That’s a question we now might begin to ask following an implicit and very subtle criticism of PBOC’s approach towards cryptocurrencies.
Tao Yang, Assistant to the Institute of Finance at China’s Academy of Social Sciences, has penned an editorial for China’s People’s Daily, the official state paper, where he argues according to a rough translation:
“From a technical point of view, it is difficult to achieve a complete ban on digital currencies, and countries are more focused on the bottom line supervision and investor protection in transactions, such as anti-money laundering and market manipulation.”
Without mentioning government policy and in an apparent over-view of a general global approach, Yang nonetheless throws a subtle criticism:
“The existing monetary and financial systems are not naturally evolving, but are the inevitable result of legal restrictions or government regulations. Although there are many flaws in the encrypted digital currency, it is also a valuable experiment.”
Yang says digital currencies are not necessarily money, highlighting their different approaches. He points out to Venezuela’s Petro which is more of digitally issued government debt, he says.
“If there are too many price fluctuations, speculation, deflation restrictions, etc., encrypted digital currency can not really fall in the payment function, you can only get farther away from the ‘money experiment’, or become a certain kind of special ‘digital assets,'” he says.
Addressing head on the suggestion that cryptos might directly threaten government’s control over money, Yang says:
“Digital currency represented by Bitcoin has its own ‘monetary attributes’ that are not prominent and are more often regarded as special assets or commodities. Therefore, its actual impact is often not on the monetary level, but on financial markets.”
China stands out as the only country of relevance and size to ban crypto-exchanges and to fully ban Initial Coin Offerings (ICOs) in a somewhat chaotically enacted policy last year.
That isolated the country from the digital revolution, with bitcoin’s price doubling since their decision even taking into account a 75% fall from its all-time high.
It is unclear however whether they can maintain this policy as they are in effect cutting cultural links too, to their own detriment, while blockading themselves from an exceptional level of talent and innovation found in this space.
While the end results do appear to be ineffective as a boom in South Korea’s trading volumes coincided with China’s policy enactment, suggesting leakage through probable loopholes.
More generally, China’s decision has global ramifications especially as far as Shenzhen is concerned, which is at the center of the maker movement that showcases grassroots hardware innovations.
Their mastery of hardware, as they produce most of the computers, phones, etc, makes it a hot-spot for a potential marriage of IoT and smart contracts with the aim of in effect automating machines.
Yet, as the brains are in the west while the hands are in China, their isolating of blockchain talent might mean other nations need to either stop the blockade or bring back hardware manufacturing home so that home grown hardware talent can then innovate with blockchain tech and potentially create the newest steam engine, or electricity, or whatever it may be.