The cryptocurrency market has seen a massive decline this year and the Chinese government has continued to celebrate its downfall. A local blockchain expert went as far as referring to bitcoin as a Ponzi scheme.
Cryptocurrencies are a Ponzi scheme
One of the major technology companies in China is Red Date Technology and it is participating in the development of a major blockchain project in the country called the Blockchain Service Network (BSN). The company’s chief executive, Yifan He recently penned an article that is dedicated to different types of cryptocurrencies and he talked about how similar they are to Ponzi schemes.
In his article, the CEO has called cryptocurrencies the biggest Ponzi scheme to have been seen in human history. The author talked about the collapse of the Terra Network, with its native token called LUNA crashing by 99%. Similarly, the TerraUSD (UST) algorithmic stablecoin lost its 1:1 peg to the US dollar back in May and this saw it implode as well.
He was also critical of the virtual currency concept known as X-to-earn, which has become quite popular these days. He stated that these play-to-earn or move-to-earn projects were essentially a phishing strategy. The BSN chair also talked about some of the criticism that Bill Gates, the founder of Microsoft Corp. had leveled against Bitcoin, along with those highlighted by renowned investor Warren Buffett.
Not a fan of Bitcoin
Yifan He is also not a fan of bitcoin or crypto in general. He said that in his understanding, these are nothing but Ponzi schemes and the only difference is in the risk levels based on the number of users it has and its market caps. He also disclosed that he does not own any crypto asset, or a crypto wallet and has no intention of investing in them, even if they were to be regulated because he does not believe they have any value to offer.
In fact, He said that governments, such as that of El Salvador that made Bitcoin legal tender last year, require some finance training. The executive said that otherwise, they were just putting the whole country at risk unless their plan is to develop state-owned crypto platforms for scamming citizens.
Stablecoins are acceptable
Even though Yifat He criticized Bitcoin and some other cryptocurrencies, he does believe that there are some aspects of the crypto space that could do quite well under regulation. The BSN chair stated that cash-backed stablecoins like Circle’s USD (USDC) and Tether are not Ponzi schemes. He said that these were not speculative assets and were actually payment-related currencies.
He said that they would work out just fine when they are fully regulated. He had previously spoken in favor of stablecoins in 2020 as well. In fact, he even had plans of incorporating stablecoins into BSN, but scrapped the plan last year due to China’s stance toward crypto.
The Chinese government is justifying its multiple bans on the crypto space by citing the crash in the market.