Zhu Guangyao, China’s former Finance Minister, has urged the Chinese government to invest more time and resources into researching cryptocurrencies. Speaking at the Tsinghua PBC Chief Economist Forum in Beijing, Zhu addressed the potential and risks of cryptocurrencies within the digital economy.
He acknowledged the negative effects associated with cryptos, such as volatility and potential risks to capital markets, and stressed that it was crucial for China to fully recognize these dangers. At the same time, Zhu encouraged the government to stay updated on international changes and policy adjustments regarding cryptocurrencies. According to him, this research is essential for China's future growth in the digital economy.
His remarks follow increasing global attention on crypto adoption, especially in the U.S., where former President Donald Trump has championed the importance of embracing crypto technology. Trump warned that failing to adapt to this new landscape could leave the U.S. trailing behind China.
Surge in China's OTC Crypto Trading
Zhu’s comments come in the wake of new data from Chainalysis, revealing that China's over-the-counter (OTC) cryptocurrency brokers have seen inflows of $20 billion in each of the last three quarters, totaling $75 billion in nine months. This surge indicates that despite China’s ban on cryptocurrency transactions and mining activities in 2021, the underground market remains vibrant.
Chainalysis cybercrime lead Eric Jardine noted that the enforcement of China’s crypto ban is inconsistent. He stated, "These services are operating in a gray zone of the economy," where OTC brokers facilitate transactions for those looking to engage in crypto despite government restrictions.
The data reflects growing interest in cryptocurrencies in China, driven by the country’s economic uncertainties. As China's economic growth slows and traditional investment opportunities diminish, many are turning to cryptocurrency as an alternative.
Conclusion
China’s growing OTC market, along with Zhu Guangyao’s calls for increased research into cryptocurrency, shows the complex relationship between the country and digital assets. As both interest and caution grow, China may need to reconsider its hardline stance on cryptocurrency, or risk falling behind in the global digital economy.
