Former PBOC Monetary Policy Member Huang Yiping: China Bans Cryptocurrencies, May Miss Development Opportunities
Huang Yiping, professor of finance and economics at the National School of Development of Peking University and former member of the monetary Policy Committee of the People’s Bank of China, wrote:
There are several factors to consider when taking a stance on cryptocurrencies. First, cryptocurrencies such as bitcoin are not strictly currencies, but more like digital assets, due to their lack of intrinsic value. What’s more, studies have shown that roughly a quarter of all Bitcoin account holders and half of all trading activity is linked to illegal transactions.
Second, the regulatory attitude towards cryptocurrencies and digital assets depends on the maturity of the country’s financial system and regulatory regime. As you know, the Chinese government currently prohibits cryptocurrency trading in China. The main reason is that our country still faces significant challenges in anti-money laundering. Moreover, the country retains many capital account controls, and if digital assets like cryptocurrencies can be traded freely, it will cause far more problems than benefits.
Finally, long-term trends need to be fully considered. A ban on cryptocurrencies may be practical in the short term, but it is worth in-depth analysis to see if it is sustainable in the long run. Some of the new digital technologies brought about by cryptocurrencies are valuable to the formal financial system, including tokenization, distributed ledger, blockchain technology, and so on. A prolonged ban on cryptocurrency trading and related activities risks missing out on important digital developments, and bans may not be effective for long.
There is no particularly good recipe for how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.