The idea of lifting the cryptocurrency ban began floating around in China when a former central bank official called the country to review its strict cryptocurrency restrictions.
Huang Yiping, a former member of the People’s Bank of China (PBoC) monetary policy committee, believes that the Chinese government should rethink whether the ban on cryptocurrency trading is sustainable in the long term.
Huang raised concerns about the future of fintech in China in a speech in December, according to a transcript published by local financial website Sina Finance on Jan. 29.
The former official argued that a permanent ban on cryptocurrencies could result in the loss of many opportunities for the formal financial system, including those related to blockchain and tokenization. Cryptocurrency-related technologies are “very valuable” to regulated financial systems, he stated, adding:
“Banning cryptocurrencies may be practical in the short term, but whether it is sustainable in the long term deserves further analysis,” Huang said. He also highlighted the importance of developing a proper regulatory framework for cryptocurrencies, although he admitted that it will not be an easy task. Huang said:
“There is no particularly good way to ensure the stability and operation of how cryptocurrencies should be regulated, especially for a developing country, but ultimately an effective approach may still need to be found.”
Despite calling for an in-depth analysis of the potential long-term benefits of cryptocurrencies for China, Huang still stressed that there are many risks associated with cryptocurrencies like Bitcoin (BTC). Huang argued that Bitcoin is more like a digital asset than a currency because it lacks intrinsic value. Echoing a common anti-cryptocurrency narrative, he also claimed that a significant portion of Bitcoin transactions are related to illegal transactions.
Huang, now a professor of economics at Peking University’s National Development School, also admitted that China’s central bank digital currency (CBDC) failed to achieve widespread adoption despite being launched many years ago. He added that whether to allow private institutions to issue stablecoins based on the digital yuan remains a “very sensitive” issue, but the pros and cons are worth considering.
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China has long been known for its “blockchain, not Bitcoin” stance, and Chinese President Xi Jinping urged the country to accelerate the adoption of blockchain as a core for innovation in 2019. At the same time , the Chinese government has shown some hostility towards crypto, eventually banning virtually all crypto transactions in 2021.
Despite the ban, China has remained the second largest Bitcoin miner in the world as of January 2022, suggesting that there is still a large crypto community in the country. According to official data, clients from mainland China accounted for 8% of the collapsed FTX crypto exchange despite a ban on crypto trading in the country.
Some local cryptocurrency enthusiasts even believe that China has never really banned people from owning or trading cryptocurrency.