Bitcoin ‘not accepted’ as legitimate payment tool in China: central bank governor

China does not recognize Bitcoin and other virtual currencies as legitimate tools like paper money, coins and credit cards for retail payment, Zhou Xiaochuan, the governor of the People’s Bank of China, told a recent press conference.

Zhou Xiaochuan, governor of the People’s Bank of China, fields questions at a press conference on the sidelines of the first session of the 13th National People’s Congress in Beijing, capital of China. (Photo by Zhang Qichuan from People’s Daily Online)

“The banking system does not accept it,” Zhou said at a press conference on the sidelines of the annual session of the National People’s Congress, adding that direct trading between Bitcoin and yuan is not supported by the central bank.

“We don’t like speculative cryptocurrency products since it is not a good thing to give people an illusion of getting rich overnight,” the governor said.

Zhou’s statement came as Chinese authorities, including the People’s Bank of China, have taken a string of steps in recent years to clamp down on cryptocurrency market.

Chinese officials said that Bitcoin’s downward trend has been accelerated after China ordered a ban on initial coin offerings and continued its crackdown on a series of domestic and foreign trading platforms for digital currencies.

A rapid expansion of the blockchain and distributed ledger may exert a big negative impact on consumers, Zhou warned, adding that it could also bring some unpredictable effects on financial stability and monetary policy transmission.

He pointed out that the development of a digital currency should be a prudent and cautious process, and those promising products also need to be watched, tested and verified before being launched in market.

Any virtual currency, according to him, must focus on convenience, rapidity and low cost in a retail payment system while taking into account security and protection of privacy. They should also not conflict with the current financial order, Zhou added.

A Russian investor posts an online photo of an alleged Bitcoin mine. (Photo: Huanqiu.com)

The central bank is now working with industry insiders to research digital currency and electronic payment, he said, adding that tests will be made if the research project makes certain progress.

A seminar on cryptocurrency was hosted by the bank in January 2016, and a research institute of digital currency under the bank was set up 10 months later.

Warning of the risks in the current cryptocurrency market, Zhou said research in the field now mainly focuses on get-rich quick schemes, which has veered off the original goal of using digital currency for retail payment.

“If nobody accepts the technology for payment then the value would be 0,” a Morgan Stanley analyst noted in a report released in December.

The financial services firm also said in a previous report that five online merchants out of the world’s top 500 e-commerce merchants accepted Bitcoin in 2016, but that figure shrank to three in 2017.