China Trials Its Central Bank Currency, The Digital Yuan, In Shenzhen’s Gas Stations

China’s Central Bank assists Shenzhen citizens in using its digital currency as payments to refuel their motor vehicles. The community in the tech hub of China (Shenzhen) received $1.5 million in digital Yuan, airdropped to gear up the project, 11 gas stations are now accepting digital currency as payments, reported Economic Information Daily.

A leading agency, Guangdong Petroleum conducting tests and unveiled its pilot this week on 13 October. To make a transaction, QR codes are available at stations to scan and work the same as commercial payment apps like Apple Pay.

The community experienced best practices and gave positive feedback yet, as it completes transactions in a few seconds. Alongside, all the services in a station’s boundary like stores or kiosks are integrated and support digital payment methods.

The digital yuan application characteristic that makes it distinct is it doesn’t need a phone signal to transmit. Likewise, it allows users to utilize the service until the phone battery ends.

Meanwhile, other cashless payment apps like ‘WeChat’ use a different structure. It requires an internet connection to proceed and charge a transaction fee, too.

Per a report, Guangdong Petroleum is in the process of extending its boundaries to over 110 gas stations to fix the self-operated ecosystem in Shenzhen within a month. China’s digital yuan has yet another milestone to achieve, Digital Currency Electronic Payment (DCEP). It falls in the country’s Five-Year-Plan brackets to develop and deploy the world’s advanced technologies such as blockchain and artificial intelligence.

In 2019, the Chinese Parliament declared to complete the digital yuan project before the Winter Olympics in 2022. In September, China decided to position the DCEP project as a workable option to reduce its dependency on the US dollar. This plan has become a hot topic.

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Author: Hank Klinger

Canada’s Central Bank Seeks an Economist to Monitor Digital Currencies and FinTech

The Bank of Canada is hiring an economist for “Digital Currencies and Financial Technologies.”

As per the official page, Canada’s central bank is currently engaged in a “large-scale research program to analyze the risks and opportunities” of the new developments in the fintech sector.

The idea is to ride the wave of innovation in fintech that is transforming the landscape of currency, payments systems, and financial intermediation. “This is a program of major social significance and will require us to break new ground,” says the bank.

The key part of this program is the monitoring framework for money and payments and the “contingency planning” for a Central Bank Digital Currency (CBDC).

Earlier this week, Deputy Governor Tim Lane said the COVID-19 pandemic is accelerating public use of online services, which means the central bank must move quickly to research how a CBDC works.

CBDC “looking a lot more urgent”

Under this position, the economist will be monitoring and analyzing developments in electronic money and payments, including CBDCs, cryptocurrencies, stablecoins, crypto exchanges, and others, develop tools for analysis, develop a policy to help maintain Canadian monetary sovereignty, and work on the “the potential development of a CBDC.”

The job position is for a 3 year time period with the possibility of extension and permanence that requires the knowledge of Bitcoin, Ethereum, and other networks and have experience in handling and analyzing public blockchain data besides the usual master’s degree in the relevant field.

With the closing date of October 25, the security level required for the position of “FSS Analyst, CBDC” is “Secret.” Currently, there is no specific time frame for the launch of a CBDC, Lane said,

“The main point, I think, is this is all looking a lot more urgent because of the speed with which technology is evolving.”

On Wednesday, during the panel discussion on the future of money, Lane also said that they are talking to several companies, including tech companies, banks, and financial institutions that are developing products or advising on the related things, on issuing a CBDC.

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Author: AnTy

Reserve Bank of Australia Is ‘Closely Watching’ CBDC Research, Despite A ‘No Rush’ Attitude

Barely a month after saying it sees no rush in launching a central bank digital currency (CBDC), the Reserve Bank of Australia (RBA) has confirmed that it is still following closely on the developments in this space. RBA’s head of policy payments, Tony Richards, said that the monetary authority is also considering going the ‘wholesale’ way where the CDBC would be limited to particular financial institutions.

Richards spoke at a Blockchain, Crypto, and FinTech conference held at the University of Western Australia. He highlighted some of the considerations that RBA will focus on as it continues to deliberate on the CBDC proposition,

“We will be continuing to consider the case for a CBDC, including how it might be designed, the potential benefits and policy implications, and the conditions in which significant demand for a CBDC might emerge.”

While RBA’s mid-September report was skeptical about issuing a CBDC, Richards noted that a public policy case for its issuance is yet to be made. He went on to add that the bank is currently looking at the design options that it could take if it eventually launches a CBDC. Unlike Bitcoin, whose foundation is on the blockchain, Richards anticipates that an Aussie CBDC will take the form of a centralized & permissioned digital ledger.

Other consideration factors include whether to develop the CBDC as a token-based or account-based ecosystem. The RBA is also looking at the retail case as part of its ongoing research on the policy and technological effects of launching a CBDC. Richards confirmed that they would continue to follow closely what CBDC advanced jurisdictions are doing,

“If some jurisdictions do move towards full implementations of CBDC, there will be many central banks like us who will be closely watching.”

With the current CBDC developments, it appears that these digital assets may soon become part of legal backed tenders in global circulation. The Bank of International Settlements (BIS) recently released a CBDC report in collaboration with seven major central banks. Russia has also issued a consultative paper on CBDCs, while Japan’s central bank is set to pilot its digital yen in 2021.

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Author: Edwin Munyui

Russian Central Bank to Curb Total Digital Assets An ‘Unqualified’ Investor Can Acquire

The Bank of Russia seeks to regulate the total amount of digital assets that individual investors can buy. The central bank has published a draft of regulatory proposals highlighting how they will regulate the nation’s digital assets space.

The Russian central bank is now proposing a bill that will limit the number of digital assets held by non-qualified individual investors annually.

As per the proposal, the Bank of Russia states that non-qualified investors will not be permitted to acquire digital assets above 600,000 rubles or about $7,800. However, qualified investors will not have to adhere to this limit.

According to the regulator, the new limit will help in the recently approved crypto law’s operationalization, specifically on the digital financial assets.

To be deemed as a qualified investor, one must meet 1 of the following five criteria:

  • Hold an economics degree.
  • Own securities totaling more than $74,400
  • A net worth of 6 million rubles (~$74,400)
  • Have over two years of experience working for a financial organization
  • Trade significant amounts of securities regularly.

According to the publication, the curbing will apply to both digital financial assets and various digital rights. The statement reads:

“Individuals representing unqualified investors will have a limit on the amount of digital financial assets for annual purchase at a total of 600 thousand rubles.

The limit for the acquisition of digital rights for unqualified investors who hold both digital financial assets and other digital rights is set at 600 thousand rubles for digital financial assets and 600 thousand rubles for other digital rights.”

The Russian central bank is asking for feedback and opinions about the proposal from the public. Those willing to provide their input have until Oct. 27. The restriction is set to be enforced from Jan.1, 2021.

The Russian central bank also released a distinct proposal touching on how those willing to issue digital assets should register.

Notably, the new restrictions will apply to digital assets, which will be offered when the new digital assets law is enforced. Lawyer Mikhail Uspensky, who spoke to CoinDesk, stated, “Such tokens don’t exist yet, so the document is written for the future. The law will only come into force in January [2021], and cryptocurrencies are not mentioned in it at all.”

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Author: Joseph Kibe

Fidelity Report: Trillions of Dollars Could Flow into Bitcoin as a ‘Unique’ Alternative Investment

The current macro environment is the best scenario for bitcoin; it is exactly what the digital currency needs.

As Fidelity notes in its latest report on “Bitcoin Investment Thesis,” bitcoin as a unique investable asset is gaining a lot of traction, which is to increase in response to the Federal Reserve cutting their benchmark interest rate to zero or negative.

“In a world where benchmark interest rates globally are near, at, or below zero, the opportunity cost of not allocating to bitcoin is higher,” reads the report by Ria Bhutoria, the Director of Research.

What makes bitcoin an attractive alternative investment is its low correlation to traditional assets.

BTC, being uncorrelated to other assets because of its dynamic narrative, being a young asset, and favored by retail investors. As such, it makes all the sense to invest in Bitcoin.

When it comes to retail, it has more to gain as the retail investors’ channel for financial information and advice shift to Twitter, Reddit, Telegram TikTok, and YouTube, a new wave of retail investors “will undoubtedly flow to bitcoin and other digital assets.”

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As a matter of fact, the report found that “The annualized returns of portfolios with an incrementing allocation to bitcoin outperformed a portfolio with no allocation to bitcoin over all time horizons displayed here, ending in September 2020.”

Given the growing interest in alternatives amidst low yields, overvalued equities, and the potential for funds to flow from fixed income into other asset buckets, it is beneficial to have BTC as a component of the alternative bucket.

With a market cap of just $210 billion, it is a drop “in the bucket compared with markets bitcoin could disrupt,” such as a store of value, alternative investments, and settlement networks.

The alternative investment market was sized alone at $13.4 trillion in 2018, as per the CAIA Association. If BTC were to capture even 5% of it, it would equate to an incremental $670 billion growth in its market size, and a 10% growth would take it to over a trillion dollars.

Also Read: Asset Manager, Stone Ridge, Buys 10,000 ($115M) Bitcoin as its Treasury Reserve Asset

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Author: AnTy

Bitcoin Indicators Following the Same Trajectory They Did Before the 2017 Bull Run

Since Square’s Bitcoin investment news broke out on Thursday, the digital currency has been chasing higher levels. The first bust of momentum saw us reaching for $11,000, the second one breaking it, and then we went nearly to the $11,500 level.

At the time of writing, BTC/USD has been trading around $11,300, back to early September level, in green on the back of the gradually rising volume.

Bitcoin’s gains have brought back the greens in the crypto market, especially DeFi tokens, which have been bleeding for the past few weeks.

Odds for Parabolic Advance

These greens have also brought back the euphoria in the market, with participants expecting a strong momentum.

“New highs after explicitly bearish news is a strong indicator of underlying market strength,” said Ari Paul, the co-founder of investment firm BlockTower Capital.

According to him, “this is the common set up” for parabolic moves, which are rare. “Higher odds of a parabolic advance now than any time since March,” he added.

Interestingly, adding to this bullish case is the 2.88 million BTC that recently flowed out of centralized cryptocurrency exchanges.

As per Crypto Quant, all exchanges’ netflow of bitcoin has hit the year-low, and it is likely to keep negative “when the bull run is about to start,” much like the case was in 2017.

Whales on it

In anticipation of a strong movement towards the north, the number of whales, those entities holding more than 1,000 BTC, has been on an upwards trend for the past few months.

“An indication that more high-net-worth individuals are entering the space to invest in Bitcoin in expectation of BTC price appreciation,” noted Glassnode.

The same momentum in whales’ increased BTC accumulation was seen in 2014-2016 and before that during 2012-2013.

BTC Whales
Source: CoinMetrics

Adding to this bullishness is the Bitcoin’s Realized Cap, which has been steadily increasing just like it did before the 2017 bull market took off.

As per Coin Metrics, “If it continues as it did in 2017, 2021 should be an interesting year.”

Bitcoin MVRV (Market-Value-to-Realized-Value) is also holding the same trajectory as of the last bull run.

Bullishness all around

Interestingly, most of the post-March activity hasn’t been followed by the re-activation of long-term held bitcoin, which supports the idea that holders expect the medium price action to be positive.

The network is also growing in a healthy fashion with the network more secure than ever as hash rate hits a new peak and transfer count growing steadily, indicating an increasing user base.

Amidst all the bullishness, trader, and economist Alex Kruger shared a bearish case, “If price were to move down and linger in the low 10s – upper 9s, it would set a bull trap and could then easily breakdown.”

However, he is not expecting the trend to be bearish; rather, he is bullish, as a matter of fact, “extremely bullish, not just bullish.”

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Author: AnTy

Ripple Launches ‘Line of Credit’ Beta on RippleNet, Allows ODL Customers to Borrow XRP

Ripple is introducing another use case for its digital asset XRP.

The company launched a new beta service on RippleNet called ‘Line of Credit’ to allow its customers to use On-Demand Liquidity (ODL) to borrow from Ripple to initiate cross-border payments using XRP.

“XRP is the key behind what only RippleNet can offer,” said Asheesh Birla, GM of RippleNet.

For now, the price of XRP hasn’t reacted to the news much enthusiastically, currently trading at $0.256, along with the green market.

By removing one of the “biggest” barriers, limited access to working capital, to growth, Ripple intends to help small and medium-sized companies (SMEs) and FinTechs to keep on growing without freeing up already limited capital, which involves additional overhead and is a slow, burdensome, and inefficient process.

This capital can then invest in the business to expand into new markets and reach new customers.

Ripple’s latest solution will be providing its customers with upfront access to capital for every market through one credit arrangement.

With no hidden fees, those customers who use ODL on RippleNet can purchase XRP from Ripple on credit, for which they are charged one fee on the amount borrowed.

As per Ripple, this service has already been piloted by RippleNet 300+ customers, although it didn’t provide any specific names.

“Early customer feedback on the Line of Credit beta shows that the service is helping money transfer service businesses make global transactions even more affordable for their customers,” Birla said.

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Author: AnTy

Japan’s Central Bank to Launch Its Digital Yen Pilot in 2021; China’s CBDC Accelerating BoJ Plans

  • Bank of Japan (BoJ) plans to launch pilot programs on the digital yen in April 2021.
  • The central bank digital currency (CBDC) will not be distributed to the general population yet.

Japan is playing catch up to China’s CBDC plans, Kenji Okamura, vice-finance minister for international affairs, said in an online seminar on Friday, as Reuters reported. Speaking on the dangers of being left behind by the largest Asian economy in digital currencies, Okamura called for the country to move towards developing its own digital yen.

“The (digital) renminbi is moving at a relatively fast pace – presumably, they are aiming to take the first-mover advantage,” he said.

“First-mover advantage is something we should be afraid of.”

Less than 24 hours following the comments, the Bank of Japan (BoJ) announced its plans to officially draft a digital yen plan as early as the start of its next financial year – in April 2021. The report, titled, The Bank of Japan’s Approach to Central Bank Digital Currency, gave the central bank’s first full picture of what its CBDC will consist of.

As reported before, the digital yen will comprise of two main “digital coins” – wholesale CBDC and the general purpose CBDC. BoJ will begin a series of testing phases on the coins by developing a test environment for the CBDC and experiment with its core function as a payment instrument among the general public.

“The Bank will first test the technical feasibility of the core functions and features required for CBDC through a Proof of Concept (PoC)”.

The first proof of concept phase is expected to test basic functions needed in a central bank digital currency, including issuance, redemption, and distribution. The second PoC phase will experiment on additional features on a test environment, checking for a digital yen’s feasibility in the economy. BoJ will then launch a pilot program if the CBDC is successful.

The report further targets security, convenience, and resilience as the main pillars for a successful launch of the CBDC. The latter remains a key factor given the geographical nature of the islandic country.

“Offline use in times of system and network failures as well as electrical outages is also important for Japan, given the frequent occurrence of natural disasters.”

However, the BoJ stressed they still do not have any plans to launch the CBDC to the general public, stating,

“While the BOJ currently has no plan to issue CBDC…it’s important to prepare thoroughly to respond to changes in circumstances.”

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Author: Lujan Odera

China’s Digital Currency Pilot Project (DC/EP) Hits Over $160M In Transaction Volume

  • China’s central bank digital currency project nears launch as its pilot project hits over 1.1 billion yuan (~$162 million) in transactional volumes.
  • The pilot project of the DC/EP project was carried out in major cities across China.

First reported by the South China Morning Post, the People’s Bank of China deputy governor, Fan Yi Fei, speaking at a SWIFT-organized virtual conference, Sibos 2020, stated massive progress in the digital currency and electronic payments (DC/EP) pilot projects.

So far, over 1.1 billion yuan (~$162 million) worth of transactions has been carried out on the central bank’s pilot programs ranging from paying bills across cities and utility bills. Additionally, over 113,000 personal digital wallets have been launched with a further 8,800 corporate digital wallets during the pilot phase.

Speaking on the progress, Fei confirmed over 3.13 million transactions had been processed so far given using the digital yuan. The PBoC tested the DC/EP project in some of China’s major cities, including Shenzhen, Guangzhou, and Xiongan, in preparation for a full launch in 2022 during the Winter Olympics.

Fei termed the digital renminbi as an “important infrastructure for the future,” citing its widespread use in payments, including facial recognition, QR code, or tap-and-go payments systems. Furthermore, Fan confirmed over 6,700 use cases had been implemented as of the end of August across the test cities.

Such a case is the government’s initiative to launch e-yuan red packets in the Shenzhen state, aiming to reward over 5,000 medical and health workers for their selfless deeds in dealing with the COVID-19 pandemic. These red packets are acceptable in several stores in the Luohu district.

Fei, the former chairman of Shanghai Bank and deputy secretary of China Investment Corporation, has long been a supporter of digital currencies replacing banks across the globe in the future. With the central bank’s launch of its e-yuan edging closer to launch, the world’s second-largest economy could move to a totally cashless society.

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Author: Lujan Odera

CBDCs Are A Threat to The US Dollar’s Reign As The World’s Reserve Currency: Deutsche Bank

A new report by Deutsche Bank has acknowledged the potential of Central Bank Digital Currencies (CBDCs) to disrupt the US dollar’s dominance as the most held reserve currency. This is not the first research that highlights such a possibility; previous reports by Bloomberg and German think tank, DGEN, have speculated similar situations as more Central Banks evaluate the feasibility of a CBDC.

The report, which is dubbed ‘Central Bank Digital Currencies; Money reinvented,’ was released in September and particularly highlighted that CBDCs could ‘erode the dollar’s primacy in the global financial market.’ Currently, the U.S dollar is involved in over 90% of global transactions and has been the world’s reserve currency since abolishing the gold standard.

This dominance is, however, at a threat given a sudden spike in CBDC interest and their value proposition to individual jurisdictions when it comes to oversight and bilateral trade. China, which appears to have taken the lead, is already piloting its digital yuan (e-RMB) in several cities, including Hong Kong and Beijing; the initiative began back in 2014 but was accelerated previously following Facebook’s intentions to launch Libra.

Though still at its early stages, the ongoing global tech wars seem to be in line with the digital yuans’ purpose as China looks to challenge the U.S economic supremacy. Deutsche Bank’s Chief Investment strategist, Gerit Heinz, told Coindesk that,

“The e-RMB and the Belt and Road Initiative would give China a chance to increase the importance of that currency overall … That could also imply some changes in the global reserve system.”

The report goes on to mention that around 80% of the world’s central banks have already begun active research into potential CBDCs. However, progress has been different for some countries already in the development and implementation phases. That said, Europe is also considering a digital Euro, although its progress is far behind compared to China. Heinz was keen to point out that societal underpinnings such as a democratic approach should have placed the continent ahead,

“In Europe, I would expect a lot of discussions about this. The euro, introduced as a currency decades ago, has triggered a lot of discussions.

So CBDC in a euro system of different countries would, of course, imply much more discussion than in a bigger, more centralized country like China.”

Being a relatively new concept, this report by Deutsche bank also highlighted that the current verifiable evidence is not sufficient enough to make conclusive speculations. Nonetheless, the bank noted it would follow CBDC developments more actively to provide informed updates on the impact of this upcoming class of legal tenders.

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Author: Edwin Munyui