Zhou Xiaochuan and Li Bo spoke at the Boao Forum: Crypto assets must be subject to market supervision if they want to become payment tools

At the Boao Forum for Asia on April 18, Zhou Xiaochuan, former governor of the People's Bank of China, and Li Bo, current vice governor of the People's Bank of China, expressed their views on cryptocurrencies. Li Bo said that we believe that crypto assets should play a major role in the future as an investment tool or alternative investment. If it is used as an investment tool, many countries, including China, are also studying it.

Zhou Xiaochuan : As long as the money is taken out of the digital wallet, it is digital currency. You don’t need to distinguish whether it is account-based or token-based. You don’t need to care about the payment and settlement system behind it, because ordinary people may not understand what the system behind it is like. You don’t need to say whether it is decentralized or centralized. Of course, you may need to know one thing, that is, you cannot use this system to launder money, evade taxes, engage in drug and arms transactions, and you cannot gamble in China. This is the starting point of the digital RMB.

Host : Thank you! Mr. Li Bo, Vice Governor, the People's Bank of China took some measures on digital currency transactions a few years ago. Do you think the People's Bank of China will continue to maintain a tough stance on cryptocurrency transactions in the future?

Li Bo : We believe that Bitcoin and stablecoins are crypto assets. Crypto assets are investment options, not currencies themselves. They are alternative investments, not currencies themselves. So we believe that crypto assets should play a major role in the future as an investment tool or alternative investment. If it is used as an investment tool, many countries, including China, are also studying what kind of regulatory environment should be for such an investment method. Although this regulatory rule is the lowest regulatory rule, there must still be regulatory rules. And we must also ensure that speculation on such assets will not cause serious financial risks. This is a must. In other words, before we figure out what kind of regulatory rules are needed, we will continue to maintain our current measures and practices.

The second point is that for some stablecoins, they are crypto assets. If we want such crypto assets to become a widely used payment solution, we need a stronger regulatory rule, that is, stricter than the current regulation of Bitcoin. Because for a stablecoin issued by a private enterprise that will be used as a payment tool, there must be regulatory rules like quasi-banks or banks to regulate the functions of this stablecoin. Therefore, in the future, if any stablecoin hopes to become a widely used payment tool, it must be strictly regulated, just like banks or quasi-bank financial institutions.

Host : Governor Zhou, do you have anything to add?

Zhou Xiaochuan : I agree with what you just said. We should distinguish between digital assets and digital currencies. Digital currencies have three main characteristics, which Augustin Carstens just talked about. I would like to add that China has a characteristic in considering these issues, that is, we attach great importance to the real economy. Finance is to serve the real economy. Whether it is digital currency or digital assets, they should be closely integrated with the real economy and serve the real economy.

Since digital currency supports a large number of payments, it is definitely beneficial to the real economy, and it is indispensable. Without these payments, the real economy cannot function. So everyone will ask, what exactly are the benefits of digital assets to the real economy? I still have doubts about this in my mind, so everyone will be more cautious. We also went through the global financial crisis in 2008. At that time, there were several phenomena, that is, some financial products would have problems if they were separated from the real economy. For example, shadow banking at that time, for example, some derivative products that everyone criticized at that time, purely became speculative transactions between several financial institutions, and had no connection with the real economy. As a result, these products were prone to problems. So many big bank leaders, such as Citi or Bank of America, said that they could not understand what the people in their trading rooms were trading, so it was difficult for me to do a good job of internal control.

So we are not saying that we can draw conclusions about such derivatives now, but you have to be careful. In addition, from the perspective of policy encouragement, this is a characteristic of China, that is, it emphasizes that new things and new institutions in financial products and financial services should pay attention to serving the real economy and making it clear what the benefits are for the real economy.

Wabi.com believes that in the era of economic diversification and integration, cryptocurrency will not only prevail and develop in overseas markets. The deputy governor of the central bank affirmed that cryptocurrencies such as Bitcoin have the attributes of investment tools and expressed his thoughts on the future management of the industry. The editor believes that under strict supervision in the future, digital currencies and digital assets will definitely develop positively in my country, gradually create Chinese characteristics, and play a positive role in my country's real economy.