PBOC Official On Sovereignty, Bitcoin, And How The Internet Age Will Change China And The World

Caleb Chen @bitxbitxbitcoin
July 7, 2014

The 中国互联网金融论坛 (China Internet Finance Forum) was held in Beijing on June 19th, 2014. In his keynote speech, Xu Nuojin, of the PBOC’s Survey and Statistics Department, talked about sovereignty, Bitcoin, and the Internet age. He expressed hope that the new generation in China would be the one to seize the opportunities presented by Internet Finance in the Internet age, chief among these opportunities is none other than Bitcoin. Currently, the PBOC has advised all banks and financial institutions within China that they are not allowed to handle Bitcoin or Litecoin, a step recently imitated by the European Banking Authority. Despite the lack of established financial institution participationInterestingly, just one border away, in Hong Kong, the Bitcoin community is thriving much more in the open with banks willing to operate with compliant Bitcoin businesses.


Xu has been evolving his speech on Internet Finance for many months now. On March 28th, Xu spoke at the 互联网金融大会 (Internet Finance Conference). There, he highlighted nine reasons that internet finance was going to change China. Weeks later, in April, the PBOC restated their intentions to all banks in China: Close accounts related to the use of Bitcoin or Litecoin. Even then, the PBOC’s governor stated that the “PBOC will not ban Bitcoin.” As a result, three Chinese Bitcoin exchanges closed their doors for good in early May. Larger and more established Chinese Bitcoin exchanges such as BTC China, OKCoin, and Huobi, merely changed their deposit methods, yet again. Chinese Bitcoiners have proven their tenacity time and time again, something that Xu Nuojin seems to have taken note of.

Zu Nuojin

At the China Internet Finance Forum, Xu Nuojin delivered the keynote speech, highlighting ten impacts of Internet Finance. The Bitcoin mention comes in point three, full text of point three is provided by btc38.com:


第三,冲击货币金融主权的概念。现在的货币都带上了国家主权的烙印。即使你口袋里装的是美元,也是代表美国政府,或者是美国美联储银行对你的负债。即使是美元在全世界流通,但其他国家也有限制它的权力。美元的这种发展形态也预示着互联网金融时代的电子货币行使货币职能,比如比特币。前段时间,比特币经历了低潮,现在又在慢慢复苏。因为这种货币在互联上有其生存的空间和必要。如果未来的互联网上只能流通人民币(6.2268, -0.0037, -0.06%), 这个做不到,而且也没有必要。再比如说金融服务,在互联网上可以向地球上另一个地方的人提供金融服务。在未来,货币金融的主权概念是大大突破的,比特币是有存在空间的。比特币是一种货币,但不是我们现实中的法定货币,各个政府可以接受,也可以限制。因为我们是主权国家,经济主权主要体现在货币主权方面。未来,在互联网时代,各国之间会慢慢放松主权的管制,淡化主权的概念。

Xu Nuojin:

Third, is the impact on monetary and financial sovereignty. Modern day currencies come from monetarily sovereign nations. If your pocket is filled with USD, what you really have is a representation of the US Government’s, or the US Federal Reserve’s obligation to you. Even if only USD were circulating around the world, other countries would still limit its use. The growth of this type of USD power has heralded the development monetary functions designed for the world of Internet finance; for instance, Bitcoin. In the past, Bitcoin has experienced a downturn but is slowly recovering because this Internet money [Bitcoin] has found living space and necessity to feed off of. If somehow the future Internet only accepted RMB, this would not be feasible nor wanted. Another example of Internet finance is this, on the Internet you can provide financial services to people in an entirely different location on Earth. In the future, the concept of monetary or financial sovereignty will be broken through: Bitcoin has a lot of space to exist. Bitcoin is a sort of money, and though it is not currently accepted as legal tender, any government could accept Bitcoin then limit its use. Because we are a sovereign state, the economic sovereignty of the country is largely dependent on the monetary sovereignty. In the future, in the Internet generation, every country will slowly relax sovereign control and even dilute the concept of sovereignty.

The complete ten points are translated in summarized form by /u/KoKansei of /r/BitcoinMarkets *:

First will be the impact on traditional physical bank branches. This is because finance itself is already heavily virtual and is in essence a bookkeeping system which is responsible for recording debts and liabilities between people. The virtual nature of finance and the virtual nature of the Internet are capable of naturally integrating.

Second will be the impact on traditional concepts of time and space. In spatial terms, the Internet can be extended indefinitely. In temporal terms, Internet financial services are not limited in any way and can operate 24 x 7. The goal of obtaining or providing financial services can be attained at any time and in any place, using any method.

Third is the impact on the concept of monetary and financial sovereignty. In the future, there will be large breakthroughs in the concept of monetary and financial sovereignty and there is space for Bitcoin to exist.

Fourth, Internet banking will bring about an overall decline in interest rates. Internet banking can reduce costs significantly, including risk-related and information costs which will be greatly reduced; at the same time, information available on the Internet will correspondingly improve.

Fifth, risk management constraints will be broken through, greatly expanding the financial services space. The core of finance lies in how to control risks. The Internet can help us improve our ability to control risk as massive amounts of information can be used to understand people’s credit and find credit-worthy customers using the Internet space. Why is Yu’ebao* a great resource? Because they have an enormous amount of information on businesses, including clearly laid out information on shipping, finance, trading, and transfers.

Sixth is the impact on existing rules and regulations. When you sign up for a credit card, you need to go in person and sign the paperwork and in order to complete a [credit card] transaction you need to go to the cashier in person.** When you enter the field of Internet transactions, many of these rules and regulations appear to be outdated.

Seventh is the impact of the current financial situation which has resulted in the rise of financial giants in the Internet age. The age of Internet finance may very well spawn financial giants; for example, an internet company like Sina could become a financial giant. It is also possible that China’s big four banks (ICBC, ABC, BOC and CCB) may combine with one such giant to form a new financial giant.

Eighth is the impact on the current state of specialized operations and industry restrictions resulting in a closer merger between the financial world and the physical world.

Ninth, traditional strategies for competing in the financial space will be completely changed, achieving true integration between the notions of “customer first” and product marketing as well as private tailoring and public services.

Tenth and finally, Internet finance will have an impact on traditional concepts of financial regulation.

* Translator’s Note (1): Yu’ebao is a product integrated with AliPay (Chinese: Zhifubao, created by the Alibaba Group) that allows users to use their AliPay balance to invest and take advantage of other financial services typically associated with a bank or broker. Think using your PayPal balance to buy annuities or having the ability to put your PayPal balance in a money market fund.

** Translator’s Note (2): In China, it is generally not possible to make online purchases using a credit card like in the U.S. Online bank transfers or the use of third party “PayPal-like” services like AliPay are preferred.

Should You Throw BRICs In A Glass House?

BRICs refers to Brazil, Russia, India, and China, four sovereign nations in similar stages of advanced economic development (Catch-up, whence compared with the United States). While the opinion above is likely to be that of Xu Nuoji’s and not the PBOC’s or the Chinese Government’s at large, the fact that no visible backlash has occurred in the last few weeks is a something in and of itself. In March, Zhang Niannian, a PBOC manager, posted anti-Bitcoin sentiments to his personal blog. Within days, Zhang clarified in public that he was but an observer and that he was “Definitely going to get told off on Monday.” Last week the Bank of Russia also signaled a new attitude towards Bitcoin in a much more officious manner. These events are small blips on the media’s radar; however, in the context of an impending currency war, anything anti-dollar will fly. The head of Russia’s central bank has made it clear:

“We are discussing with China and our BRICS partners the establishment of a system of multilateral swaps that will allow to transfer resources to one or another country, if needed. A part of the currency, reserves can be directed to [the new system].”

The USD is still the strongest currency in the world; however, according to ZeroHedge, the BRICs are morphing into an anti-dollar alliance… Hopefully, the re-shuffling of fiat currencies and the re-ranking of sovereign currencies and the nations which use them will not be settled by the massive military hardware behind fiat currency. The “Internet age” is coming: What does sovereignty mean to you?

Featured image by Shutterstock.

Last modified (UTC): July 8, 2014 10:28

Tags: pboc
Caleb Chen @bitxbitxbitcoin

Caleb is a graduate of the University of Virginia where he studied Economics, East Asian Studies, and Mathematics. He is currently pursuing his MSc in Digital Currency at the University of Nicosia.