financial stability

Chinese central bank: no signs of easing

The Chinese central bank has announced its agenda for the coming year. It continues to focus on the regulation of crypto currencies. Their markets must be corrected, according to the letter of Thursday. With it the authority disappoints hopes of a course change. In the middle of the month, these were blazed up with the appointment of the new central bank chief Yi Gang in the course of the personnel carousel in Beijing’s executive apparatus.

Nothing new (for the time being) in the East

On Thursday the People’s Bank of China, the central bank of the Middle Kingdom, announced the agenda for the current year 2018. In it, the authority mentions crypto currencies in the same breath with immediate dangers for the financial stability of the yuan. It is therefore important to continue to counter their markets with appropriate measures.

“One of our goals continues to be strict quality control of the yuan […] through corrective measures for various crypto currencies,

central bank vice-president Fan Yifei announces the new, old direction of the PBoC. While the concrete remains in the dark, the innovative possibilities of a centrally regulated digital currency will continue to be considered, according to Fan.

No change of course for the time being

The PBoC thus disappoints hopes of an imminent price change. In the middle of the month, the PBoC’s hopes of an imminent price change became loud with the appointment of Yi Gang as the new head of the central bank. After long-time PBoC Governor Zhou Xiaochuan warned of Bitcoin’s speculative risks only in March, Yi appeared to be a possible glimmer of hope for the global market. He had reportedly called the Bitcoin “unique” and “inspiring” in recent years. There had already been speculation that the strong Chinese headwind might ease.

Last year the government had set a strict course and put on hard bandages against the domestic crypto markets: Last September, Beijing surprisingly called on crypto exchanges to shut down their operations. In addition, ICOs were banned from Chinese territory.

This year, too, there has been no relaxation so far. Only last month, for example, the Chinese Ministry of Public Security announced that it would extend its monitoring to international crypto exchanges in order to be able to monitor the transactions of Chinese citizens.

Governments worldwide: crime the real problem
From an international point of view, China is one of the first countries that are decisive for the international financial sector to regard crypto currencies as a threat to financial stability. In this part of the world, the European Central Bank (ECB), for example, is insisting on a wait-and-see approach. The tenor from Frankfurt: crypto currencies are still far from endangering the euro. American colleagues are currently of a similar opinion.

While more and more governments and central banks around the world are turning to possible control mechanisms, these days a different reputation is echoing through the high government houses. Instead of worries about financial stability, legislators around the world are currently looking at the criminal potential for using crypto currencies. For example, coordinated efforts were already on the agenda at the first G20 meeting of finance ministers and central bankers this month. The result: by 2020, common tax standards should steer the trade in crypto currencies in an orderly fashion. The focus here too: Money laundering and tax evasion instead of financial danger.

The actual market capitalisation of all crypto currencies is currently 214 billion euros. Compared to global financial traffic, however, this is still small and disappears. An actual impairment of the financial market therefore seems doubtful, at least from the perspective of the figures.