there are three ways of investment in digital currency. First, if you’ve got money, you can hire talents to set a research lab. Second, co-found a company with people who have resources. Third, invest in some potential startups.

According to Baidu and Google, 1.4 billion USD was put in digital currency and blockchain industry by the end of 2016. And as of April, 2017, the number was 1.9457 billion USD. That’s 600 million in 4 months. We can assume that more investors will go blockchain initiative and bitcoin startups.

Digital currency so far is the most successful application of blockchain technology. Recently, I visited several bitcoin startups doing payment services. These companies are aiming to become the next Alipay that can be added to your mobile site. Digital currency will have a bright future and it will move to mobile payment.

Another data we can get is that people worldwide are becoming more interested in blockchain than artificial intelligence. And according to the latest Gartner Hype Cycle report, bitcoin or blockchain will need another three or five years before they can move to the next phase. Therefore, if we want to join the global blockchain race, we should pay attention to mobile payment or cross-border clearing and settlement.

 The original source of the Chinese version:

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