Chinese Official Admits Challenges with Crypto Ban, Seeks Clarification

A ranking Chinese official has admitted the difficulties in imposing a total ban on cryptocurrencies, citing the profound implications of digital money for the global financial system.

A ranking Chinese official on Monday admitted the challenge of completely banning cryptocurrencies as he recognized the profound impact of the new asset class on the economy while seeking clarification of "some vague concepts" to explore the connotation of digital currencies.

Yang Tao, an assistant at the Institute of Finance, Chinese Academy of Social Sciences, explored the potential of digital currencies and their implications for the existing global financial and monetary systems in an article for the Chinese Communist Party’s official newspaper, The People’s.

Yang stated in his piece:

“Both the traditional ‘private currency’ and the new ‘private currency’ similar to Bitcoin have affected the “monetary power” of the monetary authorities of various countries. However, from a technical point of view, it is difficult to achieve a complete ban on digital currency.”

Part of the challenge lies in some countries being focused on “bottom line supervision” as well as protecting investors from possible criminal acts and fraudulent transactions such as market manipulation and money laundering.

Yang also questioned the current debate about cryptocurrencies, with some branding them as commodities and others as currencies. He said digital assets would have an impact on the way money could be transferred.

 “From a narrow perspective, digital currency represented by Bitcoin has its own ‘monetary attributes’ that are more often regarded as special assets or commodities. Therefore, its actual impact is often not on the monetary level, but on financial markets,” he wrote.

But from a broader perspective, Yang said that electronic currencies have the most profound impact on the existing monetary system because they have a direct effect on the "statistical category of the money supply," as well as the transmission mechanism of currencies and the efficiency of settlements and payments.

China bans all crypto activities

All cryptocurrency-related activities were halted in China in February this year as the government ordered a sweeping crackdown on digital currencies and restricted technologies involved in cryptocurrency trading.

The move followed the shutdown of all cryptocurrency exchanges in the country in September last year. Financial News, a local publication affiliated with the People's Bank of China, wrote:

"To prevent financial risks, China will step up measures to remove any onshore or offshore platforms related to virtual currency trading or ICOs.”