An economics professor and former adviser to the People’s Bank of China has urged the Chinese government to reconsider its ban on cryptocurrencies. He warned that banning crypto activities could result in missed opportunities that are “very valuable” to regulated financial systems.
Chinese Economist Warns Of Missed Opportunities Due To Crypto Ban
A former adviser to China’s central bank, the People’s Bank of China (PBOC), has called on the Chinese government to reassess its cryptocurrency ban, the South China Morning Post reported Monday.
Huang Yiping was a member of the Monetary Policy Committee of the People’s Bank of China from 2015 to 2018. He is currently a professor of finance and economics at the National Development School of Peking University.
While acknowledging that a cryptocurrency ban may be practical for China for the time being, the former central bank adviser stressed that the government should consider whether such policies will be sustainable in the long term. He warned that a permanent ban on cryptocurrency-related products could lead to missed opportunities in technologies like blockchain, which are “very valuable” to regulated financial systems.
In September 2021, the Chinese government declared all crypto activities illegal, claiming that cryptocurrencies disrupted the country’s economic and financial order and provided a breeding ground for criminal activity.
Despite the ongoing crackdown by the Chinese government, a significant number of cryptocurrency investors are still in China. According to blockchain analysis company Chainalysis, China is among the top 10 countries with the highest cryptocurrency adoption. In addition, FTX’s bankruptcy filing in November last year shows that users in mainland China accounted for 8% from the customer base of the collapsed crypto exchange; FTX had over 5 million active users before it imploded.
Additionally, cryptocurrency mining activities have increased in China. According to data from the Cambridge Center for Alternative Finance (CCAF), traffic from China accounted for approximately 20% of the total bitcoin hash rate from September 2021 to January 2022. The center explained: “This strongly suggests that has formed significant underground mining activity in the country…As the ban is put in place and time passes, it appears that underground miners have become more trusting and seem content with the protection offered by local proxy services.”
Huang noted that the PBOC is trying to boost adoption of its central bank digital currency (CBDC). Although the digital yuan or e-CNY is still in its testing phase, the central bank started counting the digital currency as part of its money supply in December last year. However, former PBOC Research Director General Xie Ping recently said that China’s CBDC usage has been “low” and “highly dormant.”
Do you think China will establish a more crypto-friendly crypto framework in the near future? Let us know in the comments section.
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