A senior official at the People’s Bank of China (PBOC) urged regulators to consider cryptocurrency risks and fraud that could lead to bank failures when innovating regulation. The Chinese official pointed to the recent collapse of US banks that provided services to crypto clients as an example. “Philosophy, technology and regulatory capacity must be updated to ensure that financial innovation does not come at the cost of financial stability,” he emphasized.
Chinese central banker on crypto risks and bank failures
Xuan Changneng, deputy governor of the People’s Bank of China (PBOC), the Chinese central bank, spoke at the Boao Forum on Friday about the potential dangers of financial innovations, including cryptocurrencies, which could cause banks and lenders to fail. He was quoted by Bloomberg as saying:
The risks and fraud associated with cryptocurrency, including the two US banks that ran into trouble after providing many services for cryptocurrency, from receiving deposits to settling, demonstrated that regulators need to play by the rules when innovating regulation.
Although the Chinese central bank official did not mention specific banks, two crypto banks in the US, Signature Bank and Silvergate Bank, recently went bankrupt. Signature Bank was seized by the New York State Department of Financial Services, while Silvergate Bank underwent voluntary liquidation.
While stating that there must be enough room for innovation, the PBOC lieutenant governor stressed that regulators should “verify and confirm new technologies that apply to various financial models and products, rather than simply accept or approve them.”
Furthermore, the central bank official emphasized:
Philosophy, technology and regulatory capacity must be updated to ensure that financial innovation does not come at the cost of financial stability.
At the same forum on Friday, Vice Finance Minister and Deputy Director of the Office of China’s Central Economic and Financial Affairs Commission Liao Min stressed the importance of the Chinese government’s active participation in international cooperation and standards coordination. . He asserted that China needs to get “deeply” involved.
What do you think of the Chinese central bank official’s statements? Let us know in the comments section.
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