China Calls Bitcoin An 'Investment Alternative' — Why The Move Is Significant
What Happened: “We regard Bitcoin and stablecoin as crypto assets … These are investment alternatives,” Li Bo, deputy governor of the People’s Bank of China (PBOC), was quoted by the report as saying during a panel hosted by CNBC at the Boao Forum for Asia.
The comments mark a potential shift in tone by China, which cracked down on crypto issuance and trading in 2017 amid concerns about the risks to financial stability. The Chinese central bank banned initial coin offerings and also shut down Bitcoin exchanges.
Prior to the ban, China was one of the largest buyers of Bitcoin in the world. A significant portion of worldwide Bitcoin mining is still done in China’s Xinjiang region.
Li also reportedly said the PBOC will continue to maintain the current regulations on cryptocurrencies. He added that some kind of regulatory requirement is needed for crypto assets to prevent “the speculation of such assets to create serious financial stability risks.”
Why It Matters: The shift in tone by China assumes significance amid the renewed excitement surrounding cryptocurrencies that has been partly fueled by cryptocurrency exchange Coinbase Global Inc. (NASDAQ:COIN) making its high-flying debut on the Nasdaq stock exchange last week.
The world’s two largest cryptocurrencies by market capitalization — Bitcoin and Ethereum (ETH) — hit new all-time highs recently. Bitcoin touched a never-before-seen level of $64,863.10 last Wednesday and Ethereum hit an all-time high on Friday of $2,547.56, before retreating significantly. Bitcoin is down about 0.4% in the last 24 hours and is trading at $57,154.76 at press time.
See also: Is Bitcoin a Good Investment?
A growing number of financial firms and companies, including Goldman Sachs Group Inc. (NYSE:GS) and JPMorgan Chase & Co. (NYSE:JPM), are embracing cryptocurrencies. Companies such as Tesla Inc. (NASDAQ:TSLA) and Jack Dorsey-led Square Inc. (NYSE:SQ) have also invested in Bitcoin.
China is reportedly working on its own digital currency called the digital yuan and is now testing it in major cities across the country. The digital currency, to be issued by the PBOC, is intended to replace the cash and coins in circulation.
China is said to be planning to put the digital currency into use at the 2022 Winter Olympic Games in Beijing.
© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.