A former vice-governor of China’s central bank, Wu Xiaoling, has said that digital currencies like bitcoin “could co-exist with fiat currencies”.
Wu, who is currently a member of National People’s Congress Standing Committee and a vice-chairperson of the Financial and Economic Affairs Committee, made her remarks as keynote speaker at the Sanya International Financial Forum, amainstream event featuring political and business leaders.
The forum’s guidebook contained the following introduction to its digital currency stream:
“Does ‘digital money’ refer to a set of digits or a type of money? Neither is true, perhaps. It denotes an underlying technical protocol for virtual economic value exchanges in the digital world. An exploration of the future of digital money offers insight into the status quo of digital money development today. We need to view digital money as a technical framework with an open-minded and tolerant attitude.”
It was the first time digital currency played a formal role at a high-profile Chinese event, with its own dedicated track named “Digital Currency: From Information Network to Value Network”.
The comments make Wu one of the highest-ranking Chinese officials to speak publicly about bitcoin, and likely the first to have discussed cryptocurrencies at length in such a setting.
In April, central bank governor Zhou Xiaochuan stated that the bank did not intend to ‘ban’ bitcoin. In other unconfirmed comments, Xu Nuojin, deputy head of the PBOC’s Statistics and Analysis Department, described bitcoin as a “kind of folk currency”.
Coexistence with fiat, but no threat
According to translations posted on Bitcoin Talk and news site Bitell, Wu claimed that currency competition was a normal and inevitable phenomenon in human society. Whether digital currencies have the ability to become widely-used mainly depends on their acceptance, the recognition of industry participants and stable pricing, she said.
Digital currencies, while they could co-exist with other forms of money, fiat currencies remain a key factor in national sovereignty and would not be challenged by any private money system.
Cryptocurrencies solve the trust issue, she added, but they miss a supply-demand mechanism that is required to meet economic demand and avoid price volatility.
Though Wu said digital currencies were unlikely to make effective daily currencies, she said they could function as financial products or assets and provide key technological benefits to users.
“We can utilize the Internet’s open-source distributed information technology to publicize digital currency, achieving value transmission in a low-cost and high-efficiency way.”
Like other government officials worldwide, Wu also referred to issues regarding international money transfers, including money laundering and traceability.
She said she foresees a future where multiple settlement protocols will co-exist, adding that using technology to build a decentralized value transfer network is an idea that deserves further consideration.
Chinese industry represented
Also invited to speak on digital currencies at the event was Leon Li, CEO of major Chinese trading platform Huobi.
Sharing facts and statistics from his time in the industry, Li took the opportunity to inform attendees of the history and nature of bitcoin, as well as the development and status quo of the bitcoin industry in China.
Bitcoin’s history and development mirrored that of the early Internet, he said.
Comparing China’s situation to that of the rest of the world, other countries have more user and merchant adoption, while mining and trading are strong in China.
Li examined the regulatory and tax approaches in the US, UK and Japan, compared to China. While the US has not explicitly prohibited banks from working with bitcoin businesses, many banks remain reluctant to work with them.
“There are two possibilities for the future development of cryptocurrency: it will either become a lower-cost channel of value transfer within the existing centralized financial system, or it will evolve into an entirely new financial system altogether, one that is lower-cost, more efficient, decentralized, and operates in parallel with the traditional system.”
Private ownership and use of bitcoin is legal in all major countries, he noted, and there are no indications of prohibition coming.
China’s bitcoin year
The news comes at the end of a year that has seen Chinese authorities show everything from veiled hostility to seeming indifference towards bitcoin, as its value continued to slide.
Earlier this year, Chinese banks closed accounts attached to bitcoin businesses, and in May exchanges withdrew at the last minute from the country’s first bitcoin conference in Beijing. Local media were also conspicuously absent from the event.
Since then, however, exchanges have been allowed to operate as normal and expand into new areas without interference, while a second conference in Shanghai in September raised controversy only over its remote location.
In a further display of China’s warming climate, the nation’s largest portal site Baidu has added a bitcoin index to its list of services, with regular price updates.