The debate over the role of cryptocurrencies in the global financial system continues to evolve, but according to Zhou Xiaochuan — former People's Bank of China governor, current chairman of the China Society for Finance and Economics, and vice chairman of the Boao Forum for Asia — some digital currencies have already missed their window to become viable tools in the payment space.
Speaking at the 13th Lujiazui Forum on June 11, Zhou emphasized that while certain cryptographic technologies hold potential, many existing cryptocurrencies are no longer suited for integration into mainstream payment systems. “Some cryptocurrencies want to return to the payment domain, but they’ve already lost the opportunity,” he stated. “They may no longer be appropriate, nor widely accepted.”
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Why Cryptocurrencies Struggle in Payments
Zhou Xiaochuan explained that from a technical and philosophical standpoint, cryptocurrencies were initially envisioned as tools that could support real economic activity — particularly through decentralized, efficient, and secure payment mechanisms. However, early design limitations have hindered their practical application.
One major issue is transaction processing speed, commonly measured by Transactions Per Second (TPS). Many popular blockchain networks still suffer from low TPS, leading to slow confirmation times and network congestion during peak usage. This makes them impractical for high-volume retail payments where speed and scalability are essential.
Additionally, he pointed out that these systems consume significant network resources and computational power, raising concerns about sustainability and efficiency. The energy-intensive nature of proof-of-work consensus models, in particular, has drawn criticism globally.
Beyond technical constraints, Zhou highlighted ideological challenges. The core principles of decentralization and resistance to regulation — while appealing to some — create friction with established financial frameworks that prioritize oversight, anti-money laundering (AML) compliance, and consumer protection. As a result, widespread institutional adoption remains limited.
From Payment Tool to Speculative Asset
Perhaps the most critical shift Zhou addressed is the transformation of cryptocurrencies from payment instruments into speculative digital assets.
“When participants are overly eager to make quick profits — to cash out fast or multiply returns through trading — the original purpose gets distorted,” he noted. This profit-driven behavior shifts focus away from utility and toward market volatility, turning crypto into a vehicle for speculation rather than a medium of exchange.
This evolution has had lasting consequences. Once a cryptocurrency becomes primarily associated with trading and investment, rebuilding trust as a stable payment method becomes extremely difficult. Public perception, regulatory scrutiny, and market dynamics all reinforce its identity as a digital asset rather than a functional currency.
As a result, “returning to the payment field is no longer feasible for many,” Zhou concluded. The window has closed.
Financial Services Must Serve the Real Economy
Zhou stressed China’s long-standing principle that finance should serve the real economy — a concept that underscores the importance of aligning financial development with tangible economic growth.
He described the relationship between finance and the real economy not as binary, but as a spectrum ranging from 0 to 1:
- At "1" are financial activities deeply integrated with real economic functions.
- At "0" are those completely detached — existing purely for speculation or arbitrage.
What Falls Under “1”: Finance That Supports Real Growth
Zhou identified three core areas where financial services directly contribute to economic productivity:
- Payment Infrastructure
A robust payment system is indispensable for daily commerce. Without it, supply chains stall, wages go unpaid, and transactions grind to a halt. When finance enables seamless payments — whether via mobile platforms, digital wallets, or central bank digital currencies (CBDCs) — it operates as an intrinsic part of the real economy. - Working Capital Financing
Businesses rely on short-term liquidity to purchase raw materials, manage inventories, and cover operational costs before revenue comes in. Loans and credit facilities that support this cycle ensure smooth production and distribution — making them essential components of economic continuity. - Investment in Innovation and Expansion
Long-term growth depends on capital allocation toward research and development, new equipment, technological upgrades, and product innovation. Whether funded through bank loans or capital markets, this type of financing drives industrial progress and competitiveness.
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Where Finance Risks Drifting Away
While some financial activities anchor the real economy, others drift toward abstraction.
Zhou acknowledged that financial markets also exist for risk management, such as hedging against price fluctuations or interest rate changes. These functions can be productive when tied to underlying economic exposure.
However, he warned that complex derivative products and high-frequency trading in secondary markets often become detached from real economic needs. In extreme cases, they approach the “0” end of the spectrum — existing solely for speculative gain.
For example:
- An IPO that raises capital for a tech company to develop new software clearly serves the real economy.
- But highly leveraged derivatives traded among institutions with no connection to physical goods or services may contribute little beyond volatility.
Such activities require careful monitoring. While not inherently harmful, they can amplify systemic risks if left unchecked — especially during market bubbles or crises.
Balancing Innovation and Responsibility
Zhou’s remarks reflect a broader policy perspective: technological innovation in finance must be guided by purpose. Blockchain and distributed ledger technology still hold promise — particularly in improving transparency, reducing settlement times, and expanding financial inclusion.
But whether these innovations benefit society depends on how they’re applied.
Cryptocurrencies built for utility — such as programmable money, cross-border remittances, or tokenized assets backed by real value — may still find legitimate roles. The key lies in designing systems that prioritize stability, compliance, and integration with regulated financial infrastructure.
In contrast, projects driven primarily by hype, anonymity, or deregulation face diminishing prospects — especially in major economies focused on financial stability and consumer protection.
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Frequently Asked Questions (FAQ)
Q: Can any cryptocurrency still be used for payments today?
A: Yes, select cryptocurrencies and stablecoins are used in niche markets or specific regions, but widespread adoption remains limited due to volatility, scalability issues, and regulatory barriers.
Q: What does "finance serving the real economy" mean?
A: It means financial activities should support tangible economic output — like production, employment, innovation, and trade — rather than exist purely for speculative or self-referential gains.
Q: Is blockchain technology still valuable if crypto payments fail?
A: Absolutely. Blockchain has applications beyond currency, including supply chain tracking, identity verification, smart contracts, and secure data sharing — all of which can enhance efficiency in various industries.
Q: Why is TPS important for payment systems?
A: High TPS ensures fast transaction processing, which is crucial during peak demand. Traditional systems like Visa handle thousands of transactions per second; most blockchains lag behind.
Q: Are all speculative financial activities harmful?
A: Not necessarily. Speculation can provide market liquidity and price discovery. However, when disconnected from economic fundamentals, it increases risk and instability.
Q: What alternatives exist for crypto-based payment systems?
A: Central bank digital currencies (CBDCs), regulated stablecoins, and interoperable payment networks offer more controlled and scalable options aligned with national monetary policies.
Core Keywords: cryptocurrency, payment systems, real economy, blockchain technology, financial innovation, digital assets, transaction speed (TPS), decentralized finance.