The rapid development of cryptocurrencies and stablecoins threatens the traditional financial system, so the People’s Bank of China (PBOC) maintains a negative attitude towards the digital asset class. The director of the department of payments and settlements of the regulator, Wen Xinxiang stated this. The Shanghai Securities Journal reported.
According to Xinxiang, virtual currencies can be divided into two categories: assets that are a “reservoir of excess liquidity,” for example, Bitcoin; and assets for storing “basic liquidity” are stablecoins. They play the role of payment instruments.
The official noted that the cryptocurrency industry creates a number of problems. However, he believes that one of the most important features is its ability to function outside of the traditional payment system. With the support of banks and financial institutions. In addition, he said that digital assets “weaken the power of clearing organizations”.
Virtual currencies create a big problem
The head of the department also mentioned the anonymity of virtual currencies. As a result, people can use them for illegal purposes. As an example, he cited money laundering and the movement of illegal capital abroad.
“Virtual currencies create a big problem. When the traditional financial system responds to competition from fintech companies in its home field, it also relies on traditional methods like laws and supervision to increase antitrust efforts and increase the protection of privacy and personal information,” Xinxiang said.
In August, the PBOC warned investors about the lack of real value in Bitcoin. And announced the continuation of regulatory pressure on crypto trading.
Stablecoins are speculative instruments
Recall that in July, the deputy chairman of the regulator, Fan Yifei, called Bitcoin and stablecoins speculative instruments that threaten the security of the financial system and social stability.
Answering questions from journalists at a briefing of the State Council of the POBC, Yifei said that private digital currencies and central bank digital currencies (CBDC) should be separated. The first ones include Bitcoin and stablecoins issued by non-state companies.
According to the analytical company Chainalysis, Chinese residents use USDT to withdraw capital abroad. Since the authorities have set a limit of $50,000 on international transactions in fiat for individuals.