China does not recognize bitcoin as a legal currency, and even compared it to a pyramid scheme. However, China’s Digital Currency Research Institute would support a state-issued digital currency.
Earlier this week, the Digital Currency Research Institute’s Director, Yao Qian asserted that a state-issued digital currency could be a way to stabilize domestic fiat currency and secure the country’s financial status.
However, he was critical of Bitcoin: “A total cap of 21 million like bitcoin whose current supply also halves every four years is actually driving backward along the currency evolution,” he said.
Yao added “The value of cryptocurrencies such as bitcoin primarily comes from the market speculation. It will be a disaster to recoganize it as a real currency. And the lack of a value anchoring inherently determines that bitcoin can never be a real one.”
However, in his view, a state-owned digital currency can generate real economic value and help stabilize the market position of fiat currencies. “The nature of a state-owned digital currency is a government liability issued to the public. And it’s backed by the sovereign credibility.”