The introduction of digital currency is “inevitable”, according to the outgoing governor of the People’s Bank of China, who nevertheless stresses that any progress on the issue will be carried out in a “steady and orderly fashion”.
Last September China introduced a blanket ban on cryptocurrency trading, but the country has also been busy investigating the possibility of tapping into distributed ledger technology for a state-backed alternative.
Speaking at a press conference earlier this month, Zhou Xiaochua – who has now left his role as PBC governor – said: “It is safe to say that the digital currency is inevitable due to technology development. In the future, the use of traditional banknotes and coins will shrink or even disappear one day. There is such a possibility.”
The PBC will continue its research work on digital currency and electronic payments, entering the testing phase “when ready”, with Zhou stressing that digital currency should promote convenience, efficiency, cost effectiveness, safety and privacy protection in the retail payment system.
In contrast, he argued, some “technological applications” have become simply virtual asset transactions, which need to be dealt with strongly by regulators because “from the perspective of the government policy, virtual asset transactions conflict with the principle of financial products and services serving the real economy”.
Explaining the decision to ban trading between Bitcoin and RMB, he said: “We don’t favor creating speculative products that give people illusion of becoming rich overnight. That is certainly not good. The emphasis should be on serving the real economy.”
However, some Bitcoin enthusiasts are hopeful that new central bank governor Yi Gang could initiate a shift on the virtual coin, noting positive comments he has made in the past, calling the cryptocurrency “inspiring” and “enlightening”.
Separately, the PBC says that it will start letting foreign companies access its $27 trillion payments market. Firms are being invited to apply for payment licenses but will have to set up local units with local infrastructure as well as store client information domestically.