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The former head of the Hong Kong central bank says that crypto will not destroy traditional finance – and that volatility will hold back the progress of many cryptoassets.
Norman Chan, the former Chief Executive of the Hong Kong Monetary Authority (HKMA), was speaking in an interview with the 21st Century Business Herald. Chen said cryptoassets like bitcoin (BTC) could never become “currencies” because they “have no intrinsic value and their prices fluctuate too much.”
Chan stated:
“Bitcoin can be used for speculation, but it does not meet the requirements [of a currency].”
He also took aim at stablecoins, saying:
“[Stablecoins] have many application scenarios. They can reduce transaction costs and improve transaction efficiency. But they cannot subvert and replace traditional finance.”
He explained that decentralized finance (DeFi), too, was inferior to centralized models as in the DeFi world, investors “generally have no protection.”
He warned that stablecoin adoption could “affect the efficacy of fiat-based monetary policy.”
And, he said, this would compromise the stability of the financial system by “getting rid of the models of regulation and trusted intermediaries.”
Hong Kong Banking Guru: Crypto Cannot Beat Tradfi
Chen did not totally dismiss the potential of crypto and Web3, however.
He conceded that “stablecoins have great future potential, provided that they meet a certain degree of investor protection and regulatory conformity.”
The former HKMA boss also suggested that non-fungible tokens (NFTs) had “broad” application potential for investors. He said this was particularly the case for such as those looking to make art, wine, or antique purchases.
But he dismissed the notion that crypto had the power to “replace central banks, traditional financial markets, and institutions.” He claimed that price volatility would prove an Achilles heel for BTC and major altcoins.
Chan served as the HKMA’s Chief Executive from 2009 to 2019. Before this, he worked as the Regional Vice-Chairman of the banking giant Standard Chartered.
Hong Kong is currently working with the Beijing-based People’s Bank of China on testing the “cross-border” functionality of the latter’s digital yuan.
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