Former People's Bank of China Governor Zhou Xiaochuan stated at the 13th Lujiazui Forum that certain cryptocurrencies have missed their window to become viable payment instruments due to fundamental design flaws and shifting market perceptions.
Key Challenges Facing Cryptocurrency Adoption
Zhou Xiaochuan highlighted three critical limitations preventing cryptocurrencies from achieving mainstream payment utility:
Scalability Issues:
- Inadequate transaction processing capacity (low TPS - transactions per second)
- Excessive consumption of network resources and computing power
Philosophical Controversies:
- Decentralization principles creating regulatory tensions
- Perceived anti-establishment positioning
- Market Psychology:
"When participants prioritize quick profits through speculative trading rather than utility, these assets transform from potential payment tools into purely speculative digital assets," Zhou observed.
China's Financial Service Philosophy
The former central banker outlined China's financial service framework with three core components:
| Service Component | Economic Impact | Example Activities |
|---|---|---|
| Payment Systems | Direct operational infrastructure | Transaction clearing, cross-border settlements |
| Working Capital | Sustains business continuity | Inventory financing, receivables management |
| Investment Finance | Enables innovation and expansion | R&D funding, equipment leaseback arrangements |
Financial Product Spectrum Analysis
Zhou proposed a "0-1" evaluation system assessing financial products' connection to real economic activity:
1.0 (Strong Link):
- IPO financing for tangible business expansion
- Asset-backed commercial paper
0.5 (Moderate Link):
- Commodity futures for price hedging
- MBS securities with transparent underlying assets
0 (Detached):
- Highly leveraged derivatives without underlying exposure
- Algorithmic trading instruments lacking economic purpose
Frequently Asked Questions
Why can't some cryptocurrencies transition back to payments?
Their technical limitations and speculative reputation have permanently altered market perception, making them unsuitable for transactional purposes.
How does China evaluate financial products' legitimacy?
Through continuous assessment of each product's measurable impact on productive economic activity using Zhou's "0-1" framework.
What makes payment systems different from other financial services?
👉 Payment infrastructure forms the circulatory system of modern commerce, directly enabling all economic exchanges rather than intermediating them.
How should investors approach new financial innovations?
Prioritize understanding the underlying economic value creation mechanism rather than speculative potential.
Future Outlook
While acknowledging cryptocurrency's theoretical potential, Zhou's analysis suggests China will maintain its 👉 real-economy focused financial policy orientation. Market participants should expect continued scrutiny of financial products based on their demonstrable contributions to productive economic activity.