People's Bank of China

China Is Drafting Laws for the Circulation of National Digital Currency

26/03/2020 by Idelto Editor

Amid the coronavirus pandemic, China’s central bank has reportedly completed the basic development of the nation’s central bank digital currency. The central bank is now drafting legislation for its circulation, according to local media. A number of patents have revealed what the digital yuan will be like.

Also read: 2x Bitcoin — Wanna Double Your BTC to the Moon? Forget About It

Coronavirus Pandemic Could Accelerate the Launch of China’s Sovereign Digital Currency

China’s central bank, the People’s Bank of China (PBOC), is reportedly closer to issuing its own digital currency, Chinese publication Global Times reported on Tuesday, citing an unnamed industry insider. The central bank, in collaboration with private companies, “has completed development of the sovereign digital currency’s basic function and is now drafting relevant laws to pave the way for its circulation,” the publication detailed. The insider elaborated:

As more central banks around the world are cutting interest rates to zero or even entering negative territory to release liquidity into the market amid the coronavirus (covid-19) pandemic, China should accelerate the launch of its digital currency.

The next step “involves digital currency legislation and working with banking and insurance regulators on supervision,” the insider noted, adding that this step “could be more lengthy” and “poses uncertainties for the exact date of the launch.” Cao Yan, director of the Advanced Research Institute of Blockchain under the Yangtze Delta Region Institute of Tsinghua University, believes that the PBOC “should accelerate the launch of its digital currency in the face of the unprecedented coronavirus pandemic,” the publication conveyed.

China’s central bank, the People’s Bank of China (PBOC), has reportedly completed the basic development of the central bank digital currency. The bank is now drafting relevant laws for the circulation of the digital yuan.

The PBOC started researching the possibility of launching its own CBDC in 2014 with the aim “to cut the costs of circulating traditional paper money and boost policymakers’ control of money supply.” In August 2019, Mu Changchun, deputy director of the central bank’s payments department, said that the digital yuan was “almost ready.” However, Governor Yi Gang later clarified that there was no timeframe for the launch and more time was needed for further research, testing, trials, assessments, and risk prevention.

Central bank officials explained that the CBDC will use a two-tier system where both the central bank and financial institutions will be legitimate issuers. Mu detailed that it would not be a cryptocurrency like bitcoin or a stablecoin, adding that the central bank has “completed the top-level design, standard formulation, functional research and development, joint debugging and testing.”

Patents Related to China’s Central Bank Digital Currency

A large number of patents have reportedly been filed relating to China’s central bank digital currency. The PBOC is said to have filed 84 patents relating to its plans to launch a digital yuan, as news.Bitcoin.com previously reported.

According to Global Times, a number of private companies participated in the development of China’s digital currency, including Alibaba, Tencent, Huawei and China Merchants Bank. Alibaba’s payment platform, Alipay, publicized five patents related to China’s CBDC between Feb. 21 and March 17, the news outlet detailed, adding:

The patents cover several areas of digital currency, including issuance, transaction recording, digital wallets, anonymous trading support and assistance in supervising and dealing with illegal accounts.

Many patents filed by the PBOC and Alipay revealed the nature and scope of China’s central bank digital currency.

The first patent, entitled “Implementation and Electronic Equipment of CBDC transaction,” was publicized on Feb. 21, the 8btc publication reported, asserting that by filing this patent, Alipay likely plans to participate in the second issuance in the national digital currency’s two-layer structure alongside commercial banks.

The next patent, revealed by Alipay on Feb. 25, was entitled “A Digital Currency Account Control Method and Device.” It indicates that “If regulators want to restrict illegal transactions, they need to go through the bank’s currency operating agency when illegal activities have occurred and it’s very difficult to recover the transferred fund,” the publication described.

Another patent, publicized on Feb. 28, was called “Digital Wallet’s Method and Electronic Device.” It discusses many types of digital wallets for different services. The next patent revealed by Alipay on March 17 was entitled “An Anonymous Trading Method and System Based on Digital Currency.” It details a system that uses temporary passwords for anonymous transactions.

Do you think China will be the first country to launch a central bank digital currency? Let us know in the comments section below.

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Central Bank of China Pumps 300 Billion Yuan Into Financial System, Cuts Loan Rates

18/02/2020 by Idelto Editor

The Chinese government has taken multiple steps so far to contain the economic fallout from the coronavirus epidemic, including interest rate cuts and financial injections worth billions of yuan. It did it again this week, extending the monetary easing provided by the central bank. With the budget under pressure, however, there are indications that Beijing may opt for some austerity measures later this year rather than a larger fiscal stimulus.

Also read: China Is Scrubbing Cash Notes to Stop Virus Spreading so Its Government Paper Money Won’t Kill You

PBOC Cuts Interest Rates on Loans for Lenders

The People’s Bank of China (PBOC) injected 200 billion yuan (almost $29 billion) into the country’s banking system which has been experiencing liquidity issues over the past year. On Monday, the funds were offered as one-year medium-term loans for Chinese financial institutions, according to Reuters. The central bank also cut the interest rate on the money from 3.25% to 3.15%.

Furthermore, the PBOC added another 100 billion yuan ($14 billion) through seven-day reverse repurchase agreements, Bloomberg reported. 1 trillion yuan (over $143 billion) of reverse repos were due to expire on the first day of the week but in the end the measures resulted in a net 700 billion yuan (over $100 billion) withdrawal from the markets.

This week’s interest rate reduction was largely expected by observers. A similar cut in the benchmark loan prime rate, which serves to determine the price of corporate and household loans, is likely to follow later this month. Economists surveyed by Bloomberg expect the same 10-basis point decrease of the rate on 1-year loans.

These measures come in the wake of early February’s PBOC announcement that it’s going to spend 1.2 trillion yuan (over $170 billion) to support growth in the Chinese economy hit hard by the coronavirus epidemic. The outbreak has already claimed the lives of more than 1,700 people in mainland China. The funds were dedicated to the reverse repurchase operation aiming to maintain stability in the currency market.

Experts quoted in the report have expressed similar opinions about the latest intervention. According to Zhou Guannan, an analyst at Huachuang Securities Co., the rate cut was expected and the supplied funding is relatively small. Becky Liu, head of China macro strategy at Standard Chartered Plc, thinks the PBOC does not intend to lower front-end rates any further.

Stimulus Through Fiscal Spending Only Not Feasible

Beijing has so far refrained from announcing a significant increase in its stimulus measures. Quoted by Reuters, the chief economist at Founder Securities, Yan Se, predicted that the PBOC will shift its focus from short term stabilization through large fund injections via reverse repo operations, to addressing the mid to long-term financing needs of Chinese businesses.

Additional fiscal spending and measures to encourage consumption remain on the table after China vowed to meet its 2020 targets for the economy last week, according to South China Morning Post. Local governments have been reportedly allowed to issue more debt to support growth in the short run. Corporate tax cuts should ease the burden on companies.

All this requires funding and the Chinese Minister of Finance, Liu Kun, believes efforts to reduce “unnecessary” government expenses must be made to fill in the widening budget gap. He discussed government plans in an article published recently in Qiushi, a magazine linked to the Communist Party of China. The minister pointed out that various external developments have intensified the downward pressure on the Chinese economy. At the same time, internal challenges such as the virus outbreak have created the need to increase fiscal revenue to cover the higher expenditures.

In 2019, China introduced the largest tax and fee reduction measures in its history, the government official remarked, amounting to over 2 trillion yuan, or more than 2% of GDP. These cuts will promote economic growth but also directly reduce fiscal revenue. Liu Kun also expects continuing pressure to increase spending, forcing the government to keep fiscal operations in a tight balance. “Under such circumstances, it is not feasible to implement a proactive fiscal policy solely by expanding the scale of fiscal expenditure,” the finance minister elaborated, indicating that Beijing is unlikely to commit to a large stimulus package as some investors have hoped.

What are your expectations about China’s fiscal and monetary policies in 2020? Share your thoughts in the comments section below.

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Chinese Regulators Question 8 Crypto Companies in Shenzhen

20/12/2019 by Idelto Editor

Authorities in Shenzhen have started pressuring crypto businesses operating in China’s tech capital. Eight companies, two suspected operators of trading platforms, and six entities allegedly associated with coin offerings, have been placed under inquiry, Chinese media revealed, with authorities reportedly questioning their representatives at a meeting hosted by Shenzhen Financial Regulatory Bureau.

Also read: Crypto Employees in China Work From Home to Avoid Government Pressure

Exchanges and ICOs Under Inquiry

Shortly after embracing blockchain, the Chinese government moved to demonstrate it hasn’t changed its negative stance on cryptocurrencies, trading venues and initial coin offerings (ICOs). For example, the Shanghai branch of the People’s Bank of China (PBOC) announced last month the strengthening of “supervision and control to crack down on virtual currency transactions.” A study led by the central bank concluded that only 4,000 out of 28,000 blockchain firms are actually working with blockchain technology. The “Bluebook on Blockchain” report claims that as many as 25,000 entities have attempted to issue tokens.

After investigations into the local cryptocurrency market were initially conducted in the financial hub Shanghai and the capital Beijing, China’s most innovative and tech-oriented city also issued a warning against crypto business in its area. Soon after that, the Shenzhen Financial Regulatory Bureau revealed that law enforcement had identified 39 enterprises suspected of illegal activities related to cryptocurrencies. The local financial regulator announced that a cleanup in the sector was about to start in the near future.

Eight of these companies were recently placed under inquiry, the 8BTC crypto outlet reported, during a “rectification meeting” held by the bureau this past Wednesday, Dec. 18, with the participation of 10 other regulatory bodies. According to the publication, two of the entities are believed to be involved in providing crypto trading services, while the other six are said to be linked to the ICOs of a number of tokens such as KAN, VSC, HOB, BST, and MCC. The regulators said they have conducted both online and offline investigations. Commenting on the case, a representative of the bureau stated:

That doesn’t mean that the companies that have not been inquired have no problem, and that those that have been questioned today at the meeting have troubles.

Crackdown on Crypto Escalates

A source at one of the investigated enterprises shared that regulators wanted to learn details about the company’s current situation and the scope of its business operations. They also reiterated that Chinese companies should not be engaged in token sales and other crypto-related financing. The news about the Shenzhen crackdown coincided with a new offensive by the state-run CCTV against crypto trading and scams under the banner of blockchain. A report emphasized that the government push to suppress such activities has intensified, adding to the fear in the industry which has already led to crypto employees working from home rather than their offices.

Chinese Regulators Question 8 Crypto Companies in Shenzhen — Shenzhen

The Beijing Business Daily provided further insights into the Shenzhen case, quoting various sources including some from the interviewed companies. The Chinese outlet lists their names along with the allegations but a member of the local crypto community contacted by news.Bitcoin.com expressed doubts about the full accuracy of some of the media reports. One of the mentioned names, for example, is actually an old name of а well-known crypto platform formerly based in Shenzhen which has been deregistered since 2017. The company currently operates from Japan and Singapore, where it’s not only registered but also maintains its physical offices.

A source with knowledge of the regulatory efforts told the Beijing Business Daily, however, that regardless of whether a company is headquartered abroad or in China, if it provides crypto trading channels to domestic customers, Chinese authorities will be going after it. The thrust to sever such links to overseas crypto platforms is led by the People’s Bank of China on national level, with local cleanups carried out by regional financial bureaus with public security services and tax administrations playing supportive roles. The overall principle of this approach, as the economic daily notes, is that no virtual currency transaction is allowed.

Do you expect China’s crackdown on crypto companies to intensify further? Share your thoughts on the subject in the comments section below.

Images courtesy of Shutterstock.

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Currency War Erupts as US and China Bring Out the Big Guns

06/08/2019 by Idelto Editor

What started out as a trade dispute between the world’s two largest economies is now a full-blown currency war as the U.S. and China bring their big guns to the battlefield. The impact on the global financial markets was immediate and severe, driving up safe-haven assets as ordinary people fear losing the value of their fiat savings.

Also Read: US, EU and Japan Could Trigger ‘Cold Currency War’ by Debasing Fiat

US vs China Trade War Heats Up

The U.S. – China trade war has rapidly escalated in the last few days, with the governments on both sides apparently pulling out all the stops. Last week U.S. President Donald Trump revealed his decision to impose a new 10% tariff on $300 billion worth of Chinese goods, in addition to his previously imposed tariffs on imports from the rival country. On Monday, the government of China retaliated by officially announcing it is suspending the purchases of U.S. agricultural products by Chinese firms as well as threatening to impose tariffs on the farm goods purchased after August 3.

The trade battle has also spread into the monetary arena and sparked what is now an undeniable currency war between the two economic superpowers. This Monday, the People’s Bank of China (PBOC) also allowed the Chinese currency to fall bellow the 7 yuan to 1 U.S. dollar threshold, an important level that it maintained for 11 years, ever since the 2008 financial crisis. And this happened after last Wednesday the U.S. Federal Reserve cut its key interest rates for the first time in more than a decade.

In a statement regarding the exchange rate changes on Monday, the PBOC explained that it “has accumulated rich experience and policy tools, and will continue to innovate and enrich the control toolbox, and take necessary and targeted measures against the positive feedback behavior that may occur in the foreign exchange market.” This was taken by the American side as an official announcement by the Chinese central bank that it remains committed to fight in order to defend its interests on the currency front.

The Pot Calling the Kettle Black

In a response to these recent developments, the U.S. Treasury Department announced on Monday that Secretary Steven Mnuchin, under the auspices of President Trump, has officially determined that China is a ‘Currency Manipulator.’ As a result of this determination, Mnuchin will now turn to the International Monetary Fund (IMF) in order to “eliminate the unfair competitive advantage created by China’s latest actions.”

The Treasury’s announcement complains that: “In recent days, China has taken concrete steps to devalue its currency, while maintaining substantial foreign exchange reserves despite active use of such tools in the past. The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade.”

Besides asking the IMF to probe into its trade rival’s currency devaluation, this step will also allow the Trump administration to take further actions against China within the American legal system. These include banning Chinese companies from seeking trade financing or taking part in U.S. government contracts.

Currency War Erupts as US and China Bring Out the Big Guns — U.S. Treasury Secretary Steven Mnuchin

President Trump himself came out with a tirade against China on Twitter, accusing it of manipulating its currency while simultaneously putting pressure on the Fed to effectively devalue the U.S. dollar again. He wrote: “China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!”

The U.S. president also added that: “China has always used currency manipulation to steal our businesses and factories, hurt our jobs, depress our workers’ wages and harm our farmers’ prices. Not anymore! China is intent on continuing to receive the hundreds of Billions of Dollars they have been taking from the U.S. with unfair trade practices and currency manipulation. So one-sided, it should have been stopped many years ago!”

Labeling China a currency manipulator was one of Trump’s 2016 presidential campaign promises as part of his strategy to focus on the trade imbalance between the two countries. By taking this action now he is signaling to his voters that he is still focused on this issue as the 2020 elections are coming up as well as to the Chinese leadership that he is not going to back down, despite the economic impact on the American economy.

Immediate and Severe Financial Impact

The news that the two biggest economies in the world are headed for a direct collision, with international trade and currency battles, sent global stock markets way down. In the U.S., the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite all dropped between 2.9 to 3.5% on Monday, the worst daily performance for all three major indexes during the whole year of 2019. Chinese stock markets were also badly hurt on Monday and trading across Asia opened with a wave of red screens on Tuesday morning.

Unsurprisingly, the currency war has also triggered a flight to safety by investors who see both governments across the Pacific struggling to weaken their own fiat currency in an attempt to hurt the other side. Gold, for example, jumped to a price level not seen in more than six years on Monday.

This phenomenon is also widely considered to be one of the driving factors behind the recent sharp upturn in the cryptocurrency markets. With the situation only heating up and no end in sight, this might be the start of a new long term crypto bull market as more investors will see it as a hedge against their savings losing value. If you want to diversify some of your money into digital assets, you can purchase BCH, BTC, ETH, XRP, LTC, and BNB with a credit card at Buy.Bitcoin.com or with all other payment methods over at Local.Bitcoin.com from peer-to-peer traders.

What do you think about the global currency war and how it will impact the cryptocurrency ecosystem? Share your thoughts in the comments section below.

Images courtesy of Shutterstock.

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PBoC: Bitcoin Trading in Chinese Currency Drops Below 1% of World Total

08/07/2018 by Idelto Editor

Bitcoin trading in renminbi (RMB) has dropped to less than 1 percent of the global total, the central bank of China announced. The People’s Republic banned yuan-crypto trade last year, prompting the exodus of hundreds of Chinese crypto businesses, including some of the world’s leading trading platforms.

Also read: Crypto Exchange Binance Expects up to $1 Billion Profit in 2018

‘Zero-Risk’ Exit for 88 Exchanges, the People’s Bank Says

The trading of Bitcoin with the Chinese national currency, the renminbi (RMB), has fallen to less than 1 percent of the world’s total, the People’s Bank of China (PBoC) announced this Friday, quoted by Xinhua. At its peak, the RMB/BTC trade reached more than 90 percent of the volume, the state-controlled news agency noted in its report without detailing the data.

In September, 2017, Beijing authorities imposed a ban on the trading of cryptocurrencies like bitcoin with the Chinese yuan, referring to the presumed financial risk associated with the rapidly expanding crypto market. The measure also prohibited Chinese businesses from conducting crowdfunding campaigns through Initial Coin Offerings (ICOs).

In its announcement, The People’s Bank of China said the country had ensured a “zero-risk exit for 88 virtual currency exchanges and 85 ICO trading platforms,” since last year. Xinhua also quoted a “blockchain analyst” saying that “The timely moves by regulators effectively fended off the impact of sharp ups and downs in virtual currency prices and led the global regulatory trend.” The opinion belongs to Zhang Yifeng from the Zhongchao Credit Card Industry Development Company.

In February this year, reports came out in Hong Kong that advertisements of products and services offered by companies from the crypto industry no longer appear in China’s major search engines and social networks. The absence of sponsored crypto content prompted local media to allege that the ban also censors all crypto-related ads.

Chinese Platforms Expanding Across the Globe

PRC regulators imposed a comprehensive ban on bitcoin trading in September, 2017, when they ordered local exchanges to suspend their operations. The authorities in the People’s Republic also tried to block access to foreign cryptocurrency trading platforms offering services to Chinese residents. The restrictions encompassed the crypto-yuan trade hitting some of the world’s largest trading platforms.

The ban forced exchanges with Chinese roots, like Huobi, OK Coin, and Binance, to halt all trading in the country and seek to relocate to more favorable jurisdictions. The trading platforms founded new entities and opened offices in Hong Kong, Singapore, South Korea, Japan and the United States, which allowed them to continue their activities and even grow significantly.

Huobi, once one of the largest Chinese cryptocurrency exchanges, is now headquartered in Singapore and maintains presence in Hong Kong, the US and Japan, although it recently decided to close the accounts of Japanese residents as a result of compliance issues. The exchange also announced the launch of a trading platform in Australia supporting 10 pairs against the AUD, including bitcoin cash (BCH), with plans to add new cryptos in the future. Huobi confirmed it will open an office in London, too.

In April, the Hong Kong based Okex, the digital asset exchange founded by OK Coin CEO Star Xu, revealed plans to expand its operations to Malta. Its announcement came after in March, Binance, currently the largest crypto exchange by trade volume, shared its intention to move to the island nation. Binance wants to offer EUR and GBP pairs from Malta, which is a member of the European Union. The company is also launching a fiat-crypto trading platform in Uganda.

Do you think Chinese regulators will eventually reverse the ban on crypto trading? Share your expectations in the comments section below.

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