China pushes on with its digital currency, while Australia's regulator intends to support innovative crypto products, but also warns against scams
by Bethan Rees
China requires the support of big tech companies for its digital yuan plan to be successful, according to an article by GlobalData Thematic Research for Verdict. The Chinese government has been working with state banks to create the digital currency since 2014. It will form part of the government's effort to "assert its dominance globally and rival the US dollar as the reserve currency", says the article.
JD.com, one of China's largest online retailers, is one of the tech companies the government has support from. It has announced that it will use the digital currency to pay some of its employees. Ant Group, Tencent, and the People’s Bank of China (PBoC) are working together to design, develop and test the currency.
China's online payment market and its associated data is 94% controlled by online payment platform Alipay and mobile payment company WeChat Pay. The digital yuan is likely to disrupt this dominance. Referring to a Reuters article, the article notes that the PBoC has said the currency won't compete with the two tech companies mentioned, but will act as a ‘backup’.
However, the article says, "Transactions made in digital yuan can be completed directly on the banks’ digital wallet, thus bypassing the need for Alibaba and Tencent’s payment services."
Verdict article
Australia's support of digital currency
The Australian Securities and Investments Commission (ASIC) intends to support the digital currency sector, although it also highlights a number of scams impacting investors, writes Ed Drake for Coin Geek.
According to Drake, ASIC says that it will "maintain, facilitate and improve the performance of [Australia's] financial systems and the firms that operate within it", despite the challenge of regulating new and emerging technologies. ASIC commissioner Cathie Armour is quoted by Drake in the article after speaking at a panel event during Australian Blockchain Week. "When we’re talking about innovations like [distributed ledger technology], or new products like various crypto asset products, from our perspective at ASIC, we are really interested in how those products can be utilised to improve how our financial system operates," Armour says.
Speaking on the high numbers of complaints regarding scams and frauds in the digital currency space, Armour urges investors to be aware of "poor practices or scam activity" surrounding digital currencies. Drake says that the regulator found that digital currency scams rose by 20% in the first few months of the pandemic, "which it feared was indicative of a trend towards even more scam activity".
Coin Geek article
Crypto lives on
According to Deutsche Bank International Private Bank, cryptocurrencies will survive the incoming central bank digital currencies (CBDCs) but their usage might decline, reports Sophie Kiderlin for Markets Insider.
But they could also become more robust. According to Kiderlin, Christian Nolting, global chief investment officer at Deutsche Bank, in an introduction for a special report on digital currencies, writes: "The longer cryptocurrencies survive, the more robust and credible they become due to network effects (Metcalfe's law). Once we see some stability in terms of price fluctuations, the use of cryptocurrencies for the exchange of goods and services goods could increase."
However, this "depends on the rollout of CBDCs and factors such as regulation, environmental impact, security issues and transaction speed". The longer central banks take to implement digital currencies, the more chance cryptocurrencies have of establishing themselves, it adds.
Kiderlin quotes further from the report: "A widespread introduction of CBDCs accompanied by higher regulation of cryptocurrencies could create a more challenging environment for crypto assets as some (but not all) of their advantages compared to traditional financial assets would fade in the longer term".
Kiderlin says that the report urges caution against using cryptocurrencies as "an equivalent to gold in terms of diversification and risk management".
Markets Insider article