Central Bank Head Says China Will Keep Cryptocurrencies Under Tight Control

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The head of the Chinese central bank says that it hopes to foster the usage of cryptocurrencies while also keeping the instruments under tight regulatory control.

Speaking the 2018 Boao Forum for Asia, People’s Bank of China governor Yi Gang (易纲) said that China is at the forefront of global efforts to develop a digital currency, and that it was conducting research into blockchains as well as other fintech areas, in order to explore how they can best service the real economy, while also avoiding any negative impacts.

“Overall, our regulation of virtual currencies is extremely tight,” said Yi. “At the same time we are researching how to exploit the positive energy of digital currencies, and enable them to better service the real economy.”

Yi’s predecessor Zhou Xiaochuan revealed just prior to his retirement that PBOC has set up a special research group to work on the development of China’s own cryptocurrency, referred to as the Digital Currency Electronic Payment (DC/EP).

PBOC has nonetheless taken the lead in putting heavy pressure on cryptocurrency use in China, launching a ban on initial coin offerings in September last year, as well as flagging a ban on domestic and overseas cryptocurrency trading platforms at the start of 2018.

At a press conference held as part of the Two Sessions in March, Zhou Xiaochuan said of cryptocurrencies and bitcoin that “we do not really want to create this kind of speculative product, and give people the dream of becoming rich overnight. ”

“This is not a good thing at all, and [we would] rather stress the need to service the real economy.”

On 28 March at the 2018 National Monetary, Silver and Gold Work Teleconference (全国货币金银工作电视电话会议), PBOC vice-governor Fan Yifei (范一飞) said that China would undertake a “reorganisation and clean-up of various forms of virtual currency,” strengthening both internal and external regulation.

More recently at the Boao Forum, PBOC counsellor Sheng Songcheng (盛松成) said that “there is no future” for the use of blockchains as money, and that virtual currency is money.

According to Song the spread of virtual currencies would make it impossible to effectively enforce monetary policy.

Dong Ximiao (董希淼), a senior researcher at the Chongyang Institute for Financial Studies at Renmin University, has called for a strict ban on financial institutions and payment organisations taking part in business activities involve bitcoins or other virtual currencies, in order to prevent the spread of risk to other parts of the economy.

Dong has also called for greater education of investors, in order to ensure that average citizens are apprised of the risks involved in bitcoin transactions.

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