Chinese government advisers propose regional Stablecoin for 4 Asian countries
Chinese top political advisers have proposed a regional digital currency that would be backed by four main Asian currencies, including the Japanese yen, the Korean won, the Hong Kong dollar and the yuan.
The proposal presented Thursday describes the currency as a “stable currency,” a term for cryptocurrencies designed to hold its value and backed by a reserve currency, although it does not explicitly mention cryptocurrencies or blockchains.
The People’s Bank of China (PBOC) would lead the proposed effort. The basket of underlying guarantees would follow the model of special drawing rights (SDR) of the International Monetary Fund (IMF), where the currency of each country is assigned a different weight depending on its economy
As such, the proposal resembles the pound’s original vision, before the Facebook-generated project diluted its plans and turned to the development of digital versions of individual fiat currencies. (The Libra Association recently welcomed Singapore investment company Temasek as its first member of the state entity.)
The proposed stablecoin would help facilitate trade between the four countries, which is key to the economic recovery in the region after the coronavirus, its proponents said. It would do so by improving cross-border settlement and clearing services with a new payment network and digital wallet for businesses.
Neil Shen, founding partner and manager of Sequoia China and a member of China’s upper house, presented the proposal to Chinese lawmakers during the Two Sessions, the country’s largest annual political meeting.
Nine other advisers who are also members of the upper house, including Kennedy Wong, a Hong Kong Supreme Court lawyer, former Hong Kong Chief Clerk Henry Tang, and Hong Kong-based Chinese billionaire Songqiao Zhang, jointly signed the proposal.
Shen attended the first session of the Chinese People’s Political Consultative Conference (CCP) on Thursday. The PCC is essentially an advisory upper house where a variety of organizations and independent members help the government make decisions at the national level. This meeting will be followed by plenary sessions of the National People’s Congress (APN) that will begin on Friday and will last approximately two weeks.
The proposals of the PCC do not tend to have the same level of influence as the more concrete bills discussed in the NPC because the bills will produce significant changes in the Laws and regulations. However, in this case, the proposal may have some holding power.
California-based Sequoia Capital, parent of Sequoia China, is one of the few reputable venture capital firms to have ventured into crypto. He invested about $ 10 million in one of the world’s largest crypto exchanges by volume, Huobi Group, when it was based in China in 2014. (Huobi Group is now based in Singapore).
He also invested in Nervos and Conflux through private token sales. Both startups have collaborated with Chinese state entities to develop blockchain technologies
The stablecoin proposal also suggests creating a regulatory sandbox and expanding the system in Hong Kong over time to improve cross-border payment services between the four countries.
Led and supervised by the PBOC, the private sector companies would launch the stablecoin and develop the project with the latest financial technologies. Users of the company could store the coins in a digital wallet and deposit cash in a custodian as reserves to back their stable coins, according to the proposal.
The Hong Kong Monetary Authority and PBOC can create a framework to regulate cross-border stable currency transactions, manage risks, and discourage money laundering, according to the proposal.
The stablecoin could launch before China’s national digital currency and pave the way for its implementation by testing use cases to identify potential technical issues and risks. If launched, the stablecoin could connect “smoothly” to the digital yuan, according to the proposal.
The proposal highlights that Hong Kong is one of the most important financial gateways connecting mainland China with other Asian countries, with more than 70% of the renminbi cross-border payment processed in the city.
Hong Kong could be the most favorable jurisdiction for a regional stable currency. The Hong Kong Securities and Futures Commission created a licensing system to regulate virtual asset transactions and trading platforms in November.
Among the first 12 licensed entities are Tencent’s WeBank; Alibaba’s financial technology arm, Ant Financial; Infinium Limited, a joint venture that includes Tencent, the Industrial and Commercial Bank of China (ICBC) and two other Hong Kong-based institutional investors; and SC Digital Solutions Limited, whose 65 percent stake is owned by Standard & Chartered Bank.
At the other extreme, the PBOC and China’s main financial watchdog, the China Securities and Regulatory Commission (CSRC), recently unveiled a series of new measures to reform the financial system in the Guangdong-Hong Bay area. Kong-Macao and encourage Blockchain Applications to improve international financial services in this area.
In 2017, the Chinese government launched an initiative to further integrate Guangdong Province with Hong Kong and Macao in an attempt to build stronger financial connections between these cities and the mainland. The initiative encourages banks in the Guangdong-Hong Kong-Macao Bay Area (GBA) to have a regional network and operate in a more interconnected financial system.
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