May 19, 2021 by Gemma A. Williams
China continues to clampdown on virtual currencies other than its own digital yuan. This latest refusal to accept digital tokes has sent digital currency shares plummeting. Photo: Shutterstock
What Happened: In another crackdown, China has refused to recognize virtual currencies such as bitcoin. In a joint statement issued on the People’s Bank of China’s WeChat account, banking and internet industry associations have stated that financial and payment institutions should no longer accept digital currencies as payment. It also noted that businesses should refuse to offer services and products related to cryptocurrencies. On the back of this, share prices have crashed sharply for a host of digital currencies, confirming the importance that this announcement has on the budding digital asset market. Meanwhile, China is continuing to roll out its own centralized digital yuan.
The Jing Take: There are a number of issues at play here. Firstly, virtual currencies such as Ethereum, Bitcoin, and Dogecoin are not connected to any country’s currency, so by their very nature they are generally more volatile. As the first major economy to establish its own digital currency, China is taking the lead on a global stage; this play indicates long-term planning and the drive to be a stabilizing nation in the modern world.
Moreover, by refusing to accept digital tokens in favor of their own currency, China is doing what it does best: localization. It’s only logical that China would favor its own virtual currency over any outside competing ones. Theoretically, the banning of these currencies should ensure that investment is kept at home too, bolstering another layer of economic security, as well as curbing domestic fintech monopolies such as Tencent and Ant Group.
Finally, and perhaps most importantly, by creating a new, digital currency that is free from the ties of the almighty US dollar, China hopes to put a dent the global dependency on the US dollar and the power and dominance that goes with it — a win-win situation for China and its global ambitions.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.
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