China might need to modify its regulations on cryptocurrencies to ensure it doesn’t miss out on technology developments in digital assets, said Huang Yi-ping, an economics professor at China’s Peking University and a former member of the monetary policy committee at the People’s Bank of China (PBOC).
See related article: China’s two systems for crypto: Trading is banned, but virtual assets can be protected
Fast facts
- It is not clear that China’s ban on cryptocurrency transactions is sustainable in the longer term, because it may lead to missing critical opportunities in the development of digital technologies, Huang said at a financial summit in December, whose transcript was published on Saturday.
- The technologies related to cryptocurrencies, which include tokenization, distributed ledger and blockchain, are valuable for the regulated financial system, said Huang, who was a member of the monetary policy committee at PBOC from 2015 to 2018, and also Managing Director and Chief Asia Economist at Citigroup from 2000 to 2009.
- However, he also pointed to the risks related to cryptocurrencies, which he said do not really function as currencies due to a lack of intrinsic value.
- China’s blanket ban on cryptocurrency transactions is mainly due to the current challenges it faces from money laundering. To allow the free trading of cryptocurrencies and other digital assets will bring more trouble than benefits in the short run, Huang said.
- Huang also commented on the digital yuan, China’s central bank digital currency (CBDC) and issues such as paying interest in the digital yuan and using the CBDC for cross-border payments and others.
- China issued a ban on all cryptocurrency transactions in September 2021 and cracked down on crypto trading, while promoting its CBDC pilot and blockchain technology.
