China's crypto ban aims to eliminate competition with digital yuan: Expert
Digital yuan and currency control to give Beijing total vision over population's financial transactions, says David Lesperance
China's latest regulations on cryptocurrencies aim to eliminate competition with Beijing's new digital currency, the digital yuan, an expert told Anadolu Agency on Friday.
"Making cryptocurrency transactions in China illegal is a much anticipated move to eliminate any potential competition to the government's new incoming sovereign digital currency," David Lesperance, managing director of international tax and immigration advisory firm Lesperance & Associates, said via email.
"The digital yuan is part of an all-encompassing series of actions by the Chinese government to have complete control over the lives of its citizens," he said.
China's central bank, the People's Bank of China, announced last week that it will tighten regulations on cryptocurrency activities, including trading and mining, as the government intensifies its crackdown on digital coins.
Its regulations on the crypto market include prohibiting trading, token issuance and crypto derivatives, considering overseas crypto exchanges, which offer services to domestic residents in China, an illegal activity, and banning financial institutions, non-bank payment companies and internet firms from facilitating crypto trading.
Lesperance argued that China wants to have complete control over its population, and the digital yuan, combined with currency control in China, will give Beijing total vision over the population and all their financial transactions.
What can Chinese users do?
After Beijing tightening regulations, cryptocurrency holders in China have some options – they can either get their crypto assets outside of the country or wait for the government to offer a swap for their crypto assets in exchange for digital yuan.
"China's crypto ban will effectively divide that country's crypto currencies holders," Lesperance said.
He argued that a group of crypto investors in China will act to get their crypto assets and themselves an escape plan to avoid the complete control of the government, while another group will be under the scrutiny of the government unless they act.
Another hot topic in the crypto market lately is whether central banks around the world will issue their own digital currencies like the People's Bank of China.
"All of the world's monies and assets will be digitalized. Old paper-based solutions are not fit for a digital world, and central bank fiat currencies are no exception to this. Every central bank will be creating its own digital version of its fiat currency over the coming years," Matthew Le Merle, managing partner of San Francisco-based venture capital firm Blockchain Coinvestors, which invests in blockchain companies, told Anadolu Agency by email.
Noting that central banks around the world were in denial of cryptocurrencies three years ago when digital coins were introduced as alternative payment systems and stores of value in digital wallets, he said: "Today, there is no serious central banker in the world who doubts that the world will be going digital."
"It is notable that most of the world's banks do not have digital wallets... In the US, banks are far behind where they need to be. US lawmakers should help by providing constructive and future leaning laws to accelerate these innovations," he said.
Although US Treasury Secretary Janet Yellen has been critical of Bitcoin and other cryptocurrencies, Federal Reserve Chair Jerome Powell said last Wednesday that the Fed is evaluating whether to implement its own digital currency and will be releasing a paper on the issue shortly.
"It all begins with a reliable, secure, compliant digital wallet and the US Treasury moving quickly to create a digital dollar," Le Merle said.
Lesperance said the move from physical to digital currency is accelerating.
"Some countries such as the US will use a central bank digital currency (CBDC) as a means of protecting its reserve currency status. Other countries such as China will be using it as a means of controlling their citizens," he said.
"Those individuals who are looking for an alternative to the former or are worried about the assault on their freedom of the latter should look seriously at cryptocurrencies," he added.