People’s Bank of China has started a crackdown campaign on digital currency in Shanghai and Shenzhen. Since a legal ban on digital currencies trading was introduced in 2017 most of such “exchanges” moved outside mainland China to Japan or Singapore, even EU and US. The most likely reason for a recent crackdown is to cease any operations in digital currencies to prevent capital flight.
Capital flight from China had substantially decreased to $22 billion in 2018 vs $675 billion in 2016 and $380 billion in 2017. But capital flight accelerated to $139.2 billion in the first half of 2019 amid US-China trade tensions.
PBoC authorities claimed some 39 “illegal” digital currency exchanges are spotted in Shenzhen only. Many of digital currency exchanges in China are operating on peer-to-peer platforms that enables users to buy or sell digital currencies using Chinese yuan, some offer to buy US stocks using digital currency. Mounting pressure on such firms followed by suspension of exchanges’ accounts with social media like Chinese WeChat and Weibo, local police investigations.
China itself is dedicated to “accelerate the development of blockchain technology”, President Xi Jinping stated late October on Politburo study session. PBoC is likely to launch national digital currency in 2020. The VC of the China International Economic Exchange Center Huang Qifan quoted by Sina Finance saying, “the People’s Bank of China has been studying [digital currency] for five or six years, and I think it has matured. [It] is likely to be the first central bank in the world to introduce digital currency”. Li Wei, the head of technology for the People's Bank of China, the central bank urged commercial banks to increase their use of blockchain technology, the backbone of digital currencies. China's parliament in October passed a cryptography law that will take effect on Jan. 1 and aims to support research into blockchain technology and increase of government regulation of such research. The head of the Chinese central bank’s digital currency research institute, Mu Changchun said in August that such a digital currency is “almost ready”. However, in September, Chinese central bank chief Yi Gang said there was no timetable for its rollout and that it still needed to meet requirements, such as anti-money laundering.
Nevertheless, fears grasped the markets over China’s possible intentions to introduce new, more efficient SWIFT-like technology, a rival cross-border payment system. That could be a further step to undermine US grip over cross-border money flows.
Countries line up to explore centralized digital currencies
Not only China but many other nations exploring benefits of own digital currency. Turkey’s President Recep Tayyip Erdogan announced launch a blockchain-based digital currency after likely by end of 2020.
Swedish Central bank outlined a plan to implement its digital currency, “e-krona”, Bank of England governor Mark Carney suggested that a “private or state-run digital currency could serve as a global counterbalance to the [US] dollar”.
The Bank of International Settlements’ study concluded that of 63 central banks surveyed, 70% are studying possibilities of Central Bank digital currency (CDBC), albeit mostly at a conceptual stage. Most central banks see themselves unlikely to rollout CBDCs in the short term, with the possibility increasing in the medium-long term. BRICS countries are considering launching a joint payment system and digital currency.
Analysis and opinions provided herein are intended solely for informational and educational purposes and don't represent a recommendation or investment advice by TeleTrade.
Indiscriminate reliance on illustrative or informational materials may lead to losses.
Risk Warning: Trading Forex and CFDs on margin carries a high level of risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 76% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Prior to trading, you should take into consideration your level of experience and financial situation. TeleTrade strives to provide you with all the necessary information and protective measures, but, if the risks seem still unclear to you, please seek independent advice.
© 2011-2020 TeleTrade-DJ International Consulting Ltd
TeleTrade-DJ International Consulting Ltd is registered as a Cyprus Investment Firm (CIF) under registration number HE272810 and is licensed by the Cyprus Securities and Exchange Commission (CySEC) under license number 158/11.
The company operates in accordance with Markets in Financial Instruments Directive (MiFID).
The content on this website is for information purposes only. All the services and information provided have been obtained from sources deemed to be reliable. TeleTrade-DJ International Consulting Ltd ("TeleTrade") and/or any third-party information providers provide the services and information without warranty of any kind. By using this information and services you agree that under no circumstances shall TeleTrade have any liability to any person or entity for any loss or damage in whole or part caused by reliance on such information and services.
TeleTrade cooperates exclusively with regulated financial institutions for the safekeeping of clients' funds. Please see the entire list of banks and payment service providers entrusted with the handling of clients' funds.
TeleTrade-DJ International Consulting Ltd currently provides its services on a cross-border basis, within EEA states (except Belgium) under the MiFID passporting regime, and in selected 3rd countries. TeleTrade does not provide its services to residents or nationals of the USA.