Cryptocurrency ban could erode China’s competitiveness, say executives at Hong Kong forum
Regulators should instead formulate policies that are welcoming, and promote blockchain use
China’s regulators should maintain a more welcoming position towards cryptocurrencies, as an outright ban on their use and trade could undermine the country’s economic competitiveness, senior executives said during a panel discussion at the Asian Financial Forum in Hong Kong on Tuesday.
Executives from CreditEase, Microsoft China and Credit China FinTech Holdings also said the government and private sector should embrace the application of blockchain, the technology behind cryptocurrencies such as bitcoin and Ethereum.
“There are currently more than 1,400 digital currencies globally … I think regulators should not ban them but, instead, allow market forces to lead price discovery for virtual currencies,” said Phang Yew Kiat, the chief executive of Credit China FinTech Holdings, a Hong Kong-listed company focusing on financial services for consumers and small to medium enterprises in China.
Credit China FinTech signed a US$30 million deal with BitFury, a bitcoin and private blockchain infrastructure provider, in January 2017 to – among other things – establish a joint venture focusing on the Chinese market, whose details have not been disclosed. Phang said Credit China FinTech has been using blockchain technology since 2016.
Chinese regulators have been clamping down on the mining, trading and use of cryptocurrencies in fundraising activities, such as those through an “initial coin offering”, which are popular among start-ups.
But the authorities’ stance on blockchain has been more receptive. For example, the Ministry of Industry and Information Technology has been promoting the development of blockchain by establishing open labs with the industry to promote blockchain applications in various industries.
Zhang Yue, the senior vice-president of CreditEase, said blockchain technology will have a significant and constructive impact on the financial sector, and that the technology can support the extension of credit to more borrowers underserved by the formal banking system.
For cryptocurrencies, however, the government should take a top-down approach in driving more careful planning with the private sector to promote their use, said Zhang.
“In the future, China’s economic power will be associated with cryptocurrencies … if one day cryptocurrencies become a widely circulated, liquid economic [transaction] medium, that becomes a national issue, rather than a commercial decision for private businesses,” she said.
The government and regulators need to respond proactively, because cryptocurrencies “will come in one form or another, and other countries are heading in the same direction of responding to it,” she said.
The regulators can also respond by making rules and eligibility criteria enabling only certain qualified investors to trade in cryptocurrencies, said Li Jiang, the chief technology officer at Microsoft China.
“There can also be rules around requirements for [private organisations] issuing cryptocurrencies. Rather than banning bitcoin, there can also be regulatory requirements for eligible investors, the trading of these currencies and [supervision] around anti-money-laundering activities associated with cryptocurrencies,” Li said.
Although bitcoin and other cryptocurrencies have been banned in China, the People’s Bank of China is conducting research into issuing the country’s own sovereign digital currency, in a contrast to the clamp down on those that are privately issued, as the South China Morning Post reported in November.