Yao Qian, the Deputy Director of the Science and Technology Department at the People’s Bank of China, China’s central bank, recently authored an extensive report on digital currencies. In the report, Yao Qian highlights many of the advantages and disadvantages of digital currencies, focusing much of his analysis on how bitcoin (and by extension, all cryptocurrencies) are more of a quasi-currency.
China’s National Interest in Bitcoin
The report was loosely translated into English using Google translate but Redditor u/qwertyubb, a native Chinese speaker, filled in some of the more nuanced statements. Quoting Yao Qian in the report:
At present, this country (China) is very harsh on bitcoin, but in a certain sense, on top of the basis of prudence, we should also give special consideration and open to the top ten ICO companies based on market value. On one hand, (being open to cryptocurrency) will provide everyone with an opportunity to invest – it’s possible to invest in a black technology, but it’s better than buying some junk stocks (prevalent in China’s stock markets). On the other hand, from a national perspective, neighboring countries, including Japan, South Korea, and Singapore, are encouraging the development of bitcoin, which they consider to be quality assets. Not to mention this can promote the financial technology industry innovation, at least holding high-quality assets is in line with nationalinterests.
[B]ecause of Ethereum, the smart contract side (in contrast to traditional payment blockchain) has relatively fast breakthrough – taking into account the rising momentum of the currency, it is possible to surpass the bitcoin. (parentheses added by u/qwertyubb)
I’ve highlighted and emphasized two portions of the statement that could have huge implications for the cryptocurrency market going forward. First, the most surprising aspect of the report is the fact that for probably the first time ever, a senior Chinese banking official has spoken of China’s national interests as it relates to the burgeoning cryptocoin market. It might be just a coincidence that just last week, the three largest cryptocurrency exchanges in China resumed allowing investors to withdraw coins after a four-month moratorium. Some have speculated that the moratorium was ended after the exchanges agreed to new restrictions imposed by China, which makes sense given China’s interest in regulating a market it now sees as a “national interest”. u/qwertyubb speculates that China could very well be using these exchanges to secretly purchase cryptocurrency as reserves.
Confidence in Ethereum
Yao Qian’s belief that Ethereum may one day surpass bitcoin also coincides nicely with many exchanges adding Ether, the cryptocoin based on Ethereum, to their trading platforms last week as well. Ethereum is clearly gaining steam not only in China but on a global level. More and more businesses and countries are getting involved and developing new technologies based on Ethereum. Clearly, China’s confidence in Ethereum is a positive sign for the technology and for blockchain technology in general.
With all this talk of China’s interest in bitcoin and cryptocurrencies, it begs the question: when will the United States get involved. The US has yet to officially weigh in on cryptocoins except for a couple SEC denials of ETFs related to bitcoin. Now that China is moving quickly to stay on top of growing cryptocoin market, hopefully the US will see it as a sign that they better act fast, otherwise they might be left in the dust.