China has gone from the proliferation of warnings to action. Any transaction in cryptocurrency is now illegal, rules the Central Bank. The pressure is on central banks to give birth to their own digital currency.
“Business activities related to virtual currencies are illegal financial activities,” China’s Central Bank said in an online statement. Offenders will be “the subject of an investigation for criminal liability in accordance with the law,” reads a text from Agence France-Presse (AFP).
The ban covers all financial activities affecting cryptocurrencies, such as trading in virtual currencies, selling tokens, transactions involving virtual currency derivatives, and fundraising. Over the years, “the trade and speculation surrounding bitcoin and other virtual currencies have become widespread, disrupting the economic and financial order, giving rise to money laundering, illegal fundraising, and fraud, pyramid schemes and other illegal and criminal activities ”, denounced the People’s Bank of China.
Through its central bank, Beijing is only tightening its austerity policy towards private digital currencies, after the 2013 ban on commercial banks to manage cryptocurrencies. This ban has been extended to mining activities, with many provinces not allowing the exploitation of cryptocurrency “mines” since the start of the year, AFP adds.
The Chinese government is thus trying to maintain its control over the financial system with, in parallel, the creation underway of a digital version of the yuan, thus conceding the inevitable advent of cryptocurrency in the payment system.
In the United States too, we are rather belligerent with regulators taking the path of confrontation. We denounce the use of currencies such as bitcoin for illicit purchases or fraud and the risks for the financial markets posed by the volatility of their price. Among others, Benoît Cœuré, director of the technological innovation center of the Bank for International Settlements (BIS) continues to insist that “we have clearly said that bitcoin does not meet the conditions to be considered as a means of payment. It is a speculative asset. Adding to this volatility is the constraint of limiting the number of simultaneous transactions.
Moreover, the central banks will defend a democratic control of the currency and not a private control for mercantile ends or profit. Free-market cryptocurrencies and stable digital currencies are private initiatives that meet profit imperatives, and they do not offer international coordination with societal objectives in mind, insists the BIS.
Nevertheless, central banks say they are still stunned by the proliferation of ” stablecoins »Backed by a currency or an asset, by the proliferation of decentralized platforms and by the growing action of technological giants in the financial system, which challenges the traditional banking model and financial intermediation. The “central bank of central banks” keeps reminding them that “the future is now”, urging them to accelerate the development of a central bank digital currency that would provide security, liquidity, integrity and integrity. confidence necessary for any currency constituting the heart of the payment system.
In a presentation published at the end of March, Agustín Cartens, Director General of the BRI, exposed its form. Essentially, he recalled that the current payment system involves bill clearing operations to settle transactions and then transfer liquidity, with a central bank playing the role of lender of last resort as its backbone. Its foreign exchange reserves thus take the form of a digital currency for the exclusive use of commercial banks, he had illustrated.
However, it is possible to integrate “tokenized” assets into this system and avoid this stage of intermediation. With a central bank digital currency, the transaction takes place in real time, directly on the institution’s balance sheet, Agustín Cartens explained. This has the effect of lowering the transaction cost and the credit risk. And to maintain the support of the system on a stable reserve of values which can be converted into cash at a fixed nominal value.
This concept of central bank digital currency has “come of age”, believes the BIS, seeing it as writing “a new chapter for the monetary system” and preserving “the essential characteristics of money that only central banks can guarantee ”.