By The Peoples Bank of China recently displayed their extreme confidence in the apparent eternal superiority that fiat currencies have over that of digital assets.
In a recently published 20 000- word research document, written by none other than, you guessed it – the PBoC, well their research wing at least, the Central Bank of China on many occasions on the document refused to acknowledge blockchain technology and all of its derivatives as catalysts for any sort of financial innovation to come in the near or far future.
Wow. No winning with these guys right? The PBoC, in their paper, stated that no technology would ever be able to disrupt the monetary system we’ve come to know over decades and they also believe that blockchain tech would not result in any true, substantial differences in the ways that traditional financial protocols currently operate.
Furthermore, they believe that blockchain assets such as Bitcoin and Ethereum would remain inflexible & without intrinsic value-credit collateral. The report, aptly named “What blockchain cannot do” reiterated the Chinese regulator’s anti-crypto beliefs all the while claiming to be an academic paper of sorts.
The report touches on a myriad of aspects which pertain to various cryptocurrency & blockchain innovations, all ranging from legality, regulatory processes and the practicalities and includes potential uses of dApps, tokens, smart contracts and consensus mechanisms.
Blockchain – A Utopian Fantasy:
The author of “What blockchain cannot do” goes by the name of Xu Zhong, director of the abovementioned PBoC research wing, specifically highlights certain irregularities in the many promises and potential advances found within blockchain technology by claiming that many of these technological uses for blockchain never truly yield any social benefits:
“In addition to the low physical performance of blockchains, the shortcomings of blockchain economic functions are also important reasons,” Zhong wrote. “It should be based on continuous research and experimentation. Rationally objectively assess what the blockchain can and cannot do.”
Furthermore, Zhong in his paper, went on to describe blockchain and blockchain technologies a “Utopian Fantasy” which paints a picture of a stable and perfect financial ecosystem. The paper questions many of the pros of decentralization claiming that blockchain innovations are impractical and idealistic adding that the notion of replacing the current tradition fiat models with new technologies in the hopes of replacing institutions & trust would be an almost impossible feat, especially since, currently, blockchain researchers are still figuring out ways to make the tech more scalable.
Rome wasn’t built in a day and nor was the current fiat system we say. However, the PBoC paper also acknowledges the fact that blockchain could, for the most part, be a cog for improving the current fiat model to a certain extent, but never will fix or replace it completely.
Schemes, Bubbles & Fraud:
We all know, that to date, China has seen it’s fair share of ICO fraud, Ponzi schemes & illicit activities related to trading and of course money laundering.
Zhong and the PBoC paper touches upon these issues, advising the Chinese government to begin taking the proper steps in the defining of legal & illegal unauthorized uses of blockchain technologies but failed to offer any concrete ideas or insights into a solution for the proper guidelines which could be created in order to maximize the use of ledger technology without exposing users to any risks presently found within the realm of blockchain.
As we already know, the Central Bank under their jurisdictional rights have already issued a blanket ban on the use of cryptocurrencies such as Bitcoin while allowing the blockchain industry to develop in China with many of the PBoCs very own DLT projects currently in development, including the rollout of a new national digital currency, their version of Bitcoin-esque Chinese Yuan.
Why blockchain technologies and not cryptocurrencies presently found? Could the creation of a Yuan-backed token be the government’s way of dipping their toes in the crypto pond? Let us know your thoughts by commenting below.
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