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China Could Use Bitcoin As A Financial Weapon Against US Dollar

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China has time and again revealed its inclination towards digital assets. However, the United States of America has been extremely stringent with regard to the crypto market. Just when the crypto-verse is growing in terms of popularity as well as price, several individuals across the globe have started to view the crypto industry as a promising investment portal. However, the strict laws imposed by the American government has made it difficult for the citizens of the country to invest in the asset.

Anthony Pompliano, appearing in a recent interview with CNBC’s Squawk Box, pointed out how the US could lag behind in the financial race if it did not embrace Bitcoin [BTC]. Speaking at the Nixon Seminar, prominent investor Peter Thiel suggested how Bitcoin could be thought of as a “Chinese financial Weapon against the US”. While Thiel speculated that this could undoubtedly threaten the US Dollar, Pomp went on to agree to the same.

China Getting Ahead In The Financial Race?

With the fast-paced development of the digital yuan, China had already established its dominance. While the US is still lagging behind in the development of the CBDC, embracing crypto could possibly help the country stay ahead in the game, the community speculates.

Elaborating on Thiel’s recent statement, Pomp stated,

“Everyone in the world has an opportunity to use this, just like the internet. And so, just because other countries, maybe adversarial or not to the United States, are going to use it, it doesn’t mean [Thiel] is taking an anti-Bitcoin stance. Actually, it’s quite the contrary.”

Further dismembering Thiel’s comment, the Morgan Creek Digital co-founder suggested that the US could fall back in the “global competition” which would further push other countries like China to use this to “destabilize or financially attack the United States.”Additionally, he added that America was required to “be the leader” and embrace crypto in order to retain its place on the top.

He added,

“What we need is for the United States to be the leader here. We need to embrace this, so we need to make sure that we use this technology to continue to be a leader on the global stage.”

Sweden Fastens Its Pace In The Development Of CBDC As China Moves Ahead

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Central bank digital currencies [CBDC] have started to take the world by storm. Sweden was seen trying to catch up to China in the development of the CBDC with its latest announcement.

As countries across the globe have just started to explore the prospects of launching a CBDC, China is already at the testing phase of the digital yuan. While Japan is working on Phase 1 of its CBDC pilot, Sweden announced that it had concluded the first phase of its CBDC pilot program. However, this pilot reportedly gave rise to a number of issues that had to be addressed by the country’s central bank.

Sweden Completes Phase One Of CBDC Development

The central bank of Sweden, Sveriges Riksbank released a recent report revealing the results of Phase one of the CBDC pilot conducted by the bank. While the e-krona proved to be competent in various aspects, certain things like the purchase of coffee by Stockholmers with the e-Korna had to be looked into by the bank.

The report further read,

“The solution tested in phase one of the e-krona pilot has met the performance requirements made in the public procurement. But this has taken place in a limited test environment and the new technology’s capacity to manage retail payments on a large scale needs to be investigated and tested further.”

With scalability as a major issue, the e-krona still needed some work. Additionally, issues pertaining to privacy were also noted in the e-krona. While the second phase of the Sweden digital currency is said to address all these issues, it would also focus on aspects such as retail payments and storage systems.

Addressing the privacy feature, the bank stated,

“The Riksbank is currently analyzing to what extent the information stored in the transaction history can be regarded as information covered by banking secrecy and whether it comprises personal data.”

China Takes Digital Yuan To Hong Kong For A Cross-Border Pilot

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China has been spearheading the entire central bank digital currency [CBDC] game. The Covid-19 pandemic enhanced the importance of digitalization as a mere human touch had the ability to cause death. While several countries despise cryptocurrencies they still decided to go ahead with a central bank digital currency.

While the world fears that China could garner financial and technological dominance over the globe, several countries have been forced to fasten the pace in the development of their respective CBDC. Japan recently revealed that it would soon roll out Phase 1 of its CBDC pilot. Just when all the regions are prepping for the launch of this digital asset, China revealed that it had conducted its first cross-border pilot of its CBDC.

China’s Digital Yuan Moves Ahead With Full Force

As per a recent report from a local news platform, Sina Finance China has taken the digital yuan to Hong Kong to explore the cross-border aspect. The Chinese central bank, People’s Bank of China’s [PBoC] digital currency research bureau’s director, Wang Xin revealed that a couple of technical tests were done to review the cross-border phase of the Chinese digital currency.

Wang Xin reportedly made this announcement at the State Council Information Office of China hosted a press conference earlier this week. During this event, the official pointed out that the PBoC had joined hands with the Hong Kong Monetary Authority for this pilot.

Additionally, several platforms across the country have been testing the digital yuan. Recently, the country had given the public a chance to test the digital yuan. Several shoppers reportedly carried out over a thousand transactions during the Women’s day weekend.

Speaking about the emergence of CBDCs, Wang Xin told CNBC,

“On one hand, this is related to more and more central banks in the world participating in the development of domestic digital currencies. On the other hand, this (interest) may also be related to the large increase in the price of bitcoin.”

Digital Yuan To Uphold Privacy By Supporting Anonymous Transactions

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China’s central bank digital currency [CBDC], the digital yuan has been making headlines for quite a while now. The country’s plunge towards digitalization inspired an array of other countries to start developing their own digital asset. While China is well ahead in the game, all the other countries were trying to catch up.

Despite, the emergence of the digital yuan, rumors pertaining to the Chinese government controlling their citizens finances began surfacing. While privacy was a great concern of many citizens, with regard to the digital yuan, an official of the Chinese central bank affirmed that a certain magnitude of privacy would be given to those using the country’s CBDC.

Digital Yuan To Entail “Controllable Anonymity”

In a recent report by a local Chinese news portal, it was revealed that the People’s Bank of China [PBoC] intended to uphold privacy with the launch of the digital yuan. Speaking about the same at the 2021 China Development Forum, the head of the digital currency research institute of the People’s Bank of China, Mu Changchun, addressed the potentials of the country’s CBDC.

While suggesting that a entirely anonymous CBDC was out of the picture, Mu pointed out that it wouldn’t be very feasible. Since the Chinese currency would soon be used throughout the country as a national currency,it needs to come under certain anti-money laundering, anti-tax evasion as well as counter-terrorist financing procedures. However, privacy would still find its place, Mu announced.

Limited anonymity would be available, revealed the official. The PBoC will reportedly permit anonymous digital yuan transactions, however, in dainty amounts. He added,

“The digital renminbi adopts a design of small amounts anonymous, keeping large amounts traceable. In short, the protection of user privacy by digital renminbi is the highest among the current payment tools.”

Additionally, the digital yuan is already out and about for testing. The PBoC has been testing the Chinese CBDC on various platforms across the globe.

Japan geared up to launch native CBDC as it takes cues from steps taken by China

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The concept of cryptocurrencies started as a nascent idea but has now spread into a global phenomenon. It is not just the mainstream cryptocurrencies like Bitcoin and Ethereuym that are doing the rounds but rather centralized cryptocurrencies launched by state governments.

China was the first country to take centrally backed cryptocurrencies seriously, especially with the creation of the digital renminbi. Looking at the steps taken by the red dragon, other countries such as Japan were coming to the forefront to voice their contributions using Central Bank Digital Currencies [CBDCs].  

CDBCs are generally used for cashless payments through a smart device such as a mobile phone or tablet. The main intention of a digital currency is to eliminate the overheads and wastage related to physical fiat currency. Former Bank of Japan officials stated that China’s efforts in the ecosystem inspired other regions to follow suit.

The People’s Bank of China has been the pioneer in terms of building a digital trading ecosystem with officials also responsible for releasing coherent updates. Hiromi Yamaoka, an ex-official at the Bank of Japan commented:

“China has prompted moves toward digital currency (around the world). t (has done so at) surprising speed, as central banks tend to take a cautious stance. The design of a CBDC is very tricky and delicate. In advanced countries, a CBDC could conflict with existing payment and banking systems.”

Banking officials in Japan were confident that introducing native digital currencies in a major way would only uplift the financial situation of the country. The proposed method is to give the Japanese population a trading limit access of 50,000 yen per person. This would result in a total trading volume of 5 trillion yen, a figure that would account for just 5 percent of the total Japanese capital circulation.

Digital Currency Forum, a popular advocate of digital currencies in Japan revealed that there were plans to create “some form” of digital currency by 2023. Banking officials were of the opinion that if Japan does not launch a CBDC soon, it may lag behind other major countries in the race towards a streamlined digital economy.

Fintech Will be Catalyst for Innovation and Growth, says OneConnect CEO

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Over the years, the financial world has grown in numerous ways, with the most visible shifts occurring in the way traditional bodies have embraced emerging technology. This has been realized by Fintech organisations as the ideal jumping point for transitioning to a more developmental point of view.

The latest company to recognize the promise of fintech was OneConnect Financial Technology, with its Chief Executive, Ye Wangchun, creating major positive prospects. OneConnect’s head honcho gave his two cents on the rising fintech industry at the fourth annual China Digital Banking Forum.

The general consensus that Fintech developments could go hand in hand with traditional bodies was formed during the discussion. The Forum featured more than 300 industry experts, researchers and media professionals who were tasked with increasing the popularity of the fintech industry. Ye Wangchun told prestigious participants that major banking institutions need to accelerate their digital transformation strategies, which would go a long way towards creating an active trading ecosystem.

Ye believed that the Fintech industry had become a driving force in raising small and large-scale banks. Reports have shown that the rate of adoption by the Fintech industry has increased from 16 percent in 2015 to a total of 64 percent in 2019. China was the market leader in terms of fintech adoption, as the South Asian superpower had fintech tendrils in 84% of all industries. Ye made his statements at a time when OneConnect was making long-term expansions to regions like Malaysia. The company had also acquired a digital banking license from the Hong Kong Monetary Authority.

The CEO of OneConnect confidently claimed that the adoption of fintech was like moving from the production of spare parts to the creation of the entire vehicle. He also called for further involvement of the Internet Finance Association of Small and Medium-Size Banks in order to also monitor the rules and regulations. One of the main agendas of the forum was to bring together the brains of the dignitaries and to find solutions to the current financial situation.

China’s Digital Yuan Sees 20K Transactions Within 24-Hrs On E-commerce Platform

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China’s new sovereign digital currency, Digital Yuan has become a hot topic around the world. In the latest development, close to 20,000 transactions were paid for with Digital Yuan within 24 hours through e-commerce company JD.com as it conducted a real-world trial.

The residents of the country actively participated in the trial of its digital currency in Suzhou, a city in East China’s Jiangsu Province and the largest online payment reportedly surpassed 10,000 Yua 80% of the participants for the trial were made by the younger generation who were born between 1980-1990.

JD.com was not the only platform that participated in the trial. There were nearly 10,000 physical shops in Suzhou that took part in the real-world trial for Digital Yuan at the “Double Twelve” shopping festival.

Cao Yin, who happens to be the Managing Director of the Digital Renaissance Foundation in Shanghai was quoted saying,

“As far as I know, the PBC is also hiring talent from a lot of private digital currency firms and internet companies to develop the digital currency. It hopes to implement the digital yuan using market-oriented means”

However, despite the fact that China has become the frontrunner in developing its central bank’s digital currency [CBDC] as it is currently deploying it on major e-commerce platforms within the country, the process has been cautious and not hasty. And it was something that Yin himself stressed.

Scaling Digital Yuan

China is gearing up for the implementing Digital Yuan on a massive scale and was looking to use the digital currency at the 2022 Winter Olympic Games.

This was part of the pilot programs launched by the People’s Bank of China back in April in cities such as Shenzhen, Chengdu, Suzhou, and Xiongan. Till last month, the programs had conducted more than 4 million transactions, which roughly totaled to $300 million,

Previously, reports regarding Hong Kong’s central bank working with the People’s Bank of China for the trial use of the Digital Yuan emerged. This was the first instance of China’s central bank digital currency’s use outside the country, this initiative was for the purpose of cross-border payments.

China’s Fintech Firms Struggle As Govt Steers Towards Imposing Severe Rules

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China has been spearheading the innovation of finance and technology. Chinese business magnate, Jack Ma has been catching the eyes of many with his big moves in the fintech sector. However, Ma was seen making news over a set back that was caused by the government that further disrupted his intention of listing the Ant Group’s $35 billion IPO was put on hold.

China’s Big Takedown

Jack Ma wasn’t the only one to bear the wrath of the suspension of the IPO, several companies including, Richard Liu’s JD Digits Technology Holding, Lufac Holding were also subject to the sector-wide IPO crackdown. Ma’s online lending platform, Ant was shown the door and the regulators were ordered to be more severe with the same. While several believes that the latest move of the government was to reboot the existing regulatory environment, it was pointed out that it was all a part of China’s transition that entailed keeping the technology giants in check.

Analysts across the globe were inclined towards the fact that China intended to send a message to its fintech firms as financial stability is mostly political in the country. A Washington DC-based analyst, Sean Ding told Bloomberg,

“The whole point of sending such a strong message is for future fintech companies to be more careful, understand that their products can bring about financial risk.”

Chinese President Xi Jinping Strikes

In an article shared by a banking regulator, President Xi Jinping’s intention about the regulatory climate is highlighted. The Chinese President had reportedly dared to master their supervisory position. With China’s online lending market as its first priority, the government began imposing rules that are severe and outrightly bringing down platforms. Reciprocating the government’s latest move, Ant decided to relax the velocity at which it packages current loans into asset-backed securities that would be sold to the investors.

While Ant has been working with the regulators to work things out, Kevin Kwek, a Singapore-based analyst suggested that investor sentiment would be more restrained when the online lending platform returns to the market.

Another platform that had also filed an IPO with the Shangai Star Market had endured a similar setback. JD Digits had an intention of entering the market with its IPO in the first had of 2021, however, this target has become a task following the government’s latest takedown. Furthermore, another platform, a newly listed one, Lufax was substantial proof of the drawbacks of going public at times of uncertain regulatory climate.

The platform was reportedly listed for lesser in the prior funding round. The post further read,

” [It] allowed existing shareholders to swap their stock into convertible bonds to make up for potential losses, according to people familiar. The lender has seen its stock swing violently since it recent debut as it’s become a target for short-sellers.”

While JD Digits has been in talks with the regulators, Lufax seems to be making amends already. Back in September, Lufax reportedly lowered the fees by further decreasing the clients’ costs. The platform has even commenced offering credit guarantee options from a wide range of insurance partners in order to make sure the customer has an increased choice.

While transparency has always been a huge deal in the world’s most populated country, the head of Asia investment strategy at Citigroup Inc.’s private-banking arm, Keng Peng told Bloomberg that the investors could be uncertain about the transparency pertaining to the financial regulations in the country. Keng added that regulations take time to adapt, and scrutinizing fintech firms seem to be the latest interest of the Chinese lawmakers.

Malaysian Crypto-Exchange Suspends Listing of LongBond’s $3 Billion Blockchain Bond

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A blockchain bond worth $3 billion has been withdrawn from a Malaysian cryptocurrency exchange. The said bond has been arranged by the tier-1 branch of Beijing-headquartered China Construction Bank Corporation [CCB] unit using blockchain technology.

According to the latest reports, the bond was withdrawn at the request of the issuer – Longbond Ltd,  which is a special purpose vehicle created for the purpose of issuing digital bonds and deposit the proceeds with CCB’s branch in Labuan, a Malaysian offshore financial center.

The listing sponsor and the lead manager of the bond in question was CCB Labuan and it was to be tradable on the FUSANG exchange, which happens to be a platform that trades digital assets such as Bitcoin, as well as Security Token Offerings [STOs], the report said.

It is important to note that the listing was originally scheduled to go live on the Exchange on the 13the of November. However, as just before the listing time, FUSANG revealed receiving written communication from the Listing Sponsor on behalf of the Issuer, where it requested for the postponement of the Listing. Three days later, on the 16th of November, the exchange formally wrote to the Listing Sponsor to ask for a reason as to the postponement, as well as the updated timeline for the Listing. But the Listing Sponsor responded on the 20th of November that it had “decided not to proceed”.

The Blockchain Bond in brief:

According to FUSANG, the aim of the bond was to give investors access to bank-secured deposits at an annualized rate of LIBOR +50 bps [~0.70 %]. This figure is significantly higher than the market interest rate for typical fixed deposits. The platform asserted that the bond would offer retail investors access to an investment that was previously unavailable to them, while at the same time bringing legitimacy and investor confidence to the world of cryptocurrency and decentralized finance.

Additionally, the bond was supposed to be issued at a discount and can be traded on FUSANG Exchange prior to maturity, in US Dollar and Bitcoin with a total program target size of $3 billion.

As revealed by the FUSANG Chief Executive, Henry Chong, the bank had not provided a reason for suspension of the same. Chong went on to say that,

“While we are disappointed that this Listing has been suspended, there were no legal, regulatory, operational, or technical issues with the FUSANG platform or the IPO process and filing. The overwhelming investor interest and demand for this landmark USD 3 billion program has been a fantastic validation of the digital issuance and listing process that we have created, and it is unfortunate that the Listing Sponsor has decided that they are unable to proceed with this Listing”

China Refocuses its Fintech Directives as Government Looks to Launch Regulations for Lending Companies

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Over the last few years, the world of fintech has changed, with many traditional institutions taking a keen interest in the industry. As the blockchain sector shed more light on the usability of integrating technology with finance, even state governments stood up to take note of what was happening.

China has been heavily involved in the fintech space for some time now and its premier has made it clear that it aims to move forward all guns blazing. The same Chinese government recently played a role in halting Ant Group’s $38 billion IPO at the last minute as questions arose about the country’s growing lending problem.

Financial lending in China has grown multifold in the past few years with an increasing number of youngsters joining the roster. Young people under the age of 25 start borrowing early in their lives, causing them to fall into the loop of paying interest for the rest of their lives. This sort of unregulated lending and borrowing seems to be the issue that the Chinese government wants to tackle first.

Reports have shown that people in China borrow from a variety of fintech companies, some of which may be shady and reclusive. One 24-year Chinese student spoke about the qualms of borrowing in small sums by pointing out that:

“Now it’s like I’m in a whirlpool. I can only pay it back slowly, one small sum at a time, and after that, I will have no savings. So, the whirlpool makes me keep borrowing more and more.”

Officials within the fintech industry believe that there are two sides to the leading story: it can democratize financial products but at the same time be a risky venture depending on the lender. Ant Group was one of the major companies that grew during the lending boom with that part of the business growing by almost 60 percent in the first six months of this year. Ant’s lending arm also contributes 40 percent to the total revenue of the company.

The only way the industry can grow under the watchful eyes of the Chinese government is to comply with the incoming regulations. Popular economists also claimed that microlending platforms need to be regulated as “they have evolved more like a Ponzi scheme”. Only time will tell what type of lending companies will the government let off scot-free.