The head of the People's Bank of China revealed he is closely studying digital currencies and intends to develop fintech industry in the country. However, the regulator’s stance towards the issuance remains tough.

The bank’s governor Zhou Xiaochuan said in an interview to the Caixin Weekly that digital money is a necessary attribute of a tech-oriented society in the modern world:

“With the rapid development of the Internet and the significant changes in the global payment systems, it is necessary to establish the issuance and circulation system of digital currency, which will help build the financial infrastructure and improve the quality and efficiency of the economy.”

Xiaochuan believes that digital currency should be created and distributed only by the national central bank and be under tight supervision to prevent the use of such currency in illicit financial activities.

“The issuance, circulation and transaction of digital currency will follow the same management principles of traditional currency.”

The head of the People's Bank of China is confident that in the future digital currency is likely to displace physical money, due to increasing costs of cash transaction:

“The cost for cash transaction will gradually increase in the later stage. For instance, banks do not charge any fee for counting a large amount of coins now, but in the future they may charge their clients for such services. With the transaction costs of paper money rising, people will be motivated to opt more for digital money.”

At the same time, according to Xiaochuan, such transition will not be quick, therefore, “digital currency and cash will co-exist for a long time.”

In addition, Xiaochuan turned his attention specifically to blockchain. According to the head of the People's Bank of China, the technology of distributed ledger is interesting, but still requires too many resources to cope with the current high volume of transactions. That’s why PBOC prefers to wait and see this problem solved.

Elena Platonova