China may not recognize bitcoin as a legal currency, but it seems to have a clear vision for a state-issued alternative.
At a meeting hosted by the International Telecommunication Union this week, Yao Qian, the Director of the Digital Currency Research Institute under the People’s Bank of China, reportedly boasted about the potential of a state-owned digital currency, while suggesting that there is an inherent lack of value anchoring public cryptocurrencies like bitcoin.
According to a report by Yicai, Yao also framed a state-issued digital currency as a way to stabilize domestic fiat currency, while better securing country’s financial status.
Although the publication made clear Yao’s comments reflected his own opinions, the remarks nonetheless reveal how the country may choose to direct the future development of digital currency.
Yao told attendees:
“The value of cryptocurrencies such as bitcoin primarily comes from the market speculation. It will be a disaster to recoganize it as a real currency. And the lack of a value anchroing inherently determines that bitcoin can never be a real one.”
Launched by China’s central bank in June this year, the Digital Currency Research Institute focuses on R&D related to blockchain-based digital currency. Currently head of the institute, Yao also served as the deputy director of PBoC’s technology department.
Elsewhere, Qian had more criticism for public cryptocurrencies.
In yet another statement, he was quoted as saying that the deflationary nature of economic systems utilizing the technology could be a hinderance to their success. “A total cap of 21 million like bitcoin whose current supply also halves every four years is actually driving backward along the currency evolution,” he said.
Yao went on to argue that a state-owned digital currency, however, creates tangible economic values and helps stabilize the market position of fiat currencies.
“The nature of a state-owned digital currency is a government liability issued to the public,” he said. “And it’s backed by the sovereign credibility.”
Yet, Yao takes a different approach from current trials of other central banks’ cryptocurrency projects that focus on the distributed ledger technology.
Citing the RSCoin design concept by the Bank of England as a promising example, Yao argued that such state-owned digital currency should not be confined by the ideology of the blockchain and DLT.
“RSCoin pictures a system that is controlled by the central bank,” he said. “The role of central banks may not just be deciding how much to supply but also designing the rule of the supplying algorithm.”
Chinese currency image via Shutterstock