China Economy

China's central bank is 'quite worried' about global risks from some digital currencies

Key Points
  • The central bank is "quite worried" about global financial risks from digital currencies, particularly so-called stablecoins, Fan Yifei, a deputy governor of the People's Bank of China, told reporters Thursday in Mandarin, according to a CNBC translation.
  • Fan added the central bank's invite-only test of the digital yuan now has more than 10 million users.
  • Separately, Fan said the PBoC will apply measures it took on Ant Group to other entities in the payment services market.
A customer makes a payment using China's digital currency, or e-CNY, at Wangfujing Department Store on February 11, 2021 in Beijing, China.
VCG | Visual China Group | Getty Images

BEIJING — China's central bank is "quite worried" about risks to the global financial system from privately developed digital currencies, particularly so-called global stablecoins.

These digital currencies are tied to a fixed value, such as a government-backed currency like the U.S. dollar. One popular example is Tether, which has raised concerns in the U.S. government and ranks third in market capitalization behind well-known cryptocurrencies bitcoin and ethereum.

"Some commercial organizations' so-called stablecoins, especially global stablecoins, may bring risks and challenges to the international monetary system, and payments and settlement system, etc.," Fan Yifei, a deputy governor of the People's Bank of China, told reporters Thursday in Mandarin, according to a CNBC translation.

"We are still quite worried about this issue, so we have taken some measures," Fan said.

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On Tuesday, the central bank's business development arm and Beijing city authorities ordered a local company to shut down on allegations it provided software services for cryptocurrency transactions.

The move followed a national-level call in late May to crack down on bitcoin mining and transactions, which has sent miners looking to move operations to the U.S. and other countries. Mining is the energy-intensive computer process for facilitating bitcoin transactions. Operators can get bitcoin as a reward.

Since bitcoin's launch in 2009 as the first application of blockchain technology, the digital currency has seen cycles of interest, with the latest wave sending it briefly above $60,000 earlier this year. Bitcoin traded near $33,000 on Thursday.

"These (digital) currencies have themselves become speculation tools," Fan said, adding there are potential threats to "financial security and social stability."

He noted that his work at the central bank included digital currencies. The PBoC is developing a digital version of the Chinese yuan, which has been tested in several parts of the country in the last year.

So far, the invite-only digital yuan system has more than 10 million users, Fan said.

In contrast with bitcoin's decentralized system, the PBoC's digital yuan is controlled by the central bank.

Scrutiny on payments doesn't end with Ant

However, the more immediate challenge to the PBoC's control of currency transactions has been the rise of bank account-linked mobile payments in China. In the last several years, apps run by Alibaba-affiliate Ant Group and Tencent's WeChat have become the dominant forms of payment in the country, replacing cash.

Regulators abruptly suspended Ant's massive IPO last fall, and the central bank forced the company — which portrayed itself as a financial technology player — to restructure as a financial holding company.

The PBoC will apply measures it took on Ant to other entities in the payment services market, Fan said Thursday in response to a separate question, speaking generally of efforts to counter monopolistic practices.

The speed of development in payment systems is "very alarming" and the central bank is working against monopolies and "disorderly expansion of capital," Fan said.