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Tether Plans to Issue Stablecoin Backed by Chinese Yuan

Tether has been reportedly working on a new stablecoin pegged to the Chinese Yuan. The stablecoin project named “CNHT” came from the intention of Zhao Dong, one of the shareholders of the Bitfinex crypto exchange.

Zhao Dong’s digital banking business, RerenBit will be supporting CNHT’s trading and deposit services as soon as it is launched.

Zhao also confirmed that he believes that the new stablecoin “will be launched very soon, possibly within weeks.” The new stablecoin’s reserve is expected to be held in a Belgian bank.

The two main benefits explained by Zhao include that it would make Tether less dependent on the US dollar while boosting the circulation of the Renminbi held offshore.

He later added:

“Personally, I think the offshore yuan stablecoin could boost the circulation of offshore Renminbi and internationalize it. Regulators may be happy to see it proceed and succeed.”

Amidst the new stablecoin plans, Bitfinex and Tether are still under an ongoing investigation regarding an alleged cover-up. The NYAG is inquiring into Bitfinex’s loss of access to funds totaling to $850 million and borrowing funds from Tether’s US dollar reserve.

Facebook’s Libra Encouraged to Exclude the Chinese Yuan Being Tied to the Stablecoin

While Facebook is facing regulatory approvals for its Libra project, Facebook told US senators that the initial group of currencies that Libra will be likely backed by the US dollar, Euro, Yen, British Pound, and the Singapore dollar.

Facebook reportedly produced the list regarding the concerns expressed by Virginia Democratic Senator Mark Warner that China may try to push the Libra Association to include the yuan in the stablecoin, Libra. Senator Warner mentioned that China has been encouraging other governments to include its currency in their reserve holdings, and asked Facebook to commit to excluding it from the list of currencies backing Libra.

The Libra Association would be taking all factors into consideration, “Any decision whether to add a new currency to the Libra Reserve would be made based on all the facts and circumstances at the time, including any direct or indirect regulatory restrictions.”

Libra would be backed by a reserve fund consisting of government-issued currencies and debt instruments.

Facebook and the Libra Association have been facing a lot of pushback from lawmakers and regulators regarding their plans to launch their digital currency; concerns have been raised regarding privacy and data security. Facebook also sees an alternate route of launching the digital currency outside of the US regardless of concerns from US regulators.

Image via Shutterstock

Partner at Proof of Capital Presumes That China’s Digital Currency Could Go Live in No Time

In her view, Edith Yeung, fund manager, and partner at Proof of Capital, a blockchain-based venture capital fund, presumed that the Chinese Government could launch their digital currency, virtual yuan, in no distant time, assumably, within the next six to twelve months.

While speaking to reporters at East Tech West conference in the Nansha district of Guangzhou in China on Wednesday, Yeung stated that China has been working on creating its digital currency for the past few years.

“So I think definitely within the next 6-12 months,” she excitedly presumed. Yeung maintained that even though the US dollar remains the major global currency, the upcoming Chinese yuan has the possible potential to challenge it.

Yeung then said that she believed the Chinese government is being quite strategic in bringing about the adoption of the digital Yuan, which would make many countries to want to work with China.

“I think the Chinese government is being really smart about driving the adoption of RMB (renminbi, another name for the Chinese yuan),” Yeung said. “Can you imagine, especially for the One Belt One Road initiative, they (start) to lend all in virtual RMB? Many of these countries will want to work with China to start adopting virtual RMB.”

She then offered the United States to come up with better policies and strategies that will lead to the creation of a digital dollar. “I really think that the United States needs to hurry up to have strong thinking and policy, at least a direction for virtual USD,” she said.

Image via Shutterstock

China's Central Bank Governor Says no Timeline for Digital Currency Launch

Yi Gang, the governor of the People’s Bank of China has declared that there is no specific timeline to the official release date of the digital Yuan currently under development.

Yi stated as revealed in a transcript of an interview with the Financial Times and China Finance that the current pilot test phase is “still a routine work in the research and development process, and does not mean that the digital RMB will be officially issued. There is no timetable for when it will be officially launched.”

The Foundation of the Digital Yuan

The Chinese government was not an early adopter of cryptocurrencies and blockchain-related projects. The Chinese government’s relationship with the cryptosphere at the early stages was rightly captured by Edith Yeung, head of 500 Startups as a “love-hate relationship.” Yeung also said in an interview with CNBC at East Tech West that the Chinese government is investing in blockchain projects but decidedly averse to the financial aspects of cryptocurrencies. The involvement of the Chinese government over the years became more pronounced when China announced it will be launching its own digital currency whose development has been in progress since 2018. The government hopes this move will help strengthen the Yuan both locally and internationally.

Plans to Fast-track General Blockchain Integration

The development of the digital Yuan entered a test pilot phase in April 2020 with 4 cities actively involved in the test. The Governor of the People’s Bank of China also noted that the digitization of the Yuan is significant in that it is “conducive to efficiently satisfying the public’s demand for legal currency under the conditions of the digital economy.”

The digitization of the Chinese economy with blockchain-based innovations keeps making the rounds and industry experts believe that these moves can serve as an insurance scheme to the economic threats from the United States of America.

Goldman Sachs' Yuan Crash Forecast Could Affect Bitcoin Price, Bull Run Ahead?

Goldman Sachs is expecting the Chinese yuan to fall to its lowest since 2008 in the coming months due to the existing US-China trade war, and now the US potential sanctions on China over its feud over Hong Kong.

US President Donald Trump has announced earlier that he will be looking to end preferential treatment for Hong Kong in terms of trade and visa-free travel, due to the new security law for Hong Kong approved by Beijing.

The yuan has been forecasted by Goldman Sachs to fall to 7.25 per dollar during the next three months before recovering to 7.15 per dollar over six months, then to 7 per dollar in the next year. As the firm sees the yuan falling to its 2008 low, the potential for Bitcoin to experience an explosive price rally has been raised.

“Disputes between the two countries now cover a range of issues that are unlikely to be resolved soon,” wrote Goldman strategists, including Zach Pandl. Due the tolerance from the Chinese central bank on gradual currency depreciation, the strategists added, “As result, we expect ongoing capital outflow pressures to weigh on the exchange rate and are revising our dollar-yuan forecasts higher.”

Bitcoin comes in for people who are looking to bypass China’s strict capital control over sending money offshore. China has previously banned Bitcoin trading as well as trading of other cryptocurrencies, although the development of blockchain has been widely praised in the country.

As a recession is widely expected for China as well as the rest of the globe, Bitcoin could become a safe-haven asset for most, and Bitcoin would be expected to run a bullish track in the coming months.

China passes civil code allowing inheritance of crypto

At the Thirteenth National People’s Congress held in Beijing China, the parliament passed a new civil code that protects the civil rights of inheritance, marriage, property, personality, and contract infringement.

According to Lixin Yang, a professor at Renmin University of China, the civil code states that “When a natural person dies, the legacy is the personal legal property left by she/he.”

Personal legal property in this case also means “internet property” including virtual currencies. Chinese citizens will be able to leave their cryptocurrency and virtual assets to their heirs, coming into effect on January 1, 2021.

Chinese government to consider cross-border stablecoin for Hong Kong

Chinese officials are to consider a cross-border Asian stablecoin in Hong Kong, to facilitate a cross-border payment network between three Asian countries, and four currencies – China, Japan, South Korea, and Hong Kong. The world’s second-largest economy is aiming to build Hong Kong into an international financial center in the digital economy era.

Neil Shen, also known as Shen Nanpeng, member of the National Committee of the Chinese People’s Political Consultative Conference and managing partner of Sequoia Capital China will submit five proposals to the two sessions this year. One of the proposals includes the innovation and technology development of the Greater Bay Area, which he has submitted consecutively in the past three years.

In Shen’s proposals, he suggested a Hong Kong-based cross border stablecoin, as a foundation for a cross-border settlement network between China, Japan, and South Korea as well as the special administrative region.

Senate Hearing Views Digital Dollar CBDC as Critical to Maintaining Global Reserve Currency Status

The United States government’s plan for its digital dollar or central bank digital currency (CBDC) may have just reached a new level of urgency, as the US hopes to maintain its most effective tool of power—global dependence on the Federal Reserve and the US dollar.

The US Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy conducted a hearing on July 22, entitled—Winning the Economic Competition—which mainly focused on the rising economic power struggle between China and the United States.

The subjects being strategically discussed by the Senate focused on maintaining the US dollar’s dominance as the global reserve currency for the global economy as China’s influence continues to rise. The hearing featured five speakers who covered topic such as supply chain dependence and emerging technologies like 5G—with one speaker bringing the topic back to digital dollars.

While the previous hearings have had a major focus on what role digital asset could play in maintaining the economic status quo, cryptocurrency was referenced in this Senate hearing as one of the many tools that could maintain US economic supremacy.

Christopher Giancarlo, Former Commodity Futures Trading Commission (CFTC) Chairman was in attendance in Wednesday’s Senate hearing and he turned the subject to digital dollar experimentation and the necessity to begin pilot programs to to test the uses of a Federal Reserve issued tokenized dollar.

Subcommittee Chair, Senator Tom Cotton (R-Ark) believes the idea of a digital dollar has moved beyond just academic discussion and asserted that CBDC development should be escalated—adding that is needs to be “better than Bitcoin.”

Senator Cotton said:

“Maintaining the dollar’s supremacy is not only an economic matter, it is a critical strategic matter as well. Is what allows us to have such effective sanction regimes around the world as well as other benefits.”

Cotton then invited Giancarlo to discuss the next steps required before a digital dollar could be launched. Crypto Dad, as Giancarlo is sometimes referred to due to his openness to innovation, went on to emphasize the issue of which nation’s values will define the global reserve currency. The United States dollar has enjoyed this status for the better part of a century. Giancarlo warned that China may gain the edge in the near future as it is in the process of rolling out its digital Yuan while the US is far behind in development.

Witness to the hearing, Walter Russell Mead, the James Clarke Chace Professor of Foreign Affairs and Humanities at Bard College and a member of the Hudson Institute, lent his support to the Senator Cotton’s argument. He asserted that the US Federal Reserve System is one of the nation’s “most effective tools of power.”

On the evolution of the dollar to meet the digital landscape, Mead said:

“We have to assume that as the nature of finance changes, the nature of currencies change, we have to stay at the leading edge…we need to be thinking actively about how the dollar can be a fundamental building block for economic activity in this time of the information revolution.”

Bank of Japan Now Considers its CBDC Project a Top Priority

The Bank of Japan is reportedly expediting the development of its Central Bank Digital Currency (CBDC).

A top official of the Asian giant’s apex bank Takeshi Kimura confirmed this while speaking to Japanese news outlet The Asahi Shimbun. Takeshi said that the bank will begin substantive testing of its CBDC as pressure mounts following the fear of Beijing launching its digital Yuan which he said could pose a national security threat.

“Consideration of a central bank digital currency (CBDC) will be handled as one of the top priority issues within the BOJ, We will move forward with discussions while pushing up the level of consideration beyond the preparatory stage.” Takeshi told the news outlet.

While Japan has long been developing its CBDC, it has not shared a tangible roadmap towards the issuance of one, a position that is likely to change moving forward.

Recent Development in Japan’s CBDC Development

Earlier this month, the Japanese government said that its officials will continue to consider and discuss a CBDC in their official Honebuto Plan for Economic and Fiscal Revitalization. This move came a week after the Bank of Japan said that it will launch a Proof of Concept (PoC) test the technical application and feasibility of its proposed CBDC.

The Proof of Concept testing as gleaned from the words of Takeshi will be to ensure that the digital Yen has universal access similar to regular currency and to guarantee the availability of the asset should there be a natural disaster. These two major considerations must record adequate functionality before the digital currency will be fit for public release.

As a way to further accelerate the development and testing of the digital Yen, the Bank of Japan inaugurated a new research team to pilot the developmental process of the project. With these plethoras of development, no timeline has yet been given for the probable release of the CBDC, a common reality the project has in common with China’s digital Yuan.

China's DCEP Testing Limited to Small Retail Transactions for Now

The People’s Bank of China (PBoC) has affirmed that the testing of its flagship Digital Currency Electronic Payment (DCEP) project is concentrated only on small scale transactions for now.

As reported by the Global Times, the clarification came in order to quell rumors making the rounds with respect to the scale of the DCEP phase trials.

The rumors have it that the DCEP has been used in a real estate financial transaction involving a large sum of money. In addition, there were claims that the DCEP could not be converted into fiat currencies. These claims have been declared false as backed up by an unnamed employee of the PBOC who noted that the DCEP is the same thing as the yuan and both can be converted to the other in the ratio of 1:1.

‘At its current stage, the test’s primary goal is to ensure the digital currency’s operation runs smoothly and safely, and to determine how DCEP is distributed from the central bank to financial institutions. Only when trials in retailing are successful will they be carried out in large transaction scenarios,’ Wang Peng, an assistant professor of the Gaoling School of Artificial Intelligence at the Renmin University told the Global Times on Monday.

Strides to Launch the DCEP Gaining Traction

The Chinese government through the People’s Bank of China has shown unrelenting stride in the race to launch the DCEP. With the PBOC affirming that the COVID-19 pandemic did not cause its determination in the pursuit of the DCEP to serve, the project has now progressed into its testing phase.

The apex bank revealed that the comprehensive pilot test phase will be carried out in the country’s wealthier cities including the Greater Bay Area, Beijing, Tianjin, and Hebei province.

While there seems to be remarkable progress with respect to the development of the DCEP, no formal timeline has been set for the official launch of the digital currency. The PBoC has however stated that its DCEP will not stir inflation as many feared.

$6.2 Million Worth of Digital Yuan is Officially Piloted in Beijing

The Chinese digital renminbi is officially piloted in the capital of China-Beijing. The Chinese government plans to issue a total of $6.2 million worth of digital currency to Beijing residents through a lottery, totaling 40 million RMB.

According to the Beijing Local Financial Supervision and Administration Bureau, residents of the Chinese capital can apply for a lottery through two bank applications to share a total of 200,000 red packets. Each resident is limited to one red pocket containing 200 yuan worth of renminbi ($31) as part of the lottery.

In 2014, China was committed to developing the digital renminbi known as Digital Currency Electronic Payment (DCEP) in response to the increasing demand for coin digitization.

China’s Ministry of Commerce said that its CBDC would be trialed in the wealthier cities in China first.

A lottery event was organized in Shenzhen as early as last year, distributing 40.2 million yuan digital currency in total in February this year.

China Prime Minister Li Keqiang early said that the digital renminbi would digitize the circulating banknotes. Li emphasized that the primary target market is in China and not attempt to challenge the dominance of the U.S. dollar. He stated that:

“For the internationalization of Renminbi, we have said many times that it’s a natural process and our goal is not to replace US dollar or any other international currency,I think our goal is to allow the market to choose and to facilitate international trade and investment.”

However, Ray Dalio, the Bridgewater Associates hedge fund firm founder, questioned that China’s digital yuan would be more competitive than the US digital dollar future.

Regarding digital yuan, the deputy governor of the People’s Bank of China (PBOC), Li Bo, said in April that the central bank would expand the scope of the pilot and even allow foreign tourists to use it for the 2022 Beijing Winter Olympics.

Chinese Court Reaffirms Stablecoins are Not Legal Tender

It is already about a year since China banned transactions involving digital currency transactions, and a Chaoyang Court in Beijing has further reiterated that cryptocurrencies are not a legal tender in the country.

The court ruled on a dispute involving a senior employee and two shareholders of a network technology company regarding the payment of wages in Tether (USDT) stablecoin.

As reported by the Beijing Daily, the dispute involved Shen, who wanted to receive his funds in Renminbi after serving the firm. Hu and Deng, both of whom were the defendants, considering the business was closed up after Shen’s service. While Hu and Deng posited that they were not indebted to Shen as they have paid all requested arrears and benefits.

The prosecutors’ investigation found that the funds were paid in USDT, a stablecoin issued by Tether Holdings Ltd.

Considering the previous designation of the Renminbi and not crypto as legal tender by the People’s Bank of China (PBoC) as well as other key stakeholders, the Chaoyang Court thus ruled in favour of Shen and ordered all entitlements to be paid in the form of the Renminbi. The due fund is worth 270,000 Yuan.

Receiving funds in USDT may be worthless at this time as every legal financial service provider is complying with the PBoC’s directive to ban transactions involving digital currencies. To avoid coming into the authorities’ crosshairs, the top cryptocurrency exchanges, including Huobi and Binance all moved out of China when the crypto ban came into effect.

The PBoC is also at the later stage of its Central Bank Digital Currency (CBDC) or Digital Yuan pilot testing as it seeks to provide alternatives to private cryptocurrencies while still maintaining a touch of today’s current financial innovation.