Digital Yuan

China Issues Digital Currency Guide for Party Cadres

14/01/2020 by Idelto Editor

Understanding a complex subject should be easier with access to educational materials. With blockchain and CBDC now part of Beijing’s political vocabulary, the Communist Party of China (CPC) has issued a guide to digital currencies meant to prepare party officials for upcoming changes in the country’s financial system.

Also read: China Saw $11.4 Billion in Crypto-Based Capital Flight Last Year

Handbook Educates Party Functionaries About the Impact of Digital Currencies

“Digital Currency: A Reader for Cadres” is part of a series of guides on various current topics, from artificial intelligence to blockchain technology, Bloomberg reported. The handbook has been released by the publishing house of the largest newspaper group in China, People’s Daily, and is now in printing for its second edition.

In 200 pages, the guide acquaints readers with important aspects of digital currencies. Its 23 articles cover not only the basics but also more sophisticated matters such as the impact these currencies could have on monetary systems and global finance, the publication details. Noting their goal is to assist CPC cadres in expanding their understanding of the underlying technology, the authors have stated on the cover:

Digital currency is inevitable in the course of history.

The guide comes out as China prepares to complete the development of its central bank issued digital currency (CBDC). The research into the matter started about five years ago but the People’s Bank of China (PBOC) stepped up its efforts after the announcement of Facebook’s Libra project last summer. Also, a Politburo meeting in October revealed that the Chinese leadership wants the country to gain an edge in the blockchain field.

No timetable has been released for the issuance of the sovereign coin yet but according to recent reports by Chinese media, the central bank has completed “top-level design, standard formulation, functional research and development” as well as “joint testing” of the digital yuan. PBOC is now focusing on establishing “stability, security, and control,” the bank’s Digital Currency Research Institute announced.

Launch Date of Digital Yuan Still Unknown

Despite the stated progress, a launch date was not announced. According to previously available information, the Digital Currency Electronic Payment (DCEP) system, as the project is also known, will be introduced with a two-tier approach. PBOC will first issue the currency to commercial banks, which will then distribute it to the public. In December, the 8btc crypto outlet reported that the digital currency will be piloted in Shenzhen, China’s tech hub, and the city of Suzhou.

The trials will be led by the People’s Bank of China and will be conducted with the help of four state-owned commercial banks: Industrial and Commercial Bank of China (ICBC), Agricultural Bank of China (ABC), Bank of China (BOC), and China Construction Bank (CCB). Three leading telecom operators, China Mobile, China Telecommunication and China Unicom, will also take part, the website detailed.

Parallel to the development of the digital yuan, Chinese authorities have been cracking down on platforms working with decentralized cryptocurrencies, with particular focus on exchanges and companies related to ICO projects. The government has also been busy dealing with serious issues in the traditional financial system, where a liquidity crisis is brewing on the interbank lending market with Beijing intervening to bail out several small banks. The debt-to-GDP ratio of China has reached 255% in the past decade. And the latest symptom of the hurting Chinese economy manifested itself in figures showing a 7.5% drop in passenger car sales last year, the second annual decline in a row.

What do you think about the digital currency guide issued by the Communist Party of China? Tell us in the comments section below.

Images courtesy of Shutterstock.

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US and European Regulators Say Crypto a Priority This Year

12/01/2020 by Idelto Editor

Several regulators in the U.S. and Europe have made cryptocurrency among their top priorities this year. The Securities and Exchange Commission’s compliance office and the European Securities and Markets Authority, in collaboration with other regulators, have outlined their plans to focus on crypto oversight. Further, China’s central bank has made digital currency a priority.

Also read: Regs Roundup: SEC Actions, Crypto Tax-Free in Korea, New Chinese Laws

SEC Compliance Office Focused on Crypto

The Securities and Exchange Commission (SEC)’s Office of Compliance Inspections and Examinations (OCIE) announced its 2020 priorities on Tuesday. The office conducts the SEC’s national exam program, with a mission to protect investors, ensure market integrity, and support responsible capital formation. The exam results are used by the Commission to inform rule-making initiatives, identify and monitor risks, improve industry practices and pursue misconduct.

The OCIE stated that advancements in financial technologies, including digital assets, “warrant ongoing attention and review.” Noting that “The digital assets market has grown rapidly and presents various risks, including for retail investors who may not adequately understand the differences between these assets and more traditional products,” the document confirms:

OCIE also will continue to identify and examine SEC-registered firms engaged in the digital asset space.

The examinations will assess six key areas: investment suitability, portfolio management and trading practices, safety of client funds and assets, pricing and valuation, effectiveness of compliance programs and controls, and supervision of employees outside of business activities.

The OCIE oversight also covers robo-advisors, which are registered investment advisors that provide services to clients through automated investment tools and platforms. The compliance office will also focus examinations on the Financial Industry Regulatory Authority (FINRA), its operations, regulatory programs, and the quality of FINRA’s examinations of broker-dealers and municipal advisors. FINRA has approved several crypto investments. In October, it approved shares of Grayscale Digital Large Cap Fund for public quotation.

Europe Focused on Creating ‘Sound Legal Framework’ for Crypto

Over in Europe, the European Securities and Markets Authority (ESMA) released its Strategic Orientation 2020-22 on Thursday, highlighting its priorities for the year. Located in Paris, ESMA is a European Union financial regulatory agency and European Supervisory Authority.

According to the document, ESMA requires the “EU market participants to acknowledge the risks that may stem from digitalization by ensuring business continuity and the use of adequate and up-to-date technology, as well as adequate protection against cyberthreats, and through proper data protection and data quality management.” The regulator described:

The dangers of cyberthreats to the financial system as a whole and a sound legal framework for crypto assets are increasingly becoming areas of focus for ESMA together with the other European Supervisory Authorities, the European Systemic Risk Board, the European Central Bank and the European Commission.

Emphasizing that fintech can contribute to well-functioning financial markets and investor protection, ESMA says it “will therefore actively examine the new opportunities technology might bring especially for investor protection and share expertise and know-how with national authorities.” The regulator will collaborate with national regulators to achieve its goals.

China Prioritizes Digital Currency

In Asia, the People’s Bank of China (PBOC) announced its seven key policy priorities for 2020 on Jan. 5, following an annual conference it held last week in Beijing.

China’s central bank will “strengthen research and development and application of financial technology,” the announcement details. The PBOC specifically stated that it will “continue to steadily advance research and development of a legal digital currency.”

While cracking down on crypto and initial coin offering activities in the country, the PBOC has been working on issuing its own digital yuan. Local media reported on Friday that the bank has completed the digital currency’s top-level design and preliminary testing.

What do you think of the U.S. and European regulators making cryptocurrency a priority this year? Let us know in the comments section below.

Disclaimer: This article is for informational purposes only. It is not an offer or solicitation of an offer to buy or sell, or a recommendation, endorsement, or sponsorship of any products, services, or companies. Bitcoin.com does not provide investment, tax, legal, or accounting advice. Neither the company nor the author is responsible, directly or indirectly, for any damage or loss caused or alleged to be caused by or in connection with the use of or reliance on any content, goods or services mentioned in this article.

Images courtesy of Shutterstock, SEC, ESMA, and PBOC.

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China Takes Another Step Away From USD Hegemony

01/01/2020 by Idelto Editor

The China Foreign Exchange Trade System (CFETS) announced that effective January 1, 2020, the system “will adjust weights for CFETS RMB Index,” decreasing the weighting of the USD for the second time in the currency basket’s history from 22.40% to 21.59%, and increasing the Euro from 16.34% to 17.40%. The change could signal further disassociation with USD due to ongoing U.S./China trade difficulties. Also, reports of increased trade with the EU over 2019 and the fact that both China and the European Union are actively working on central bank digital currencies (CBDCs), have some speculating that dollar hegemony is being challenged by the move.

Also Read: Regulatory Roundup: China Blockchain ETF, France New Crypto Rules, Tokens Like Money in Russia

CFETS Adjusts Yuan Index

The CFETS yuan index has been around since 2015 and aims to measure the yuan’s performance against a basket of 24 currencies. The newly announced adjustment will see the influence of USD over this basket trimmed back for the second time since its creation. The last time the currency saw its weight diminished was in January 2017, falling from 26.40% to 22.40%. The 2020 cutback sees the dollar fall again from 22.40% to 21.59%.

The euro, on the other hand, remains the second largest currency in the basket, and will see its influence rise from 16.34% to 17.40%. The official announcement states that the change is due to updated trade data, and according to Chinese news outlet Global Times “shows the fading role of the dollar in the currency basket as the trade war between the world’s top two economies has weighed on bilateral trade.”

Also taking a hit will be the fourth largest currency in the basket, the USD-pegged Hong Kong dollar, falling from 4.28% to 3.57%.

Trade Tensions and CBDC Development

The ongoing trade and tariff war between the U.S. and China may see some changes with the upcoming “phase one deal,” which could be signed this month, bringing a proposed reduction of U.S.-imposed tariffs on Chinese goods in exchange for purchase of American agricultural products. It is not certain whether the deal will go through. Relations with China’s biggest trading partner, on the other hand, appear to be thriving.

“The nation’s yuan-denominated trade with the EU, China’s top trading partner, posted a rise of 7.7 percent in the first 11 months [of 2019], per Chinese customs statistics,” Global Times reports. The Chinese government’s relationship with the EU is interesting, especially given that both the EU and China are actively working on implementing central bank digital currencies. The ECB recently published a report on their hypothetical “Eurochain” network, and China appears to be ready for pilot testing of the digital yuan. This in stark contrast to the perceived cold feet of U.S. financial planners when it comes to creating a digital version of the greenback.

Whether CFETS adjustments signal broader intentions related to these areas is yet to be seen, but the fact that Chinese authorities are measuring the strength of the yuan now less relative to USD — at least where the trade index is concerned — has been clearly demonstrated. The CFETS Bank for International Settlements (BIS) index also notably saw changes this time around in replacing the Venezuelan bolivar with the Icelandic krona.

What are your thoughts on the CFETS index adjustment? Let us know in the comments section below.

Image credits: Shutterstock.

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PBOC Official: China’s Digital Yuan Won’t Be a Speculative Currency Like Bitcoin

23/12/2019 by Idelto Editor

According to recent statements by People’s Bank of China (PBOC) official Mu Changchun, the country’s digital yuan is ready for trials. The central bank digital currency (CBDC) will decidedly not be a speculative asset like bitcoin or stablecoins, and will not need a currency basket for backing, Changchun affirmed. Reactions to the announcement are varied, with some Chinese traders disappointed, reportedly saying they will find other means to speculate.

Also Read: China’s Inflation Hits a Record 4.5% as Beijing Prepares to Test Digital Yuan

Not Bitcoin, Not Speculative

Head of the PBOC Digital Currency Research Institute, Changchun stated Saturday at a financial meeting in Beijing that “The digital yuan is used to spend, not for speculation. It does not have the characteristics of bitcoin speculation, nor does it require a basket of assets to support its value like stablecoins,” reported Shanghai Securities News.

The media outlet details that Changchun affirmed the digital yuan would not be a crypto asset like bitcoin or a type of stablecoin as being proposed by Libra.

Preparations ‘Basically Completed’

The report quotes Changchun as saying:

At present, the digital currency DCEP [Digital Currency Electronic Payment project] of the People’s Bank of China has basically completed the top-level design, standard formulation, functional research and development, joint debugging and testing.

The next step is to begin rolling out pilot programs for the currency, though no specific timeframe has been given. When this is complete, the projected plan is to issue the currency to commercial banks which would then disperse the CBDC to the public.

Public Reaction to Changchun’s Statement

Reactions to the news have been varied, according to reports. One user of social media platform Weibo reportedly remarked “If you don’t allow me to speculate on the digital form of the yuan, I’ll speculate on other things, like foreign exchange.” Another on Sina.com is quoted as saying “So there will be no fun in it.”

Reception outside of regional media hasn’t been as dynamic, possibly because few are surprised by the news, given the Chinese government’s established track record of standing in opposition to speculative practices when it comes to crypto.

Despite bullish statements in November from President Xi Jinping, officials have made it clear that the Chinese government’s push is for the development of a regulated blockchain industry and not for ICOs or other such speculative practices. Banks may not deal in decentralized cryptocurrencies such as bitcoin, nor can exchanges directly facilitate trading thereof.

What do you think about Changchun’s statements? Let us know in the comments section below.

Image credits: Shutterstock, Shan_shan, fair use.

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Regulatory Roundup: Crypto ‘Inevitable’ in India, China Rankings, NY Streamlines Policy

16/12/2019 by Idelto Editor

In this regulatory roundup, we cover a positive crypto story in India, China’s year-end rankings, and the European Central Bank entering the stablecoin race. We also cover the New York regulator’s proposed Bitlicense revision — the first in five years — and several other notable regulatory developments in the crypto space.

Also read: Regulatory Roundup – Bitcoin Futures Fund Approved, India’s RBI-Backed Digital Currency

Crypto Is ‘Inevitable’ in India

As the Indian government is deliberating on the country’s crypto policy, a prominent member of India’s parliament, Dr. Subramanian Swamy, said that “cryptocurrency is inevitable.” His remark followed the statements made by the governor of the Reserve Bank of India (RBI) last week regarding cryptocurrencies and digital rupees. Dr. Swamy further said: “I advocate that India as an established super power in software should accept to make the transition to cryptocurrency.” He will chair a conference that will take place at UN India’s headquarters on Dec. 18 where cryptocurrency will be discussed.

NY Proposes New Rules, IRS Still Undecided

In the U.S., the New York State Department of Financial Services (DFS) has proposed new Bitlicense rules to streamline the requirements for licensees seeking to list new coins. This is the first review of the regulation in five years. The DFS proposes creating a pre-approved list of coins for all licensees to list without having to obtain approval. The coins being considered for the pre-approved list are BTC, BCH, ETH, ETC, LTC, XRP, PAX, and GUSD.

Licensees can also obtain approval for their firm-specific listing policy. Once this policy is approved, the licensee will be able to self-certify the coins they want to list in the future without having to obtain prior approval; they only need to notify the DFS of the intention to list those coins. The regulator added:

All VC [virtual currency] licensees are required to keep DFS informed, no later than at the time of their next quarterly filing, of all coins to be used or offered in connection with their virtual currency business activities.

As for how crypto transactions are taxed in the U.S., the Internal Revenue Service (IRS) has not made up its mind regarding the tax treatment of promotional airdrops, one of several unclear areas from its new tax guidance issued in October. The IRS, however, has started using the new Schedule 1 tax form requiring all tax filers in the country to disclose crypto activities.

ECB Entering Stablecoin Race

The new president of the European Central Bank (ECB), Christine Lagarde, held her first press conference as head of the ECB last week. The former International Monetary Fund (IMF) chief said “there is clearly a demand” for stablecoins and proceeded to outline her plans to lead the ECB “ahead of the curve.” She believes that her plans will be realized by mid-2020.

However, Lagarde said she only knows of one stablecoin at the moment, without specifying which one. A recent EBC report, however, discusses a number of stablecoins including Facebook’s libra, tether, and nubits.

China’s Digital Yuan and Crypto Project Rankings

Chinese news outlet Caijing reported on Dec. 9 that China’s central bank, the People’s Bank of China (PBOC), is preparing to test its digital currency in two cities: Shenzhen and Suzhou. There has been much speculation about when China will release its digital yuan, but the PBOC has not given a timeframe for the launch, noting that more tests and research need to be conducted.

Meanwhile, China’s Center for Information and Industry Development (CCID), under the country’s Ministry of Industry and Information Technology, has released the 15th update of its crypto project rankings — the last one this year. 35 crypto projects were evaluated and ranked for the center’s Global Public Blockchain Technology Assessment Index. EOS still tops the overall ranking, followed by Ethereum and Tron. Bitcoin and Bitcoin Cash have climbed up from the previous rankings.

Denmark’s 20,000 Tax Letters, Sweden’s Approval

Denmark’s tax authority, Danish Skattestyrelsen, has sent out warning letters to about 20,000 cryptocurrency owners, asking for a full breakdown of their transactions and for them to file amended returns if needed. The tax agency obtained information on these traders and all their purchases and sales made between Jan. 1, 2016, and Dec. 31, 2018, from three local crypto exchanges.

Over in Sweden, the Swedish Financial Supervisory Authority has approved the base prospectus filed by Amun AG for an exchange-traded product. Sweden was also in the news last week for its plan to create a central bank digital currency pilot platform. The country’s central bank, the Riksbank, explained that “The primary objective of the e-krona pilot project is to broaden the bank’s understanding of the technological possibilities for the e-krona.”

What do you think of the regulatory developments in this roundup? Let us know in the comments section below.

Images courtesy of Shutterstock.

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