Messages from China show digital currency is taking off

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Headquarters of the People's Bank of China in Beijing. Photo: Reuters / Kim Kyung-Hoon

China appears to be adopting crypto-currencies, but on its own terms. At last week’s annual Boao Forum for Asia, the new central bank governor, Yi Gang, indicated that while the People’s Bank of China is going to maintain a “tight supervision” over virtual currencies, it is also “exploring a better way for digital currency to play a more active role … in the real economy.”

Yi also used the event to reaffirm China’s commitment to be a global leader in blockchain innovation.

His words were followed by an editorial in Monday’s state-owned People’s Daily penned by Yang Tao, the assistant director at the Institute of Finance, which is part of the influential Chinese Academy of Social Sciences, or CASS, think tank.

In the editorial, Yang argued that outright digital currencies bans are near impossible to achieve. Speaking typically for an official from a Chinese state body, in generalities and not specifically about the country or its crypto-currency clampdown, he went on to flesh out his views.

Yang admitted that despite money laundering and market manipulation frauds, which have engulfed the sector, the existing financial system is not evolving and as such cryptos are a “valuable experiment” that should be explored.

In February, Reuters reported a CASS report which suggested that central banks should consider adopting digital currencies for cross-border payments.

By using a shared digital ledger that verifies, records and settles transactions, average transmission times could be shortened from more than three days to less than one, according to CASS, while processing costs would also be reduced.

“Moreover, as the new system becomes more open, more flexible and more inclusive, all the developing countries will get fair and easy access to these services,” the CASS report concluded.

Despite these signs of optimism, China’s position on unregulated cryptos remains strict. Last September, Beijing banned Chinese-based ICOs, or initial coin offerings, and crypto-currency trading.

Since then, the People’s Bank of China has monitored global virtual currency trading platforms and said it will crack down on any domestic users accessing overseas exchanges.

While there is no ban on crypto mining operations  – some of the biggest crypto mines in the world are still in China – many miners have started to locate some of their services outside the country.

Still, this week Taobao, the eBay of China and a subsidiary of online giant Alibaba, said it will ban from its site adverts selling any digital-currency related services or products.

These will include services involving ICO consultancies, smart contract deployment and crypto related technical operations. Taobao pointed out that this was due to the People’s Bank of China tightening up regulations.

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