Crypto Exchanges and Companies React to China’s Ban, PBoC Injects 100B Yuan Liquidity in Markets

Despite boosting the net liquidity injection of 510 billion yuan (almost $79 billion) in the preceding six days, the central bank failed to spur risk appetite; meanwhile, crypto-asset prices jumped.

China has taken even more concrete steps towards its crackdown on the cryptocurrency industry. Last week, the central bank declared virtual currency-related business activities, including the provision of services by overseas exchanges to Chinese residents through the Internet, to be “illegal financial activities.”

This time the People’s Bank of China involved the Supreme People’s Court of the Central Cyberspace Administration of PBOC, Ministry of Industry and Information Technology, Ministry of Public Security, China Banking and Insurance Regulatory Commission, and China Securities Regulatory Commission Foreign Exchange Bureau in the crackdown.

Given that the notice that appeared on PBOC’s website was dated Sept. 15, some local crypto users maintain that there was a lot of chatter about the ban in the community before it was announced, while others say while rumors were swirling for weeks, the actual confirmation made it a “material event.”

In response to this, cryptocurrency exchanges Binance, Huobi, and OKEx stopped allowing new users from mainland China to register with the platform.

On Saturday, Huobi Global officially announced that in order to comply with the local laws and regulations, they have already ceased new account registrations and will further “gradually retire existing Mainland China user accounts by 24:00 (UTC+8) on Dec 31, 2021.”

“We have not allowed Chinese people to use it since 2017, and we have no exchange business in China,” the exchanges then told the Chinese media over the weekend.

Besides these popular exchanges, BiONE, TokenPocket, BHEX, HyperDAO (HDAO) Foundation, Loopring Technology Limited, and ZKSwap stated that they would stop providing their services to Chinese users and are withdrawing business in mainland China.

Ethereum mining pool Xinghuo Pool also announced that it wouldn’t provide its mining pool services to users in mainland China the same as graphics card mining machine management software NBMINER, which would no longer provide technical support either.

In Inner Mongolia, so far, authorities have closed 45 crypto mining farms, “theoretically saving 6.58 billion kilowatt-hours of electricity per year,” and confiscated over 10,000 mining machines in its latest operation.

Crypto prices have already taken a hit from the news, and a “panic selling” of USDT was also seen, which went from 6.40 to 6.01 against RMB.

Amidst this, on Monday, the PBOC injected 100 billion yuan (US$15.5 billion) into the local banking system through open market operations, boosting the net liquidity injection of 510 billion yuan (almost $79 billion) in the preceding six days.

Still, the central bank failed to spur risk appetite as crypto-linked stocks Huobi Technology, OKG Technology, and Meitu slumped, and Hang Seng Index lost almost all its advance with no sign of a resolution to Evergrande’s debt crisis, reported SCMP.

The prices of crypto assets, however, have recouped most of their losses and especially the DeFi sector, which is seeing traction among Chinese users.

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Author: AnTy

Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency

Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency; Could Run on Ethereum

According to billionaire investor Ray Dalio, the CBDC race seems to be heating up, and China may emerge a winner.

Digital Yuan To Outpace Digital Dollar

Bridgewater Associates founder Ray Dalio pointed out that China’s digital yuan could serve as a threat to the continued dominance of the US dollar in the global marketplace.

Speaking on CNBC’s Managing Asia, the American investor noted that China is clearly at the forefront with its digital yuan program compared to the US, which is still undergoing consultation.

This delay by the world’s largest economy could enable the Asian nation’s digital version of its fiat to become more competitive than a potential digital dollar.

According to Dalio, the US will launch a digital dollar, but it will not be the most competitive digital currency given the US rising debt level. However, he pointed out that it will still be viable given the US position as a market leader.

Earmarking China’s digital yuan, Dalio said it would be the most competitive given its pricing and return on investment. He also pointed out that the digital yuan would be a viable alternative to the dollar if it enjoys international acceptance and comes with attractive interest rates.

CBDCs, short form for central bank digital currencies, have been the rave ever since the decentralization era began with Bitcoin. BTC -1.72% Bitcoin / USD BTCUSD $ 36,661.69
-$630.58-1.72%
Volume 34.62 b Change -$630.58 Open $36,661.69 Circulating 18.72 m Market Cap 686.46 b
2 h HRF Bitcoin Development Fund & BitMEX Disburses $210,000 in Grants to Developers 3 h Marathon’s Mining Pool, Marapool, to Signal for Taproot in a Change of Heart 4 h Riksbank Governor Believes Crypto Regulation is Certain, But Exchanges & Trading Is Already Regulated

They are state-backed digital versions of a country’s fiat and are usually issued by the apex bank. The majority of national banks have launched independent CBDC programs in pivoting to a digital economy.

Even some small countries have launched a digital version of their currency, but China has drawn the world’s attention given the implication of its program.

The digital yuan, which started six years ago, has been labeled a ‘threat’ by financial experts to the US dollar’s position as the world’s reserve currency. Dalio points to a potential toppling of the greenback.

The International Monetary Fund (IMF) data puts China at 2% behind the Pound, Euro, and the Japanese Yen. The US leads with 60%, and Dalio says this may not be for long.

According to the American investor, China’s digital yuan could scale up to 10 and 15% in the next couple of years.

China is close to launching its digital yuan, with pilot tests presently ongoing in its major cities. The forthcoming Olympics in Beijing has been chosen as the official wholesale launch.

The US Federal Reserve is only just picking the cue, and Fed boss Jerome Powell has announced plans to publish a discussion paper on the likely impact of a CBDC in the country.

Smart Contracts Compatible With CBDCs

China is planning to launch a digital yuan and make them ‘smart’ with time, per reports from Sina Finance. This is according to the director of the Science and Technology Supervision Bureau of China’s regulatory commission Yao Qian.

Speaking at the International Finance Forum 2021, Qian said that national banks should not only aim to launch digital versions of their currencies but add smart contract functionality. This will enable it to run on the Ethereum blockchain. ETH -2.63% Ethereum / USD ETHUSD $ 2,630.81
-$69.19-2.63%
Volume 27.35 b Change -$69.19 Open $2,630.81 Circulating 116.12 m Market Cap 305.48 b
4 h Riksbank Governor Believes Crypto Regulation is Certain, But Exchanges & Trading Is Already Regulated 6 h Billionaire Ray Dalio Believes Digital Yuan Could Become Global Reserve Currency; Could Run on Ethereum 10 h Ethereum (ETH) Holders Grows by 8.16 Million, Despite the 60% Drawdown

However, Qian advises that this should not be rushed given the inherent challenges smart contracts come with as the industry is still young. He said that the best approach would be to start with a simple, smart contract and then build more complex ones as security and legality become clearer.

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Author: Jimmy Aki

Digital Yuan Is Closing In On A Full Release As Major Institutions Start Using The CBDC

Digital Yuan Is Closing In On A Full Release As Major Institutions Start Using The CBDC

  • Alibaba’s Ant Group partnered with PBoC to develop China’s CBDC report.
  • The digital yuan could overpower the influence of WeChat Pay and AliPay in the future.
  • More institutions are adopting the CBDC as a form of payment.

Ant Group, a wholly-owned subsidiary by Alibaba, has been partnering with the People’s Bank of China (PBoC) on the central bank digital currency, popular as CBDC, a report from South China for the past four years China Morning Post reads.

This information was revealed over the weekend at a Digital China Summit in Fuzhou. MYbank, a mobile fintech app by Ant Group, was the intermediary to distribute the digital yuan since 2017. Additionally, the central bank’s main research institute, China Digital Currency Institute, picked up the app in mid-2019 to choose consumers to spend, pay and receive the CBDC.

“Ant Group, together with MYbank, will continue to support the research, development, and trial of PBOC’s e-CNY,” a representative familiar with the matter commented.

The influence of the CBDC is unquestionable across China with the trials conducted over major cities are well received by the population. At the core of the growing adoption rates is the support of China’s large banks such as the Industrial and Commercial Bank of China, the Agricultural Bank of China, Bank of China, HSBC, and the China Construction Bank, all of who have taken part in the trial phase of the digital yuan.

To further boost adoption, several large banks are promoting the use of the digital yuan in an upcoming festival on May 5th over the use of platforms such as WeChat Pay and AliPay. The banks are urging the population to download a digital wallet and purchase the digital CBDC, also known as e-CNY in a bid to make their payments “more convenient,” a representative said.

The continuous push towards a digital yuan controlled by the central banks will reduce the control and dominance private companies such as AliPay and Wechat have in mobile payments. To curtail big-company dominance in holding financial data, the Chinese government will launch a full public version of the e-CNY later in the year to battle with the private corporations.

All in all, big institutions have started embracing the CBDC as a form of currency boosting transactions within the country. JD.com, a China-based e-commerce company, announced Monday that some of their employees have started accepting to be paid using the digital currency electronic payment (DCEP) system.

Having participated in the DCEP trials, JD.com integrated the payment solution earlier this year in its business while paying some of its expenses using the digital yuan, a CNBC report stated

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Author: Lujan Odera

PBoC Official Explains Why Digital Yuan Won’t Be Fully Anonymous

PBoC Official Explains Why Digital Yuan Won’t Be Fully Anonymous

Chinese officials are willing to ensure digital anonymity for the country’s central bank digital currencies (CBDCs), but only for a small class of transactions.

Total Anonymity of CBDCs Impossible

According to a local news outlet, an official of the People’s Bank of China (PBoC), Mu Changchun, has said that a completely anonymous digital yuan is not possible given the underlying regulatory measures, local state news media STCN reports. These include requirements related to anti-tax evasion, counter-terrorist financing, and anti-money laundering. He explained,

“ A completely anonymous central bank’s digital currency is not feasible. It is an international consensus that the central bank’s digital currency achieves anonymity on the basis of controllable risks.”

However, this doesn’t mean the digital yuan won’t cater to user’s privacy and financial security.

Changchun said the digital yuan would provide more security and privacy than payment apps like AliPay and WeChat.

The bank official said the CBDC would work under a “controllable anonymity” that would protect the users’ transaction details and personal information. This partial anonymity also means the central bank can monitor transactions for illicit activity while the parties involved remain private.

The first set of CBDC users will be able to open an account with just their mobile number. No further information would be required, and they would enjoy a level of anonymity for transactions. However, this limited surveillance would only be permitted for small-scale transactions.

If a digital yuan user wants to conduct substantial transactions, they would need to provide more personal details to unlock this feature. Changchun says China choosing not to cave into the rising outcry for a totally digital state-backed digital currency is based on international consensus among regulatory agencies worldwide.

The Chinese government has outrightly banned private cryptocurrencies in the country, instead opting for a state-sanctioned digital currency. This address by the head of the country’s DCRI marks the first time the country has shared information on its CBDC program.

Changchun admitted that CBDCs would serve a dual role of being a financial surveillance tool to keep an eye on illicit transactions. According to him, total anonymity would see crimes like terrorist financing, money laundering, and tax evasion go unchecked.

The financial expert said that popular cryptocurrencies like Bitcoin were vetoed due to their propensity to support illegal transactions.

Crypto-related Crimes A Bane To Anonymity

The Chinese government has taken a firm stand against criminal elements operating under the pseudonymous canopy of cryptocurrencies to commit crimes. In a recent roundup of criminals, law enforcement officials have arrested several young men who allegedly used Bitcoin and USDt to launder illicit gains made from drug dealing and online gambling.

The government, which has cited these practices as a major reason for its firm stand against private crypto ownership, has gone as far as closing crypto exchanges in the country.

These recurrent money laundering and tax evasion themes have plagued fellow financial powerhouse-the US- from giving crypto a break. US regulatory agencies have become taciturn and combative, suing any crypto-facing company that it feels has broken any laid-down laws.

Even though the Federal Reserve (central bank equivalent) has since admitted that CBDCs use would feature in the economy, Fed Chief Jerome Powell said they would play a more secondary role to the US dollars.

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Author: Jimmy Aki

Top Chinese Bank Launches Testing for a Digital Yuan “Hardware Wallet” Card

Top Chinese Bank Launches Testing for a Digital Yuan “Hardware Wallet” Card

  • Top Chinese bank launches testing of its “hardware card wallet” for the digital yuan.
  • The card is currently testing Dongcheng District – targeting the elderly.
  • Beijing residents testing the CBDC can also use the wallet to pay for healthcare services.

A local news report, Xinhua Net, confirmed that the Postal Bank of China has launched its biometric hardware wallet card for the digital yuan. The card is still in its testing phase to provide Dongcheng District residents with the ability to pay and transact using the central bank’s digital currency.

The hardware wallet provides users with biometric security to spend their digital yuan using a one-tap system on selected stores. Once the transaction is complete, the card’s ink screen window displays the transaction amount and the wallet balance.

The new card focuses on giving the elderly a more efficient way to use the digital renminbi given the challenges they face with smartphones, Chen Yuejin, Chairman of the Postal Bank of China, said.

“With this card, it is much more convenient to enter and exit public places, and you can pay with just one touch. It is especially suitable for the elderly who have difficulty using smartphones.”

China is the leading country in testing and piloting projects supporting its digital yuan. In the past two years, the government has launched several pilot projects on its CBDC in Beijing and Shenzhen – recently disbursing over $3 million in ‘red envelopes’ to over 50,000 people, the largest pilot yet.

The expedited process of piloting the digital yuan forces central banks around the world to look into launching their own CBDCs to avoid falling behind with China. Despite several analysts touting the digital yuan to replace the dollar, Martin Chorzempa of Peterson Institute for International Economics’ believes there is a long road ahead still.

He believes Chinese electronic payment services lay the toughest roadblock for the digital yuan to become internationalized. Chorzempa said,

“A lot of people talk about (the digital yuan) being a driver of renminbi internationalization.”

“I think they have to beat Alipay and WeChat Pay in China before, I think, that they can make a dent in the U.S. dollar.”

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Author: Lujan Odera

Former PBoC Governor: China Doesn’t Have ‘An Ambition to Replace Existing Currencies’

China’s former head of the central bank said digital yuan could be useful for cross-border trade and support its efforts to promote yuan as an international currency.

Zhou Xiaochuan, who stepped down as governor of the PBOC in 2018, spoke at the Shanghai Financial Forum on Friday. According to him, digital currency allows payments and currency conversions in real-time and “brings new possibilities for interconnection.”

“If you are willing to use it, the yuan can be used for trade and investment,” said Zhou, who has been a leading advocate for China’s sovereign digital currency. He also noted that the digital yuan isn’t intended to replace globally accepted fiat currencies like the US dollar.

“We are not like Libra and we don’t have an ambition to replace existing currencies.”

China has learned a lesson from Diem and took a more cautious approach. The idea is to persuade consumers and merchants to accept digital yuan payments as it quickly resolves “the problem of cross-border remittances.” He said.

“Some countries are worried about the internationalisation of yuan.”

“We can’t push them on sensitive issues and we can’t impose our will. We must avoid the perception of great power chauvinism.”

China is preparing for cross-border testing of digital yuan in partnership with Hong Kong. Additionally, over $3 million in digital yuan was airdropped to 10k residents of Suzhou on Friday. Trials are being run in other cities, including Chengdu, the Xiong’an New Area, and Hong Kong, in collaboration with companies like Didi Chuxing, Meituan, and Bilibili.

Central Banks Divided on Private Sector’s Role

According to a survey by the Official Monetary and Financial Institutions Forum (OMFIF), more than half of the central banks surveyed expect countries to collaborate with the private sector to build and run payments systems.

The central banking and economic policy forum found that central banks are split over whether to work with private sectors in payments as three-quarters of the banks said it was the state’s job to govern such systems.

The survey by the think tank involved 20 central banks and regulators in advanced and developing economies. Bhavin Patel, OMFIF’s head of fintech, said,

“It’s up to the central banks to balance how they approach collaboration – whether it’s setting joint projects together … or if it’s more just making sure that what comes to the market is properly regulated.”

The report was produced with fintech firms that include PayPal, Citigroup, Mastercard, and Novi, the digital wallet division of Facebook. Patel said,

“Regulators need to keep pace with these innovations. New, non-traditional payment entities will emerge as systemically important components of the financial system. Proactive central banks and regulators, keen to harness the benefits of payments innovation without undue policy risks, engage more with industry.”

Demand for more efficient payments is growing, a trend that has accelerated during the coronavirus lockdowns but regulators fear that the wide use of private currencies could lower their control over monetary policy. Just last week, German Finance Minister Olaf Scholz said,

“We must do everything possible to make sure the currency monopoly remains in the hands of states.”

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Author: AnTy

Chinese Tech Firms Didi, Meituan, & Bilibili Launch Lottery-Based Trials for Digital Yuan

Tests for China’s digital yuan are still ongoing as companies continue to join the People’s Bank in its efforts to digitize the currency.

This week, local news source CLS confirmed that three large internet companies had joined the tests in what appears to be a lottery-style trial.

Everyone Welcome

As the news explained, Didi Chuxing, the largest ride-hailing service in the country, had joined commercial products and bike-sharing company Meituan and video-sharing site Bilibili on a lottery-based trial of the digital yuan. The test will focus on Suzhou, a region on the western side of Shanghai.

The report explained that the trial launched earlier today, and it will involve about 10,000 residents in the city. These residents will vie for about 200 digital yuan units each, which they can spend at merchant stores with point-of-sale technology.

In addition to retail spending, the winners can spend the tokens on the three companies’ services. They can order rides on Didi, pay for bike-sharing on Meituan, and spend on new features from Bilibili’s site. It is unclear how long the trial will last, but it continues what appears to be a series of rests and implementations for the digital yuan.

All Hands on Deck

The companies are just a shortlist in a line of corporations looking to test the digital yuan. The Peoples’ Bank has incorporated several other companies for the better part of the year, with names including Alipay and WeChat Pay, the country’s two largest payment processors.

In October, Huawei, the country’s largest smartphone manufacturer, announced on its Weibo channel that its next flagship device – the Mate40 series – will come with a hardware wallet for the digital yuan. Touting it as a channel to be a part of China’s digital revolution, Huawei explained that the wallet would provide optimal privacy and anonymity.

The wallets will also feature dual transactions, ensuring that users can complete transactions by touching two compatible phones, even without any internet connection.

The tests have also gone beyond just tech companies. Economic Information Daily reported in October that gas stations in Shenzhen had begun accepting the asset. As the news medium confirmed, 11 gas stations had been integrated into the program, and more would join.

The program was the brainchild of Guangdong Petroleum, a state-owned oil, and gas firm. Participating outlets come fitted with barcode readers to ensure easy and quick payments. Guangdong praised the asset’s speed and security, explaining that reviews of its use had been positive. It is expected that these trials have ended already.

A similar giveaway to what is happening in Suzhou also occurred in the Luohu District of Shenzhen. Per a Sina Finance report, the district’s government started a program to send ten million units of the asset (worth about $1.5 million) to 50,000 residents via a lottery.

Unlike this program, however, that one focused primarily on retailers and brick-and-mortar shops across the region.

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Author: Jimmy Aki

Japan Joins the CBDC Race With A ‘Digital Yen’ Trial; 30 Major Firms Will Start Experiments In 2021

While China has already successfully run the pilot test of its digital yuan, now Japan is getting ready to do the same.

In its attempt to catch up, Japan’s 30 major firms will begin experiments of issuing a private digital currency next year, said the group’s organizing body on Thursday, reported Reuters.

The group consists of the three largest banks in the country, along with retailers, utilities, brokerages, and telecommunication firms. Using a common settlement platform, the group will conduct the experiments for issuing a digital currency. Hiromi Yamaoka, a former BOJ executive in an online briefing, said,

“Japan has many digital platforms, none of which are big enough to beat cash payments.”

“We don’t want to create another silo-type platform. What we want to do is to create a framework that can make various platforms mutually compatible.”

Recently, the Bank of Japan announced its plan to experiment with issuing a digital yen in a country where cashless payments make up only 20% of total settlement than China’s 70% and the United States’ 45%.

Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group, and Mizuho Financial Group — the megabanks of Japan have already rolled out their own digital payment systems.

Yamaoka said while private banks will be in charge of issuing the digital currency in the experiments, other entities’ prospects also issuing a digital yen won’t be ruled out.

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Author: AnTy

China’s Crackdown on Crypto Rears its Head as BTC Gets “Over-Extended” & PBoC Focuses on DCEP

As China accelerates its digital yuan development, it is taking steps to tighten its control on the cryptocurrency market.

In 2017, during the bull market, the reports came of China banning virtual currencies on domestic cryptocurrency exchanges but permit over-the-counter transactions.

Now, as BTC enjoys a bullish market structure, currently around $13,750, China is further taking more steps towards regulating the market.

Last month, one of the biggest cryptocurrency exchanges of the country, OKEx’s founder, was arrested, which resulted in the platform suspending any withdrawals which are yet to resume.

The platform, however, maintains that the founder has been assisting in a separate investigation.

According to the latest local reports, another exchange, the biggest one this time, Huobi is facing a similar issue; its COO Zhu Jiawei being under police investigation. They have reportedly been planning in advance after the OKEx incident and are not expected to halt withdrawals.

image1

The exchange Huobi Global took to Twitter to deny the “rumors” of the arrest of a senior executive by local officials and that they are, in fact, “Operating Normally.”

Amidst this, as we reported, the Securities and Futures Commission (SFC) of Hong Kong is planning to propose a new licensing regime under which retail investors are banned from trading virtual currencies.

Additionally, all the crypto platforms operating in the city and overseas ones targeting local investors, are required to obtain a license to protect investors and combat money laundering.

There are also reports that buying and selling crypto may violate foreign exchange control and anti-money laundering laws. Those making profits from their crypto investments failing to pay income tax could also be suspected of tax evasions.

“The timing of the Chinese OTC and exchange crackdowns is no coincidence. The PRC government is sending a strong message about its stance on cryptocurrencies other than the DCEP,” said an executive at the crypto fund The Spartan Group.

However, China’s stance on crypto isn’t anything new, “It just rears its head every now and then,” he said, adding: “BTC was getting over-extended from a short term technical standpoint anyway so this event likely triggers some profit-taking.”

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Author: AnTy

Digital Yuan Pilot Records $300 Million in Transactions But No Launch Yet, says PBOC Governor

The pilot program on the digital yuan rollout across four cities – Shenzhen, Suzhou, Xiong’an, and Chengdu has been smooth, said Yi Gang, governor of China’s central bank People’s Bank of China.

Over 4 million transactions, totaling more than 2 billion yuan ($299 million) in the digital currency so far, have been made, he said.

As per the figures, the digital yuan pilot expanded 21% and 82% from the 3.3 million transactions valued at 1.1 billion yuan, respectively recorded in late August, according to South China Morning Post.

The PBOC pilot discovered 12,000 use cases for DCEP, up 80% from 6,700 ways as of late August. Yi said,

“So far, the experiment and pilot program have been (going) fairly smoothly.”

Legal Framework Needs Completion

The comments were made during the Hong Kong Fintech Week conference on Monday, where Yi was speaking on a virtual panel with Agustin Carstens, head of the Bank for International Settlements, and Klaas Knot, president of the Dutch central bank.

Despite the digital yuan usage expanding rapidly across Chinese cities, Yi said they are in the early stages of developing a central bank digital currency. On the launch of digital yuan, Yi said China first needs to complete,

“A fairly complicated, and complete legal framework and regulations (for digital yuan) that enhances its transparency.”

With DCEP, the world’s second-largest economy is accelerating towards a cashless society. The country’s digital payments transaction volume has actually been expected to surge to 412 trillion yuan by 2025, up from 201 trillion yuan last year.

A Global Framework for CBDC

As we reported, the central bank published a draft law last week aiming to provide the DCEP a legal status.

Yi didn’t say anything about that on Monday but said the PBOC had completed the architectural design of the (CBDC). He further reiterated that the pilots would also run at the Winter Olympics in 2022, for which QR codes, tap-and-go transactions, and other features will be available.

During the panel, which was moderated by the Hong Kong Monetary Authority’s chief executive Eddie Yue, Yi said the PBOC would also collaborate with other central banks to establish a legal framework for CBDs globally. Yi said,

“I would like to cooperate with the Bank of International Settlements, the Financial Stability Board and international central bankers to discuss a legal framework, [fostering] transparency and how to safeguard [the development] of central bank digital currencies.”

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Author: AnTy