Being amongst the major talk of the town for a year and more, China still rules the talk show of the world but certainly for a different reason now. This time it is a matter of deep concern for the financial stability of the country.
This concern arose with the significant rise of the digital currency in China which made the government bit insecure about their financial building blocks. As a result, China has taken certain tough stances on the cryptocurrency industry and acted aggressively on this front.
We don’t claim it to be right or wrong, the norms may certainly vary for each nation but it becomes essential for us to dive deeper and understand what potential backlogs and opportunities do it hold and how can it impact the world.
Cryptocurrency Trend in China
Bitcoin, the renowned player in the crypto world certainly enjoys mass adoption and investment. But what has drawn global attention is a stable coin. Unlike, other cryptocurrencies, Stable coins are not normal ones.
They gain value from external factors and references such as the US dollar or valuable commodities like gold.
The global adoption of Stable coins, like Tether, can greatly influence the global monetary system.
These are becoming attractive investment options because of lesser volatility than Bitcoin and other cryptocurrencies. Presently, stable coins are majorly used to park money in the crypto exchanges without the need for many transferring protocols from bank accounts.
The Tether and USDC are the two prominent stable coins and their total market capitalization was recorded over $100 billion at the end of May 2021.
Impacts of Stablecoin on China
Inarguably, China being in the news for Cryptocurrency is nothing new. There were several instances before when this East Asian nation has crackdown its opinion and rules on Cryptocurrency be it Bitcoin or Altcoin but this time it is Stable Coins. As a result, crypto mining and trading activities have witnessed a sudden drowning phase in China.
The major impact could be seen on the Beijing –based Company that was all geared up to provide cryptocurrency-based services. Followed by the crackdown on Bitcoin mining in China, the rage still does not seem to stop here.
Recently, the deputy governor of People’s Bank of China Fan Yifei, while addressing the press has shown a deep concern towards arising threats to their financial systems. He has indicated that Stable coins (a type of digital currency) are becoming a major threat and risk to their financial welfare.
Additionally, according to him, the stable coins are remarked as speculative tools that put the financial security and the stability of the country in great danger. It has also been claimed that this popular digital currency.
A stable coin is creating room for illegal activities and money laundering to exist. Thus, it is quite evident that China is all geared up to limit the expansion of global cryptocurrencies in the country.
Consequences of Stablecoin Adoption in China
The aggressive outlook of China towards Cryptocurrency started taking the form of strict actions and decisions.
1 It started with the mass arrests relating to cross-border online gambling in the Southern Chinese City, Huizhou.
2 Additionally, a Beijing Qudao Cultural Development, a software maker was ordered to shut down its operations relating to cryptocurrency trading. This came up as a clearly strict action to instruct all companies to stay away from facilitating crypto-related activities and services.
3 This is not where it ended; crypto influencers on Weibo also faced the outrage of the country as their accounts were completely suspended. Yes, this was again a step to prevent and control the financial speculation arising due to virtual currency transactions.
4 These actions and remarks from Asia’s giant bank officials have laid down a hammer on the existence and expansion of crypto markets across the continent. As a result, The Reserve Bank of India (RBI), the US Treasury, the South Africa Reserve Bank, and others have also started to consider it as a warning signal for their citizens.
Hence, the investors and crypto players have kept their eyes wide open on how their respective authorities will make the move.
E-CNY: China’s Alternative for Cryptocurrency
In April 2020, China took a step ahead and introduced its own digital currency E-CNY (Electronic Chinese Yuan) to compete with the cryptocurrencies. As a result, China already got itself on the mission to create a free atmosphere for its digital currency to exist and expand.
According to Fan Yifei, so far the country has allowed 10million people to participate in its Yuan’s expansion trial. Thus, the interested personals are free to join “white lists” at their respective state-owned banks where Yuan will be distributed. Furthermore, this expansion trail could be seen taking a bigger shape with the Beijing Winter Olympics 2022.
Today it was the stable coin that suffered the financial poaching activity of China, but tomorrow it can be some other cryptocurrency. Here lies the major concern as to how we respond to such actions and remarks?
Inarguably, the stable coin does create room for illegality to prevail but what cannot be ignored is the growth potential it holds.
Therefore, what is the need for an hour is that we avoid making ill use of these potential virtual coins and making them stand in the bad books of the investors and authorities.