A representative from the Chinese Academy of Social Sciences (CASS) has said that cryptocurrencies are challenging to ban, but are worth experimenting with in the development of an international reserve currency.
“Countries are more focused on supervision and investor protection in transactions, such as anti-money laundering and market manipulation,” Yang Tao, Assistant Director of the Institute of Finance at CASS, wrote in a People’s Daily editorial (in Chinese).
This year has seen a number of cryptocurrency crackdowns in China. In February, the country’s central bank announced that it would ban trading on platforms both at home and abroad. The crackdown started late last year and focussed on initial coin offerings (ICOs) and aimed to shutter some of the more prominent exchanges. In March 2018, another crackdown was announced, along with the news that the central bank would be stepping up research and development of its own digital currency.
But Yang said that from a technical standpoint, digital currencies are challenging to ban entirely.
He also noted that digital currencies have a profound impact on the ways money is transmitted and the efficacy of payment settlements. He said cryptocurrencies can not necessarily be classified as currencies, but commodities.
“From a narrow perspective, digital currency represented by Bitcoin has its own ‘monetary attributes’ that are more often regarded as special assets or commodities. Therefore, its actual impact is often not on the monetary level, but on financial markets,” he said.
Yang also expressed enthusiasm for the idea of experimenting with cryptocurrencies as an international reserve currency but highlighted their volatility.
“Of course, if there are too many price fluctuations, speculation, and deflation restrictions, digital currencies cannot be used for payments, as you will only get farther away from the ‘money experiment,’” he said.
China has been an advocate of experimenting with an international reserve currency for years. Shortly after the 2008 financial depression, the governor of the People’s Bank of China Zhou Xiaochuan said that the crisis called for “creative reform of the existing international monetary system towards an international reserve currency.”
He said that its implementation would reduce future risks and enhance crisis management capabilities.