Deputy governor of the People’s Bank of China: Bitcoin and other private digital currencies are speculative tools that pose potential risks that threaten financial security and social stability

For the first time, the People's Bank of China responded to the recent crackdown on Bitcoin, emphasizing the opposition to the central bank's digital currency, and emphasizing the threat of stablecoins. These relatively negative new formulations mean that the future regulatory situation does not seem to be loosened. This is the first time to take the initiative to explain the recent strong supervision policy, revealing the following important meanings:

First, the negative vocabulary of virtual currency is no longer used, but it is defined as a private digital currency (a typical representative of a private digital currency is currencies such as Bitcoin, including various so-called "stable coins" launched). A new formulation is more in line with international standards. But there is also a vague definition of whether it is an asset or a currency. For example, Zhou Xiaochuan recently called it an encrypted asset.

The response emphasized that "for these private digital currencies, whether they exist as monetary credit or not, we are still observing and studying", showing a relatively open attitude. Prior to this, Li Bo, deputy governor of the Central Bank (now transferred to the IMF), expressed similar views, saying, “If it is used as an investment tool, many countries, including China, are also studying how such an investment method should be. A kind of regulatory environment".

In addition, more information about relatively strong supervision has been released.

Second, respond to the issue of digital currency can be divided into private digital currency and central bank digital currency, to oppose the two, and to emphasize the follow-up promotion of central bank digital currency with more space. In the case of confrontation, the negative and the impact are even stronger.

Third, the response stated that these currencies themselves have become a speculative tool. This situation has occurred in the market, and there are also potential risks that threaten financial security and social stability. At the same time, it has also become a payment tool for some money laundering and illegal economic activities. The so-called "stable coins" of some commercial organizations, especially the global "stable coins", may bring risks and challenges to the international monetary system, payment and settlement system, etc. We are still quite worried about this issue, so we adopt Some measures have been taken.

Private digital currency is classified as a "speculative tool". Although this is a neutral term, it must be negative in the current policy context. This is also similar to the expression of the former central bank governor Zhou Xiaochuan. Zhou Xiaochuan said, “When it comes to the innovation of cryptocurrency, China’s attitude is also to focus on how you serve the real economy in many analyses and discussions. To provide important services to the real economy, then more attention may be given."

Fourth, this response emphasized stablecoins. Previously, only Bitcoin was mentioned in the Financial Committee meeting. In fact, compared to Bitcoin, stablecoins anchored to the US dollar have more applications in illegal activities such as speculation, payment and even money laundering and gambling. But on the other hand, it seems that the conventional practices have been exhausted, except for the prohibition of institutional participation, public opinion crackdowns, and crackdowns on electronic fraud and money laundering. Whether there will be more stringent measures, such as new regulations and even legislation, to target stable currencies such as USDT, remains to be seen.