Zhu Guangyao’s recent speech at the 2024 PBC Economists Forum held at Tsinghua has highlighted the need for a new perspective on cryptocurrencies in China.
China’s former vice finance minister Zhu Guangyao has called for a shift in the country’s policy towards cryptocurrencies, reflecting the evolution of the global digital economy and stressing the importance of adapting to emerging trends to remain economically competitive against other nations.
Zhu, with his experience as a former vice finance minister, has recognized the risks inherent in digital assets. However, he has also seen the enormous potential of cryptocurrencies to innovate and strengthen the economy. With his pragmatic approach, Zhu is suggesting the country conduct careful study to foster a deep understanding of cryptocurrencies, with the aim of creating a more informed and favorable regulatory framework that will benefit the country in the long run.
The challenges and opportunities of cryptocurrencies
According to financial channel Sina Finance, Zhu was not quick to ignore the dangers that cryptocurrencies can pose to financial markets. In his speech, acknowledged that these digital assets can have a negative impact, especially because they can be used to carry out certain illicit activities. However, the former deputy minister urged policymakers not to underestimate the importance of cryptocurrencies and digital assets in the current economic context.
Zhu noted that for more than a decade, the United States has viewed cryptocurrencies as a significant threat. This approach has been based on the inherent volatility of these digital assets in the market, which can disrupt international financial markets. However, he also argued that it is essential to study trends and changes in global policies to adapt to an ever-evolving digital economy.
Changes in US policy spark China's interest
A crucial point in Zhu’s intervention was the recent evolution of U.S. policy toward cryptocurrencies. This year, former President Donald Trump included cryptocurrency in his campaign platform, suggesting that the country must embrace the technology to avoid being overtaken by nations like China.
In addition, the US Securities and Exchange Commission (SEC) has taken a major step by approving the listing of several Bitcoin and Ethereum exchange-traded funds (ETFs). The SEC also suggested that banks can offer cryptocurrency custody services without having to apply the SAB121 regulations, which marks a significant change in the acceptance of cryptocurrencies in the traditional financial system.
Zhu stressed that these changes in US policy could have profound implications for the global cryptocurrency landscape. The US's openness towards these digital assets could encourage other countries to reconsider their own policies, which in turn could influence China's competitiveness in the digital arena.
The role of BRICS in the digital economy
Zhu's intervention also emphasized the importance of emerging markets and the BRICS nations, which are comprised of Brazil, Russia, India, China and South Africa, in adopting cryptocurrencies. Countries such as Russia, South Africa, Brazil and India have begun integrating cryptocurrencies into their financial systems, which could have a significant impact on the balance of power in the global digital economy.
For example, Russia has implemented legislation that allows the central bank to oversee the cryptocurrency sector. It has also authorized the Legal Bitcoin Mining, while South Africa and Brazil are exploring ways to regulate and encourage the use of digital assets.
Zhu argued that if China does not stay informed and proactive in this emerging sector, it could lose its competitive position in the digital economy.
Crypto industry evolves in China despite restrictions
On the other hand, despite restrictions imposed in the past, such as the ban on Bitcoin mining and cryptocurrency transactions, the crypto industry has found ways to adapt and continue operating in the country.
The persistence of cryptocurrency operations on decentralized platforms and the dominance of Chinese mining pools in the global hashrate are examples of how, despite bans, the technology continues to evolve. In April, ESG analyst and CH4 Capital co-founder Daniel Batten highlighted that bitcoin mining in China was not dead and that many of the miners based in the country were moving towards greener practices to keep their operations more efficient.
In this context, where many nations around the world are engaging in in-depth studies of blockchain technology and the cryptocurrency industry, Zhu Guangyao’s speech at the PBC Chief Economists Forum at Tsinghua highlights a paradigm shift in the way China might approach cryptocurrencies.
Recognizing both the risks and opportunities they present, Zhu is advocating for a more balanced approach that will allow the country to not only adapt to global changes but also lead in the digital economy arena. The growing importance of cryptocurrencies in today’s world demands that China reevaluate its stance and prepare for a future where digital assets will play a crucial role.
