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Former PBOC Governor Denounces Cryptocurrencies As “No Longer Suitable” For Payments

Former PBOC Governor Denounces Cryptocurrencies As “No Longer Suitable” For Payments

Zhou Xiaochuan, the former Governor of the People’s Bank of China (PBOC) spoke at length in the Lujiazui Forum on the hot button topic of cryptocurrencies, saying that cryptos might have missed their opportunity to return to the payment field and are no longer suitable as a payment mode.

Zhou Xiaochuan Picks Holes In Cryptocurrency Design

Leading Chinese crypto-journalist Colin Wu reported on Zhou Xiachuan’s speech on cryptocurrencies at the Lujiazui Forum. In the speech, the former PBOC Governor stated that there are still several shortcomings in the early stages of several cryptos. For example, he talks about TPS (transactions per second) not being high enough. He also points out how much network resources and processing capabilities get used up during these transactions. He also talks about decentralization leading to deregulation, which will be controversial in the long run. 

Xiaochuan: Cryptos Lost Their Utility As Payment Tokens 

Xiaochuan believes that in order to become a valuable tool for the real economy, cryptocurrencies will need to contribute further in the payment field. According to him, some cryptocurrency participants see it as a means of making quick money and will turn cryptocurrency into digital assets. Therefore, Xiaochuan believes that cryptos may have lost their utility as a payment token and may not be accepted by everyone. He stated, 

“Some cryptocurrencies have gradually separated from the payment industry and become purely digital assets...We must figure out whether these will help the development of financial technology to serve the real economy.”

A Zero-Sum Game: Governor Compares Crypto To Casino

According to Zhou Xiaochuan, the current cryptocurrency is a zero-sum game, which means that one can only earn money if other investors lose money, which is a concept similar to gambling. For example, in a casino table, winning money means that somebody else is losing money. 

This is why Xiaochuan believes that the innovations happening in cryptocurrency are not geared towards serving the actual economy of a nation. He states, 

“If you can provide important services to the real economy, we will invest more resources to carry out research and development.”

Similar Sentiments From Former Bank of China Deputy Governor

This speech comes close on the heels of former Bank of China Deputy Governor Wang Yongli’s criticism of the legalization of Bitcoin in El Salvador. Earlier this week, the Salvadorean Congress voted to grant legal tender status to Bitcoin and became the first nation in the world to do so. He believes that as a small country dependent on the USD, El Salvador is making this move in a rushed bid to rid itself of that dependency. He stated, 

“El Salvador and other countries that lack sovereign currencies lack the most basic understanding of currency. Using Bitcoin as legal tender can only seek a dead end.”

Even though Chinese crypto heavyweights like Colin Wu and Jihan Wu have reasoned against Yongli’s comments, it is interesting to note that these Chinese government officials are not joining the crypto craze. 

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.