According to a Chinese Central Bank Official, Cryptocurrency Adoption Is a "Major Issue"

Kavya  |  Sep 24, 2021

According to Wen Xinxiang, director of the People's Bank of China's (PBoC) payment and settlement department, one of the major issues of cryptocurrency adoption is its capability to operate independently of the existing payment system backed by commercial banks and payment organizations. 

Wen Xinxiang believes that cryptocurrency also causes problems for banks' payment services, undermining the influence of clearing agencies.

Why Cryptocurrency Adoption Is a Major Issue in China?

The growing acceptance of cryptocurrencies such as Bitcoin (BTC) poses a significant risk to the existing financial system, according to the senior official at the Chinese central bank.

Wen Xinxiang has voiced concern about the rising popularity of fiat-pegged stablecoins.

With Bitcoin's market value already nearing $800 billion and total stablecoin market capitalization topping $120 billion, Wen Xinxiang underlined serious dangers connected with the crypto industry during a payment and settlement event on Friday, according to the Shanghai Securities Journal.

Wen Xinxiang also claimed that the purported anonymity of cryptocurrencies makes them an appealing instrument for enabling criminal activities such as money laundering, asking for additional steps to combat with crypto:

“Virtual currency poses a significant problem. When the conventional financial system responds to competition from large digital businesses in the financial industry, it may also depend on traditional mechanisms such as law and supervision to boost anti-monopoly efforts and promote personal privacy and information protection.”

China Suspended Crypto Trading Transactions & Shut Down Mining Farms

Wen Xinxiang's comments confirm the Chinese government's anti-crypto position as the country has continued to crack down on crypto trade and mining this year, with local authorities shutting down several mining farms and stopping crypto trading operations.

In July, PBoC Deputy Gvernor Fan Yifei voiced concern about stablecoins, noting that the rate of development in the private payments system was “very alarming.” 

Despite the Chinese government's reservations about stablecoins, some local players are experimenting with decentralized stablecoins linked to the digital yuan, China's central bank's digital currency.

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