Dr. Zhou Xiaochuan Former Governor, People’s Bank of China, Discusses Digital Currencies in Singapore

Dr. Zhou Xiaochuan, President, China Society for Finance and Banking, and former Governor, People’s Bank of China, addressed a closed-door audience today in an event sponsored by the Monetary Authority of Singapore (MAS). The topic of Dr. Xiaochuan’s speech was “Fintech development and its interaction with policymaking.”

In recent years, the relationship between Singapore and China has grown closer. In 2016, MAS announced that RMB assets would be included as part of their official foreign reserves.

According to a release by MAS, Dr. Xiaochuan also discussed the emergence of digital currencies without providing details.

As was reported last month,  a Chinese official said the People’s Bank of China (PBOC) will soon release its own digital currency after five years of research and development.

The PBOC began development of a Chinese Central Bank Digital Currency (CBDC) in 2014 under the guidance of Dr. Xiaochuan when he set up the Digital Currency Research Institute within the PBOC.

Reports indicate that China’s intent is to protect its sovereign currency and “curb demand” for private digital currencies, such as Facebook’s Libra. Additionally, Chinese officials have said that China CBDC will not be entirely based on blockchain as the tech cannot handle the necessary volume of transactions.

While blockchain and a CBDC have been a known sector of interest in China, private cryptocurrencies have not been welcomed for some – except for the massive amount of crypto mining that is said to take place in parts of the country.

While it is not known if Dr. Xiaochuan delivered any updates on the anticipated Yuan-based crypto, a report in Caixin said the crypto will be centrally managed and guaranteed by the central bank which will distribute the virtual currency to commercial banks and thus distributed to the public. All quite similar to its more plebian paper-based fiat currency.

 

Tether Launches Offshore Chinese Yuan Proxy

Controversial stablecoin issuer Tether has launched its promised “CNHt” coin, which is designed to act as a cryptographic proxy of offshore Chinese yuan (CNH).

The coin will run as an ERC-20 token on the Ethereum network.

CNHt was first announced in Chinese media by Zhao Dong, a Chinese crypto investor and Bitfinex shareholder who promised in August that the coin would go live via his China-based cryptocurrency trading platform, RenrenBit.

Bitfinex is the sister exchange of Tether. The two company’s parent company, iFinex, is now being investigated by the NYAG for alleged fraud for allowing Tether to lend Bitfinex $650 million USD from its reserves.

The loan was made after authorities in Panama seized of $850 million USD in Bitfinex funds from an alleged “shadow banking” partner, CryptoCapital.

That seizure reportedly led to a crunch on operating funds at Bitfinex, but the NYAG alleges that the loan was not disclosed to investors in a timely way.

Crypto Capital boss Reginald Fowler was arrested in Arizona April 30th and charged with bank fraud, operation of an unlicensed money transmitting business and conspiracy for allegedly providing “shadow banking” to several cryptocurrency exchanges.

iFinex et al have been plagued by rumours of malfeasance for years, but Tether has nonetheless maintained overwhelming market share in USD proxy coins.

Scott Purcell, CEO and founder of PrimeTrust, has explained Tether’s resilience as a matter of crypto trading markets having no alternative.

Regarding CNHt synthetic yuan, Purcell commented:

“I am extremely skeptical of this new issuance by Tether. Unless the stablecoin is fully-reserved, with assets held in trust by a qualified custodian and subject to third-party audit by an independent and respected accounting firm, then the risk of fraud is almost certain.”

There may nonetheless be a market for Tether’s synthetic offshore yuan.

A recent story in Coindesk claims that tethers have supplanted Bitcoins as the remittance cryptocurrency of choice for Chinese merchants doing business in Moscow.

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Still Undaunted by New York Investigation, Tether to Issue Offshore Yuan

Tether is continuing its bid to sell synthetic versions of world currencies by issuing yet another “stablecoin,” this time in the form of CNHT, which will act as a proxy for offshore Chinese yuan (CNH).

Tether, its parent company iFinex and sister company, crypto exchange Bitfinex, are all currently under investigation in New York for alleged fraud.

This week, the companies lost their five-month battle against ex-parte orders issued by the New York Attorney General compelling them to provide comprehensive business records.

Chinese cryptomedia outlet ChainNews says Bitfinex shareholder Zhao Dong, a supposed crypto billionaire, disclosed the news regarding CNHT, and says he will be hosting CNHT on his crypto trading platform, RenrenBit.

South African crypto-and-conventional trading platform eToro already offers a stablecoin crypto version of onshore yuan (CNY), but, according to Business Insider, unlike onshore yarn, which trades within a narrow band set by the Chinese government, offshore yuan is allowed to float.

Chinese merchants reportedly like to sell goods for onshore yuan and then cash out the money in Hong Kong offshore yuan money markets, where exchange rates are sometimes higher.

The outlet says the offshore version of the yuan was created by China as it, “open(ed) up its economy…(and) wanted  its currency to be used in the international market to settle trade and financial transactions, without, however, fully opening up its capital account.”

In late July, Coindesk reported that standard USD-pegged tethers have supplanted bitcoins as the remittance currency of choice used by Chinese merchants selling goods in Moscow.

Sources to the outlet claim that up to $30 million USD is being transferred into China from Russia every day in this way.

US regulators from Maxine Waters to Steve Mnuchin to Kenneth Blanco have all lately stressed the national security implications of global crypto networks, which may enable illicit finance and sanctions evasion.

Meanwhile, Russia and China already appear to be successfully experimenting, as promised, with “uncensorable” money networks they hope will allow them to disrupt American global financial dominance.

Anonymous critics on Twitter have been warning for several years about suspicious activity at Tether and Bitfinex.

When news about Tether’s CNHT broke, “Vilecarlo The Tether Whisperer” posted a satire on his Twitter stream.

The characters in the satirical dialogue are JL van der Velde, CEO of both Bitfinex and Tether and Giancarlo Devasini, Chief Financial Officer at Tether:

Translated, “amico mio, fanculo il mondo,” means, “my friend, fuck the world.”

Safe Haven: Yuan Dives and Bitcoin Rises

Bitcoin is moving higher, once again, as the trade war between the US and China escalates.

Yesterday, the Yuan dropped below 7 to the dollar with the People’s Bank of China (PBOC) blaming the decline “to unilateral trade protectionism, as well as expectations of more tariffs on China”.

The PBOC said they have “the experience, confidence and ability to keep the yuan exchange rate basically stable at a reasonable equilibrium level,” according to a report in SCMP.

Of course, it is unknown as to what the equilibrium level is expected to be. The retaliatory move by China encouraged President Trump to quicly label China a currency manipulator.

Meanwhile, Bitcoin increased to over $11,700. Some of this increase may be Yuan holders moving money to Bitcoin to hedge the deprecation of yuan. While it is explicitly stated that crypto trading is prohibited in China, a robust OTC market has evolved and Bitcoin trading remains active in China.

Jeremy Allaire, CEO of Circle – a crypto ecosystem, joined CNBC this AM to provide his insight on the “surge” in Bitcoin price.

Allaire said that crypto and Bitcoin specifically is participating in these global macro forces. The volatility of traditional markets drives interest in a “non-sovereign” store of value such as Bitcoin. “It looks like it will continue,” said Allaire.

Allaire notes there are many exchanges with their legal venue outside of China but still operating in places like Beijing and Hong Kong. China also remains a major crypto mining center.

“There is a lot of national Chinese participation in this market,” affirmed Allaire.

He also believes there has been a political softening in Chinese policy towards crypto. Indications such as the Bank of China starting to market information on Bitcoin and a recent court case declaring Bitcoin as property helpt to legitimize the digital currency.

As stocks tumble, Bitcoin starts to look better due to is non-correlation.

So can we expect more appreciation in the price of Bitcoin as the trade war escalates? It is starting to look that way.


Circle CEO Jeremy Allaire explains the overnight surge in Bitcoin from CNBC.