The perils of fintech: China’s former central bank chief issues a word of caution
- Country needs to judge which technologies are progressive and which are subversive, Zhou Xiaochuan says
- Authorities must fully assess the impact fintech might have on monetary policy and financial stability, he says
China has to consider more than economic and technological issues when dealing with new innovations such as blockchain, the former central bank chief said in defence of the country’s crackdown on bitcoin and other internet-enabled financing activities.
For all new technologies, the relevant authorities should review not only their cost and efficiency, but also the possible impact they might have on monetary policy, financial stability and even sovereignty, Zhou Xiaochuan told the annual conference of financial magazine Caixin in Beijing.
“We need to judge which ones are progressive technologies and which ones are subversive,” he said, adding that “technology must be used for the good things”, citing the use of the darknet for illegal activities, such as money laundering and financing terrorism.
His comments come amid a long-running campaign by Beijing to eliminate risk from the financial system caused by new technologies such as electronic payments, peer-to-peer lending and bitcoin trading.
Zhou, who retired as head of the People’s Bank of China (PBOC) in March after 15 years in charge, remains an important voice in financial circles, and currently serves as president of the China Society of Finance and Banking and deputy director general of the Boao Forum for Asia, China’s Davos.
Despite the tighter controls on new technologies in the financial sector, Zhou is a former advocate for bitcoin and as early as 2014 described it as an asset class – like rare stamps – and said the government had no plans to ban it. But in September 2017, Beijing deemed initial coin offerings illegal and ordered all mainland-based cryptocurrency exchanges to shut down.