Yi Gang, the deputy governor of the Peopleâs Bank of China, this week mentioned bitcoin in comments that have sparked optimism in the countryâs bitcoin business community.
Speaking in Chinese at an economic forum, Mr Yi made statements to the effect that it would be impossible for Chinaâs central bank to recognize bitcoin as a legal, legitimate financial instrument âin the near futureâ. But perhaps more significantly, he added that people should be free to buy and sell bitcoins on exchanges with no interference from the central bank, and that he would personally look at the digital currency with a long-term perspective.
While the New York Timesâ Sinosphere blog reported Mr Yiâs comments as a âcautious nodâ to digital currency, sources in China itself were more excited by what they saw as a sign the Chinese government would not make any move to restrict bitcoin commerce. The reference to a long-term view also raised hope there would be some kind of more official endorsement at a later point.
âThe fact he made any comment at all is significant,â said Bobby Lee, CEO and co-founder of the worldâs largest bitcoin exchange by volume, BTC China. He added:
âIt means, in the near term anyway, Chinaâs central bank wonât give bitcoin any official legal status. But the key point here is ânear-termâ. Given his position, of course his statements need to be conservative. Anything else would be too much of an official statement.â
Lee saw particular significance in Mr Yiâs reference to people being allowed to buy and sell bitcoins on exchanges.
âHeâs the most knowledgable person in the Chinese government making comments about bitcoin today. To me, thatâs a strong endorsement for the future potential of bitcoin in China. I am optimistic about bitcoinâs role in the future,â he said.
BTC China this week continued its record of having the worldâs highest bitcoin value. As bitcoin peaked at around $900 on Mt. Gox in ordinary trading on 19th November, it passed CNY 7,000, or $1,100, on BTC China. At the time of writing, it sits around CNY 4,969 (around $815).
Curiously, Mr Yiâs comments did not cause any dramatic increase in bitcoin value in China. This could be attributed to a persistent lack of knowledge about bitcoin in the Chinese general public, or the comments were taken as ambiguous by those not watching digital currencies closely.
As other governments hold cautious inquiries and continue to speak of digital currencies in terms of âthreatâ and âriskâ before considering benefits, even indirectly positive comments from other parts of the world show that digital currency is a global phenomenon. Most officials in the worldâs advanced economies have remained silent on the sidelines, while private banks have even unilaterally shut down accounts belonging to businesses and individuals with bitcoin connections.
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Shortly before the start of US Senate hearings into digital currencies last week, US Federal Reserve Chairman Ben Bernanke also provoked hope with a letter stating the Federal Reserve âdoes not necessarily have authority to directly supervise or regulate these innovations or the entities that provide them to the marketâ.
He also said digital currencies âmay hold long-term promise, particularly if the innovations promote a faster, more secure and more efficient payment systemâ.
As a deputy governor of the Peopleâs Bank of China, Mr Yi Gang sits in the upper echelons of Chinaâs financial administration. He reports directly to the governor and his comments have considerable gravity for regulators.
There is also little doubt Mr Yi has followed bitcoinâs progress both in China and abroad, and is aware of Chinaâs recent dominance in trading activity and value.
Itâs of interest to note he obtained his Ph.D in economics from the University of Illinois, and was an associate professor with tenure at Indiana University â Purdue University Indianapolis (IUPUI) before returning to his native China. He has published numerous academic papers in English and is likely Chinaâs highest-ranking scholar on foreign currencies and exchange.
Over the past year, China has become both a hub for bitcoin startup activity and also mining, given the large concentration of semiconductor manufacturers in Guangdong Province. Another sign of official endorsement of digital currencies came with CCTV2âs documentary on bitcoin earlier this year.