Banks around the world, particularly in Asia, have, over the years, realized the changing currents in financial technology, and as such many have begun to consult the likes of Ripple Labs in an effort to integrate 21st century solutions into their 19th century models. Asian banks in particular have been on the move, as CCN reported earlier this year.
However, a counselor/executive at one of the largest banks in Asia, the central bank of China or People’s Bank of China, believes that all this movement toward the blockchain, “virtual”/crypto/digital currencies could potentially be dangerous. Sheng Songcheng gave an interview to Yicai Global this month in which he said that Bitcoin is “not money, in essence” and that it could destroy a national economy if it were attempted to be used as a national currency. Most experts agree on the last point, but Songcheng went much further in his demonstration of abject arrogance.
An excerpt reads:
Bitcoin is a string of code generated through a complex algorithm, and does not have inherent value, Sheng said. Being virtual is the most salient characteristic among virtual monies, and whether bitcoin can serve as a medium of value exchange completely depends on trust in it, he said. Virtual currencies have technical value and are therefore an asset, he said. […] “Project financing based on a volatile virtual money also entails risks.”
The interview nowhere mentions native Chinese cryptocurrency platforms such as NEO, but certainly, the Chinese Ethereum equivalent will be subject to any influence Shengcheng can wield.
Shengcheng also believes that the deflationary nature of Bitcoin and other cryptocurrencies (he didn’t appear to realize that not all cryptocurrencies are deflationary – some are very inflationary) would make it logistically difficult or impossible to implement as a national currency.
Perhaps Sheng’s viewpoint is purely that of a central banker whose role is to control the money supply in a large-scale economy, but making such statements without proper background borders on malicious. For instance, using cryptocurrencies to fund and invest in projects often works out much better for both parties, as experienced traders are able to capitalize on the volatility he decries. He neglects to note that in real terms investing with the Yuan will not be much more “stable” on a global scale – you may, in fact, get more mileage with your currency by using something which can be instantly deposited on the other side of the world without exchequer fees, duties, and the like. The opportunity cost of fiat investments becomes more evident by the day – cryptocurrency investors and traders are on an entirely new level in terms of how quickly they can realize massive profits purely based on technological means.
As a communist, Sheng should appreciate the global nature of cryptocurrencies, which enable people and states anywhere to access the global economy without permission. It would seem to mesh well with certain parts of his philosophy that enabling instant access to better means of production, more affordable resources, and so forth, is a by-product of cryptocurrency innovation and development.
The world order of the future very much depends on the central banks of today and how they respond to disruptive financial technology, and central bankers from China to the United States to Russia still seem to be planning to fail by failing to plan, instead wielding their considerable influence to denigrate and discredit – a telling tactic indeed.
Featured image from Shutterstock.