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Another day another Chinese ban related to cryptocurrencies. China has never hesitated to do so ban cryptocurrencies before. In early 2017, it banned the Initial Coin Offering (ICO). It was also considering banning cryptocurrency mining due to rising costs. Mining also brought challenges as miners would also steal electricity.
Over the years, the country has always imposed restrictions cryptocurrency business.
The latest in a series of restrictions is the call to the People’s Bank of China (PBOC) ban crypto issue. The central bank is gathering public comments to stop digital currencies.
The document tries to prevent any unit from creating or reselling cryptographic tokens. It also excludes the file circulation of coupons and other currencies that rival the Chinese Yuan.
The extent of China’s cryptocurrency ban
One of the concerns in crypto regulations has been the definition of scope. The new proposal defines the Chinese Yuan as a physical aspect and digital form. Try to protect the national currency.
The law targets stablecoin issuers. This is to avoid any direct competition. It prohibits any entity from creating or using symbols that could even compete with the Yuan.
The law provides for a fine equal to five times the proceeds of such sales. He also wants digital currency issuers to stop trading and lose their earnings.
The new laws will replace the central bank laws of 2003. They have been driving the financial sector in recent years. The growth of the cryptocurrency world requires changes to accommodate new assets. If the law is passed, it will be the first time China will have written laws on cryptocurrencies.
Yuan’s focus on competition is a move towards the future of currencies. The Chinese government is planning to release a central bank digital currency. Banning other cryptocurrencies is the only surefire way to make sure it thrives.
Understanding the digital yuan
The news about China ban cryptocurrencies it’s no surprise to anyone following crypto trends. The country hasn’t been the friendliest to cryptocurrencies. It was one of the first nations to do so ban cryptocurrencies citing the interruption of traditional currency.
It is even more contradictory because the country wants to be the leader in the crypto economy. He believes cryptography is the way to go for states looking to become dominant in the future. It was therefore one of the countries that supported crypto mining. It subsequently changed and banned cryptocurrency-related activities.
Different script, same goal. China wants to dominate the crypto space by launching a digital national currency. The government is in the advanced stages of verifying the electronic cash project. It is already testing the feasibility of the coin on users.
Last week it distributed digital currency worth $ 1.5 million. The coin attracted over 2 million applicants through the lottery, with 50,000 national winners.
The currency works in such a way that you download a digital renminbi app. They receive the currency through the app and can use it in more than 3000 merchant Stores. Several local shops and pharmacies are part of the testing phase.
The Shenzhen process is the largest the project has undertaken so far. It also appears to be the determining factor in the success the coin can achieve.
The digital yuan must function like traditional fiat currency. The only difference is that it will be all digital. The central bank will retain its role as the sole provider and controller. It means that other entities, such as commercial banks, will still perform the same functions.
In addition, the digital yuan will complement existing digital payment platforms such as WeChat.
The digital Yuan is different from Bitcoin and others decentralized cryptocurrencies. Decentralization means that virtual currencies have no supervisory authority. For this, they are susceptible to use in illegal transactions and volatility.
The Chinese government believes in the possible success of the digital currency. He believes that many other countries will adopt the currency. At some point, all countries in the world will use digital currencies. This would break the dominance of the USD.
World view on StableCoins and CBDC
The look that China wants ban cryptocurrencies it is not an isolated case. Many other countries have already banned cryptocurrencies. This is mainly to safeguard the existing fiat currency.
Others also want to extend their national crypto projects. Venezuela, for example, has banned all cryptocurrencies except Petronas.
Venezuela also wants to avoid economic sanctions through cryptocurrencies. However, the national digital currency has failed. Now they embrace all other coins like Ethereum is To tie.
Of all crypto projects, stablecoins remain the greatest concern for governments. Despite virtual currencies have been developed, have volatility problems. It means that most of the users still prefer fiat currencies due to its stability. Stablecoins have yet to provide access to cryptocurrencies without the volatility issues.
Stablecoins tie their values to fiat currencies or other commodities. They don’t face market changes like other cryptocurrencies.
Coins are therefore a threat to national currencies.
A successful stablecoin would see most users abandon the traditional fiat economy. Banks would have difficulty obtaining deposits for operations. The government and central banks would also lose control. Fear has seen ambitious projects like Libra and Tron face obstacles. Some even ban cryptocurrencies altogether.
However, governments also recognize that cryptocurrencies are an idea whose time has come. No matter how much they ban or control it, coins will thrive. The only way then is to join the fray.
Several governments are considering developing central bank digital currencies. The Bank for International Settlement is working with other central banks on this. They have already released a framework for CBDCs.
A successful CBDC means they maintain the status quo. It is only the operating platform that moves into the blockchain space.
Bottom line
The prospects for the digital Yuan have made China reflect ban cryptocurrencies. Look for an area with no competition for the national currency. China’s move looks like the first time that many other countries will follow.
The creation of CBDC and the ban on cryptocurrencies is the way to survive the traditional economy.
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