Xiao Gang, the former chair of the China Securities Regulatory Commission, says in his latest book on China capital market reforms that the development of a central bank digital currency (CBDC) will pave the way for digital stocks.

Stocks and currencies are separate entities in traditional finance, however blockchain-based digital currencies blur the boundaries between the two and raise new possibilities. Xiao adds that “digital stock is the natural product of digital currency in the future.” 

Before that can happen a number of challenges that need to be explored in theory and practice including: how to connect the CBDC with the digital capital market, how to prepare smart contracts to issue digital stocks, and how to use the digital currency to carry out digital stock trading and settlements. 

In addition, the former chair believes that digital currency will also play an important role in the development of digital finance in the future:

“Digital currency will bring impact and influence on currency issuance, circulation, settlement, asset pricing, asset trading and other systems attached to currency in various countries and regions.” 

As Cointelegraph reported previously, Xiao commented that China is facing a digital economy transformation and needs to embrace the right regulations for the fast growing crypto market.