Despite local players experimenting with digital yuan-pegged stablecoins, the PBoC Chinese central bank maintains its anti-crypto stance.
The rapid adoption of cryptocurrencies such as Bitcoin (BTC) poses a significant threat to the traditional financial system, a Chinese central bank executive has warned. Wen Xinxiang, director of the People’s Bank of China’s (PBoC) payment and settlement department, has expressed concern about the growing popularity of cryptocurrencies and fiat-pegged stable coins.
Wen highlighted major risks associated with the crypto market on Sept. 24 at a payment and settlement forum, according to The Shanghai Securities Journal. Bitcoin’s market value has surpassed $800 billion, and the total stable coin market cap has surpassed $120 billion.
According to the official, one of crypto’s primary challenges is its ability to operate independently of the traditional payment system supported by commercial banks and payment institutions. Cryptocurrencies also wreak havoc on banks’ payment services, reportedly eroding the power of clearing organizations.
Additionally, Wen argued that the alleged anonymity of cryptocurrencies makes them an attractive tool for facilitating illegal transactions such as money laundering, arguing that the traditional financial system should adopt additional measures to compete with crypto:
“Virtual currency poses a significant challenge. When the traditional financial system responds to competition from large technology companies in the financial industry, it can also rely on traditional methods such as law and supervision to strengthen anti-monopoly efforts and personal privacy and information protection.”
Wen’s remarks reaffirm the Chinese government’s anti-crypto stance, as the country has stepped up its crackdown on crypto trading and mining this year, with local governments shutting down multiple mining farms and suspending crypto trading transactions.
In July, Deputy Governor Fan Yifei of the People’s Bank of China expressed concern about stablecoins, stating that the rate of development in the private payments system was “alarming.” Despite the Chinese government’s reservations about stablecoins, some local players are experimenting with decentralized stable coins pegged to the digital yuan, China’s central bank’s digital currency.
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