The rapid growth of cryptocurrencies and stablecoins threatens the traditional financial system, prompting the People’s Bank of China (PBoC) to maintain a negative stance toward the class of digital assets. This was stated by Wen Xinxian, director of the regulator’s Payments and Settlements Department, according to The Shanghai Securities Journal.
In his view, virtual currencies can be divided into two categories:
- assets that are “stores of excess liquidity,” for example Bitcoin;
- assets for storing “base liquidity” — stablecoins. They play the role of payment instruments.
The official noted that the cryptocurrency industry creates a host of problems, but one of the main ones, in his view, is its ability to operate outside the traditional payment system supported by banks and financial institutions. According to Wen Xinxian, digital assets “undermine the power of clearing houses.”
The head of the department also noted the anonymity of virtual currencies, which allows their use for illicit purposes. As an example, he cited money laundering and the movement of illicit capital abroad.
“Virtual currencies pose a big problem. When the traditional financial system responds to competition from fintechs on its home turf, it also relies on traditional methods such as laws and supervision to bolster antitrust efforts and strengthen privacy and personal-data protection,” said Wen Xinxian.
In August, the PBoC warned investors about Bitcoin’s lack of real value and stated that regulatory pressure on crypto trading would continue.
Earlier in July, Deputy Head Fang Yifei described Bitcoin and stablecoins as speculative instruments, threatening the safety of the financial system and social stability.
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