A former president of the People’s Bank of China (PBoC) has revealed the reason why China stepped up its crackdown on cryptocurrencies. The former president expressed his belief that cryptocurrencies cannot blossom in China yet because of its many issues. Cina had in August announced a total ban on active cryptocurrency trading and said that it was going to further restrict the activities of crypto miners in the country.
The former president of China’s apex bank, Zhou Xiaochuan, commented on the release of China’s Central Bank Digital Currency (CBDC) and what it means for the modern economy. He also touched on the topic of the Chinese government’s ban on cryptocurrencies in the country and his opinion of the reason why the government went ahead with it.
According to Zhou Xiaochuan, China will only use digital tokens in the best way for its progress and strength. He noted that the major function of currencies is as payment systems and that they are otherwise useless to the traditional financial and economic systems as a store of value. Zhou argued that if currencies are not valuable for payment, they are not always beneficial to a government. He says this is one reason why China cracked down on cryptocurrencies
Cryptocurrencies have revolutionized the financial sector and are modifying the way traditional financial institutions interact with the growing number of fintech solutions. Digital currency technology has brought a wave of digital solutions that offer diverse benefits such as stability, reduced costs, convenience, and speed of delivery. Digital token technology is gradually changing the face of the modern economy.
Zhou believes that the struggle between the cryptocurrency industry and the deployment of CBDCs will be a strong one and the eventual winner will be the system that offers more stability and convenience for the traditional economic system.
China’s CBDC, the Digital Yuan
China launched its CBDC, the Digital Yuan, in August this year and has recorded domestic distribution to the volume of over $30 million in the first few weeks of launch. The Digital Yuan is expected to replace the physical Yuan and has the full backing of the Chinese government. Local adoption is set to increase within 12 months as more businesses and individuals switch from the present cashless fiat system to the CBDC. China is believed to have banned cryptocurrencies to pave the way for its Digital Yuan. China reportedly owns 140,000 bitcoins and has not stated its plans for cryptocurrency.
Global Cryptocurrency Adoption and Regulation
Global cryptocurrency adoption is set to increase with the development of faster and more secure blockchains. Several analysts have expressed confidence in the faster and wide adoption of cryptocurrencies as a hedge against inflation and for use as payment systems. The two major problems facing cryptocurrency adoption are decentralization and regulation, and the safety of digital tokens.
Governments around the world are not comfortable with adopting a decentralized financial system that is largely beyond their control. Control is a key issue in the regulation of cryptocurrencies. Governments are also wary of the use of untraceable digital wallets to move illegal funds.