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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.

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 Stance on Cryptocurrency Remains Critical As New Details Emerge

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China has been sitting in the driver seat when it comes to leading blockchain technology and bolstering towards the relentless global domination quest of its national currency. But things become complicated when there is “virtual currency” or cryptocurrency in the picture.

According to the latest development, selling crypto purchased with the Renminbi [RMB] to withdraw foreign currency could be considered money laundering. In addition to that, selling crypto purchased with foreign currency to withdraw RMB could also likely be deemed money laundering.

The report was loosely translated from the Chinese media platform, People’s Daily which explicitly stated,

“The holder buys “virtual currency” in China by paying in RMB, and then sells it in foreign currency in any form, or the holder buys “virtual currency” overseas by paying in foreign currency, and then passes any The form of selling and cash withdrawal is RMB. Under the above-mentioned circumstances, no matter how many currency-to-currency transactions are converted between buying and selling, it essentially violates China’s foreign exchange control regulations and is suspected of money laundering crime”

The report further went on to mention that if a Chinese citizen sells and cashes out “virtual currency”, regardless of the region and currency, as long as there is a profit, the individual must declare personal income tax to the Chinese tax authority. If the tax declaration is not filed, it could be suspected of Tax evasion.

Cryptocurrency Rules in China

According to the Library of Congress, China does not recognize cryptocurrencies as legal tender. The country’s banking system does not accept cryptocurrencies or provide relevant services. Notably, China has carried out a series of regulatory measures to crack down on activities related to the crypto industry citing the reasons as investor protection and financial risk prevention.

Those measures include announcing that initial coin offerings [ICOs] as illegal and restricting the primary business of cryptocurrency trading platforms. Despite the fact that China dominates the Bitcoin mining scene, the government has also discouraged mining in the country.

Digital Yuan

China’s stance on cryptocurrencies, in general, might be strict but not when it comes to digitizing its national currency. Its digital yuan pilot program has been picking up the pace which was rolled out for extended testing in four cities. According to reports, there have been more than 4 million transactions, totaling over 2 billion Yuan or $299 million in the digital currency so far.

Chinese Central Bank Seeks Public Advice In Amending Banking Law For Its CBDC

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Yet again, China has made it clear to the world that the central bank’s digital currency has been winning in its development and issuance. China seems to be well ahead of the CBDC game, though being first in the game has its own perks. The Asian country’s latest news revealed that progress has been made in the digital yuan regulatory sector.

Digital Yuan, Not Yuan-Pegged Tokens

A recent notice issued by the People’s Bank of China, the central bank of the world’s most populous country affirmed that the bank and the government were inclined towards regulating the digital yuan and banning yuan-pegged digital assets. Through the notice, the Chinese central bank sought feedback from the public to make amends to the existing central banking law. The bank urged people to send in their feedback for the alteration of the draft before 23 November 2020.

China’s CBDC development turned several heads. With some lauding the country’s pace in the development of the digital yuan, a few others alerted the Chinese citizens that this asset would take away financial privacy. However, the country seems to be emphasizing outlawing yuan-pegged assets.

The law put forth with regard to digital assets suggests that the Renminbi encompassed both a physical as well as a digital form. Section 3 under article 22 in the revision draft proposed that any legal entity or an individual was prohibited to sell or issue tokens that impacted or replaced the circulation of the Renminbi. The revised draft further read,

“For anyone that violates such regulation, the PBoC will halt such activities and forfeit any proceed from the making and selling of yuan-backed digital tokens and issue a fine that is up to five times of the involved proceeds.”

The latest news proves that digital yuan would soon be a part of the global financial scene. However, the fact that the country is steering towards outlawing yuan-pegged stablecoins could be a major drawback for the several platforms that the country currently harbors.

China’s Blockchain and Fintech Superiority Might Oust America-led Global financial System, Says Ripple Co-founder

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China leads the world in terms of blockchain and fintech, while the US dollar is the reserve currency of the world. The United States has drawn a lot of criticism from industry experts for its inaction on cryptocurrency and blockchain technology. The latest person to comment on this subject is the co-founder of Ripple, Chris Larsen.

The co-founder and executive chairman of Ripple, Chris Larsen, published an op-ed piece arguing that the United States and China are drawn in a “technology cold war.” According to Larsen, the fact that Chinese miners control about 65 percent of the Bitcoin hash rate, they can gain complete control of the Bitcoin network in future. Moreover, the Ripple co-founder urged U.S. authorities to work in collaboration with blockchain and crypto firms in the country.

China’s blockchain and fintech supremacy

In Larsen’s argument, the superiority of China in blockchain and financial technology might be a significant catalyst to future conflicts between the two economic heavyweights. Furthermore, Larsen claims the U.S. dollar might lose its status as the world’s reserve currency in the wake of digital currencies, digital wallets, blockchain technology and interoperability procedures.

With China leading the world in the fronts as mentioned above, Larsen argues it creates a possibility for the nation to overtake the traditional financial system powered by the U.S. dollar through digital payments such as crypto-assets such as the digital yuan. In his piece, Larsen noted:

“For China, this is a once-in-a-century opportunity to wrest away American stewardship of the global financial system, including its ultimate goal of replacing the dollar with a digital yuan.” 

Can the Chinese reverse Bitcoin transactions?

According to a study conducted by the University of Cambridge Centre for Alternative Finance, 65 percent of all cryptocurrency mining operations take place in China. In Larsen’s argument, if the United States loses financial superiority to China, it could threaten digital currencies. He argues that the Chinese could take advantage of the accumulated hash power to influence crypto transactions.

China and the United States are currently embroiled in a battle surrounding technology advancement. Notably, the two companies are battling on the upcoming 5G technology. Chinese firms have been pushing aggressively to have a bite of the American telecom market. Still, U.S. authorities have put in place barriers to the Chinese, citing matters of national security.

Chinese Blockchain Industry Flourishing Despite the Economic Impact of Covid-19 with Over 10,000 New Firms Registered in 2020

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The Chinese blockchain industry is still flourishing, given the economic impact of the coronavirus pandemic. The Chinese authorities have licensed more than 10,000 new blockchain firms so far in 2020, according to blockchain analytics firm LongHash. Most of these businesses have business assets worth as little as 5,000 yuan.

Notably, with about half of the year remaining, the number of new registrations in China this year is the third-highest, only eclipsed by the previous two years. China saw its highest number of new blockchain firms set up back in 2018, hitting the same highs again in 2019. However, given the current rate of growth in the Chinese blockchain sector, the number of new registrations will exceed the year before, as per the analytics firm.

Blockchain firms closing down in China

There are currently a total of 84,410 registered blockchain firms in china. Out of this massive figure, only 29,340 firms are operational. Most of these new firms are based in the Chinese province of Guangdong, followed by the southwestern province of Yunnan.

Notably, most of these blockchain startups were established using small capitals as per the analytics firm. The majority of these blockchain startups were registered with only 5,000 yuan (about $719). Nevertheless, a small number of startups have a registered operating capital of more than 50,000 yuan ($7,175).

Chinese blockchain industry growing despite China banning crypto trading

Even though the Chinese authorities prohibited crypto trading and ICOs three years ago, the Chinese blockchain industry is still accelerating. The industry is instead growing substantially. Indeed, early this year, the Chinese congress reviewed a national blockchain fund bill that aims to promote innovation in the sector.

Furthermore, China has a total of 224 recognized blockchain projects which involve technology behemoths such as Walmart and Baidu. Interestingly, the PBoC is also on the verge of issuing digital yuan, while also participating in a variety of other blockchain-related projects.

The Central Bank of France Enlists Eight Financial Firms Services In Its Digital Euro Trials

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The Central Bank of France has enlisted eight major financial sector firms to collaborate on its bid to pilot test the digital Euro. The partnership includes the digital currency testing as well as the interbank settlements of the central bank.

The financial authority named firms includes Accenture, Euroclear, HSBC, LiquidShare, ProsperUS, SEBABank, and Societte Generale. Previous reports also say that France’s central bank has already conducted tests with one of the firms, Societte Generale. The tests were carried out in a real-world form of transaction, and besides that, with the aforementioned eight companies they intend to even extend the tests further.

Digital Euro trials to focus on key areas

In a statement released on July 20, France’s central bank revealed the planned tests would focus more on the three key areas. Core areas include devising new ways of trading financial instruments for central bank funds; evaluating digital currency regulation to boost the execution of international payments by making favorable conditions for these transactions, and updating the forms in which CBDCs are made available to the public.

Monetary authorities across the world working on CBDC

Following the devastating effects of COVID-19, more and more people have moved to embrace digital currencies. This has forced central banks around the world to step up their efforts to create a digital currency as people are now actively avoiding contact fiat currency. As a result, this action has prompted Central Banks to increase their efforts on CBDC in a bid to curb the virus’ spread.

More central banks around the world are expected to launch their digital currencies, with nations like China poised to become the first nation to issue its very own digital currency. For the last 5-6 years, the Chinese central bank has been working on their digital yuan. A  recent study by the Bank of International Settlements (BIS) shows that central banks are more likely to issue CBDCs in developing nations than in developed nations.

Japan’s Central Bank Has Set Up a New CBDC Research Team

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The Government of Japan is set to include the central bank digital currency  (CBDC) in its official economic plan. The Bank of Japan (BOJ) has announced earlier that it will begin testing the digital yen to determine its viability from a technical point of view. Reuters reported today that the bank said it had set up a new team, to take a closer look at the  central bank digital currencies

As well as this announcement of a new team, it was also stated that this team will be in charge of joint research into digital currency. It will be done along with other large banks including the Bank of England and the European Central Bank.

The review of the CBDC will be included in the Honebuto Economic and Fiscal Revitalization Plan. In particular, the Honebuto Plan is the foundation of the economic and fiscal policy of the Asian countries. The earlier report points out that Japan will consider a digital yen while coordinating with other nations

Japan’s central bank digital currency

The Japanese government stepped up its CBDC efforts immediately after China started testing its digital yuan. Last July, the Japanese central bank maintained that it had no plans to issue a CBDC. However, things seem to have turned quickly. The Bank of Japan, although it maintains that it does not have immediate plans to issue them.

The Bank of Japan has been researching digital currencies for a while now. Notably, the central bank has recently embarked on the offline use of the digital yen as it seeks to satisfy the two key features of digital currencies: resilience and universal access. According to a research paper shared by the BoJ, Japan faces unique challenges such as earthquakes and blackouts that require offline use of the CBDC.

Moreover, only 20% of the country’s total payments are digital, as most people prefer fiat payments. Although Japan is a technologically advanced nation, the country’s use of smartphones stands at only 65 percent. In conclusion, all of these factors point to the need for the digital currency of Japan’s central bank to be used offline.

 

Didi Chuxing ,Conducting The First Real World Trial of Digital Yuan

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Didi Chuxing-what many consider China’s  Uber to be conducting a test on the digital Yuan. As per Wednesday’s announcement, Didi joined the list of companies and banks to test China’s digital yuan developed by the People’s Bank of China (PBOC). The new electronic exchange medium will be known as the Digital Currency Electronic Payment (DCEP).
The ride-sharing giant features at least 550 million users and appears to be an appropriate platform to test the China’s digital yuan as a form of digital cash payment. This comes just a few days ahead of an expert analysis citing that the China’s Digital Yuan was only here to compete with the US dollar, not Bitcoin.

China Digital Renminbi, The First Mover of Stablecoin Space

Apparently, the cryptocurrency community has been monitoring the central bank’s digital payment system since China announced the development of a stablecoin.

Researchers at the Bank of America,  have stated that China is the first mover in the CBDC area; and have recognized the digital renminbi as a welcome asset for regional trading partners. This, the analysts claim, is on the belief that payments are becoming more electronic and cashless. Thus, making the China’s  a candidate that would most likely disrupt the US dollar.

Nevertheless, ahead of the first real-world trial of the China’s digital yuan, the Chinese Central Bank had initially launched mini-trials across four Chinese cities. The tests were carried out through various partnerships between the Central Bank, Starbucks, McDonald’s and Subway. These tests were the first phase of the trial, and the nation is now preparing to enter the next phase.

According to the People’s Bank of China Strategy and the timeline for the DCEP (Digital Currency Electronic Payment), Didi Chuxing and the Central Bank Task Force will be strategizing, designing and piloting the payment system with strict safety, governance, regulation and security precautions.

However, PBoC focuses on testing the digital stable coin as a native token on the Ride-Sharing application. It seems that the successful DiDi real-world test will lead to the final launch of the DCEP system. In fact, an official at the People’s Bank of China suggested plans to have a China’s digital yuan in use during the Beijing Olympics in 2022.

China’s Digital Currency Project Lessons to the Entire World

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China’s digital currency may not conquer the present financial ecosystem which has already been controlled by the United States dollar, however, the central bank digital currency (CBDC) project is a good foundation for world economies to build on.

Back in March, the Peoples Bank poof China (PBoC) launched the testing phase for its state-issued digital currency. The test, which is stipulated to be conducted in the Chinese cities of  Suzhou, Shenzhen, Xiong’an, and Chengdu and will entail the transfer of remuneration to state employees in the embodiment of the new CBDC.

China’s digital currency to derange the contemporary financial order?

The PBoC is planning for the central bank digital currency to be ready for use before the 2023 Olympics which will be held in an Asian country, takes place. China’s decision to develop a digital currency created waves among the policy community. Back on April 20, China commenced on the first testing stage of the CBDC. Following the launch of China’s digital currency, a report by the state media outlet, China Daily, stated that:

“A sovereign digital currency provides a functional alternative to the dollar settlement system and blunts the impact of any sanctions or threats of exclusion both at a country and company level”.

Despite the increased fuss on China’s digital currency threatening the contemporary financial system, there are several reasons to hesitate on this quickness and extent of this rather long declaration.  Firstly, as illustrated by Kenneth Rogoff, a professor of economics at Havard, the present dollar dominion is backed by “America’s deep and liquid markets, its strong institutions, and the rule of law”.

The professor’s observation becomes evident in the September 2019 Bank of International Settlements (BIS) study. As per the survey, the United States dollar holds onto its supreme currency reputation, being on one side of 88 percent of the entire trades, the SWIFT banking network, and as the report points out, dominating the worlds’ bank-to-bank money transfers,

The Chinese renminbi is the eighth most traded currency

Chinese renminbi, which is popular as yuan, is the eighth most traded currency in the world. Basically, the reason behind this is highlighted by Professor Rogoff who states that:  “China’s burdensome capital controls, its limits on foreign holdings of bonds and equities, and the general opaqueness of its financial system leave the Yuan many decades away from supplanting the dollar in the legal global economy.”

All in all, the subject of China’s digital currency begs for additional probe and given it will not depose the current financial order should not restrain us from questioning the inherent value proposition of a cryptocurrency. Back in 2019, ex-PBoC digital currency head, Yao Qian, made a captivating case for CBDCs. His observations should hold great weight to countries seeking to create a central bank digital currency.