Earlier this year, we witnessed a lot of changes in how cryptocurrencies are being handled by governments worldwide, including China and India. Initially, the outlook for these cryptos was not positive, as in many cases, strict regulations were being imposed on digital assets. In China, for example, there were mixed reactions. Initially, the Chinese President, Xi Jinping, expressed his support of blockchain technology, however, since 2017, crypto trading and ICOs are illegal in the country. To top it off, the People’s Bank of China is now close to issuing its own cryptocurrency.
A shift, however, seems to be taking place in China with reference to cryptocurrencies. Recently, there was a hint from the Chinese government on their intentions to treat cryptocurrencies, such as Bitcoin, differently in the future. This comes as a result of China seeking to make reforms in their forex markets, which is likely to impact cryptocurrencies.
On the 24th of December 2019, Reuters reported that a Chinese senior government official stated that plans are underway to expand Beijing’s blockchain cross-border financing pilot platform.
China To Undergo Forex Reforms
The Beijing’s blockchain cross-border financing pilot platform was launched in March of this year and it has been running in 19 provinces as a pilot scheme.
The deputy head of the State Administration of Foreign Exchange (SAFE) in China, Lu Lei, stated that they are gradually expanding the scope of the pilot scheme as well as applying the scenarios of blockchain technology into macro-prudential management as well as cross-border financing. Lei also confirmed that the Chinese government will start to study how forex reforms will deal with cryptocurrencies and how the new forex regulation and technology system will be developed. Lei also stated that the goal is to strengthen the integration of financial technology and the forex market, while ensuring full control of supervising the technology development.
Bitcoin and Blockchain
Interestingly, as we have stated, China is preparing to launch its own central bank digital currency. The Central Bank of the country, the People’s Bank of China, has strongly stressed that this digital yuan will not have the characteristics of Bitcoin.
That is, the Chinese cryptocurrency will not be for speculation. This differs from other digital currencies which can be used for speculation plus they may require the support of a basket of currencies. For now, since trading in cryptos is banned in China, officials have not explicitly stated how the new forex reforms will impact the status quo of cryptos. In addition, Beijing intends for their new digital currency to complement the paper yuan.
The People’s Bank of China is determined to launch a digital token that will challenge the US dollar. It is also planning to conduct the first real-world test of its central bank digital currency before the end of this year. It is doing this by allowing four major banks as well as other major economic participants, like China Telecom, to test digital currency payments. It is clearly evident that major changes are taking place in the digital currency space globally, especially in China.