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 the Chinese central bank, the People’s Bank of China (PBOC), has called on the Chinese government to reevaluate its cryptocurrency ban, the South China Morning Post reported Monday.
Huang Yiping served as a member of the Monetary Policy Committee at the People’s Bank of China between 2015 and 2018. He is currently a professor of finance and economics at Peking University’s National School of Development.
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 run. He cautioned that a permanent ban on crypto-related products could result in 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 crypto disrupted the country’s economic and financial order while providing 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 analytics firm Chainalysis, China is among the top 10 countries with the highest crypto adoption. In addition, FTX’s bankruptcy filing in November last year shows that Mainland users accounted for 8% of the collapsed crypto exchange’s customer base; FTX had over 5 million active users before it imploded.
Furthermore, cryptocurrency mining activities have increased in China. According to data from the Cambridge Centre for Alternative Finance (CCAF), traffic from China accounted for approximately 20% of bitcoin’s total hash rate from September 2021 to January 2022. The center explained: “This strongly suggests that significant underground mining activity has formed in the country … As the ban has set in and time has passed, it appears that underground miners have grown more confident and seem content with the protection offered by local proxy services.”
Huang noted that the PBOC is trying to drive the adoption of its central bank digital currency (CBDC). Although the digital yuan or e-CNY is still in its trial phase, the central bank started counting the digital currency as part of its money supply in December last year. However, former PBOC director-general of research Xie Ping recently said usage of China’s CBDC has been “low” and “highly inactive.”
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