Former PBOC Deputy Governor: “Bitcoin unlikely to become a monetary standard”

A rebuttal has been raised against claims that cryptoassets (cryptocurrencies) such as Bitcoin (BTC) should serve as a new monetary standard.

On the 17th (Korea time), Wang Yongli, former deputy governor of the People’s Bank of China, wrote in a Weixin op-ed that “attempts to peg money to gold, specific physical assets, or cryptoassets such as Bitcoin misunderstand the nature of money and the process of its development,” adding that “this is fundamentally incompatible with the modern credit-money system.”

A credit-money system is a structure in which currency is issued and circulates based on a country’s laws and institutions and the credit of the overall economy. According to Wang, the modern monetary system follows such a credit-money framework.

He said, “If currency is tied to a specific asset, supply is bound to become rigid, which in turn constrains economic activity,” and pointed out that “the gold standard and cryptoasset-based monetary systems lack practicality.”

Wang agreed that there can be payment innovation using blockchain technology. Even so, he stressed that this is innovation limited to payment methods and does not change the nature of money. He said, “With the spread of mobile payments, e-wallets, and blockchain-based payments, money is being digitized rapidly,” but added, “This is merely a change in the ‘form’ of money; its essence remains the same.”

He continued, “E-wallets and digital space are only means of holding money,” adding that “attempts to use cryptoassets such as Bitcoin as a standard of monetary value are incompatible with a sovereignty-based fiat currency system.”