Bitcoin Provides Freedom, Says New PBoC Chief as China Opens Doors to $27 Trillion Payments Economy

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For the first time in history, the Chinese government and its central bank, the People's Bank of China (PBoC), has opened its $27 trillion payment market to the world. Foreign firms are now permitted to apply for permits to operate within China, competing against local service providers.

Freedom For Foreign Firms

In China, homegrown businesses have complete dominance over the internet and finance industries. Alibaba's AliPay is believed to have nearly 70 percent of the payment market share, while Tencent's Tencent Pay accounts for the remaining 30 percent. Ever since the launching of AliPay and the development of Tencent Pay, the two conglomerates have retained control over the local payment market.

However overseas companies will soon have the ability to operate within China, serving users which are already accustomed to local payment applications. Hypothetically, US-based Square, a payment app developed by a team led by Twitter CEO Jack Dorsey, and KakaoPay, a South Korean payment program developed by KakaoTalk developers Kakao, could operate in China if they register with the PBoC and obtain licenses.

«The domestic market is saturated with very strong domestic players, and it is relatively tough for foreign companies to get a piece of the pie. But there is an opportunity for them to compete in the cross-border payment market,» Iris Pang, a Hong Kong-based economist at ING Groep NV told Bloomberg.

The conclusion of the PBoC and the Chinese authorities to enable foreign firms to operate in its payment market came after the appointment of the new PBoC head Yi Gang, an American-educated economist well known for his pro-market philosophy.

Earlier this month, WSJ reported that senior officials in the Chinese government said that the PBoC intends to provide foreign firms with a chance to target the community financial sector. The WSJ report noted that the Chinese government was planning to bring in foreign companies to its payment and insurance market, to free up the two businesses.

«Liu and Yi have a shared comprehension of the requirement for financial market reforms and liberalization, coupled with more effective regulation,» Eswar Prasad, a Cornell University professor and former China head to the International Monetary Fund, told the WSJ at the moment.

On March 19, according to a South Korean media outlet TokenPost, new Chinese central bank head Yi Gang said that «bitcoin is a currency that offers freedom to anybody that uses it,» and emphasized that the cryptocurrency is transparent.

The optimistic viewpoint towards bitcoin from Yi was somewhat expected by analysts, given his pro-market doctrine and his plans to liberalize the Chinese financial industry.

Wei Chun, a local analyst, said:

«In short, the Chinese government has demonstrated a positive attitude towards blockchain technology despite its authorities on cryptocurrency and mining operations. China needs to control cryptocurrency, and China will get control. The repeated enforcements from the regulators were meant to protect its citizens from the financial risk of cryptocurrencies and restrict capital outflow.»