People's Bank of China

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People's Bank of China
Peoples Bank of China logo small.png
Founded 1948
Headquarters Beijng, China
Key People Zhou Xiaochuan, Governor
Products China's central bank
Website PBC Homepage

The People’s Bank of China ("PBOC") is China's central bank. As a key member of the Multi-Agency Task Force on Internet Finance of China, the People's Bank of China plays an influential role in cryptocurrency regulation in China.

Cryptocurrency ban

The PBOC restricted Chinese banks' business with bitcoin on December 5, 2013. In its statement at the time the PBOC said, “Currently, the public lacks sufficient understanding of Bitcoin, and some individuals have been caught up by faddishness or a speculative mentality in holding, using and trading in Bitcoins."[1]

In conjunction with one of the task force's first concerted actions, PBOC forbade cryptocurrency trading platforms from operating in China in the autumn of 2017, closing 13 platforms for initial coin offerings (ICOs) and 10 cryptocurrency trading platforms during the crackdown.[2]

When financial authorities in China renewed their campaign against cryptocurrency platforms in August 2018, an adviser to the PBOC wrote that bitcoin transactions should be regulated and that ICOs would continue to be banned there.[3]

On November 22, 2019, the Shanghai office of the PBOC, along with local financial regulatory authorities, announced a crackdown on cryptocurrency businesses.[4] The previous day, The Block Crypto had reported that Binance's local office had been visited by police and closed.[5]

State-backed cryptocurrency

PBOC Vice Governor Fan Yifei said the PBOC was not only trying to supervise private digital currencies but also to develop its own digital money. Providing a guest view to Bloomberg in late August 2016 Fan wrote, "With internet access increasing and encryption technology improving, the conditions are ripe for digital currencies, which can reduce operating costs, increase efficiency and enable a wide range of new applications." Fan had earlier told Chinese news agency Caixin that the PBOC's goal in issuing a digital currency would be to lower the costs of supplying money to the economy. [6]

Governor Zhou Xiaochuan of the PBOC reportedly told a press conference on March 6, 2018 that digital currency is "technologically inevitable" and further stated, "We also pay high attention to the application of technologies like blockchain and distributed ledger." The PBOC had already set up a research project but Zhou indicated that it was not in a rush to develop its own digital currency.[7] Zhou also reiterated, “We do not currently recognize Bitcoin and other digital currencies as a tool like paper money, coins and credit cards for retail payments. The banking system does not accept it.”[8]

In August 2019, multiple sources who had worked with the Chinese government told Forbes that seven or eight institutions in China would be issued a state-backed cryptocurrency that would be managed by the central bank of China. These institutions include the People's Bank of China, the China Construction Bank, the Industrial and Commercial Bank of China, the Agricultural Bank of China, Alibaba, Tencent, and Union Pay, as well as an eighth institution that was not named. According to the sources, it had been "ready" since 2018, and would launch as soon as November 11, 2019 - a Chinese holiday known as Singles Day, the busiest shopping day of the year in China.[9]

A research report published on August 29 by Binance said that the digital asset will likely follow a two-tiered system; in the first tier, the PBoC will issue the digital currency to commercial banks. In the second tier, commercial banks would allow individuals to withdraw funds in the form of the digital currency and spend them at businesses in China. This virtual currency would not be designed to replace PBoC funds, the report said; rather, it will seek to eliminate yuan notes and coins from circulation within the country.[10][11]

On April 3, 2020, in a teleconference regarding recent bank activities on gold, silver and cash security, the PBOC reaffirmed its intentions to "unswervingly advance the research and development of legal digital currency" (Google translation).[12][13]

In April 2021, Bloomberg reported that U.S. President Joe Biden's administration had begun increasing its efforts to understand the potential threat of the PBOC's digital yuan, also called the e-CNY. According to a report by the U.S. Director of National Intelligence the extent of the e-CNY's threat to the sovereignty of the U.S. dollar, as well as its ability to circumvent U.S. sanctions, “will depend on the regulatory rules that are established.”[14]

Despite the Biden administration's scrutiny Kazushige Kamiyama, head of the Bank of Japan’s payment systems department and the head of the bank's efforts to create a Japanese digital currency, said that month that "the dollar’s status as the key global currency won’t change so easily...In fact, the dollar’s advantage may strengthen further if the U.S. goes with digitalization.”[15]

References