PBOC Deputy Governor: Cryptocurrencies Not a Solution to Credit Currency Problems
In a speech at the Boao Forum for Asia Annual Conference 2023, Xuan Changneng, the deputy governor of the People’s Bank of China (PBOC), addressed the issue of cryptocurrency and its impact on the financial infrastructure and services in the digital era. He emphasized that cryptocurrencies, despite their popularity and hype, do not solve the fundamental problems of credit currency and pose many hidden risks.
Cryptocurrencies, which are based on blockchain technology, are often touted for their decentralized and rule-based attributes. They are viewed as a countermeasure against credit currency and are being sought after by many people in an environment of abundant liquidity. However, Deputy Governor Xuan argued that the current emphasis on decentralized coins, especially those generated out of thin air, has not solved the problem of credit currency.
According to Xuan, the process of cryptocurrency transactions involves exchange with fiat currencies and leveraged transactions, among others. These transactions are largely in the hands of trading platforms, issuers, traders, and market makers, making the process very centralized and posing many hidden risks. These risks could be detrimental to the stability of the financial system, and they require urgent attention.
The deputy governor’s remarks come amid China’s efforts to boost regulatory oversight of the digital economy, as the country is increasingly concerned about the potential risks posed by cryptocurrencies and other digital assets. The Chinese government has been cracking down on cryptocurrency mining and trading, and it is exploring the possibility of launching its own digital currency.
In conclusion, Deputy Governor Xuan’s speech underscores the challenges facing cryptocurrencies in the current financial system. While cryptocurrencies offer some benefits, such as decentralization and rule algorithms, they do not provide a complete solution to the problems of credit currency, and they pose many hidden risks. As countries around the world explore the potential of digital currencies, it is crucial that they pay close attention to the risks and develop appropriate regulatory frameworks to ensure the stability of the financial system.
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