The currency market in China, more specifically the Forex industry has finally received the promised blockchain technology update and is starting to head towards a more proficient and fast transaction system both within and outside of the country.
This addition was definitely not surprising for most people who keep up with the news. The chairman of China’s State Administration of Foreign Exchange (SAFE), Lu Lei had already mentioned the plans of implementing blockchain tech in both the regulator’s and private companies’ operations.
This turn of events for both the regulator and the industry came right after President Xi Jinping announced that China had to start focusing more on the blockchain technology if it wants to keep up with the rest of the world.
Naturally, given that the technology was commended by the President himself, the whole country was quickly on board with the idea of switching to digital currencies on the blockchain.
The accidental BTC surge
President Xi’s announcement about focusing on the blockchain technology was more or less misinterpreted by the crypto community, thus causing a sudden surge in Bitcoin’s valuation. We all know that most of the world’s Bitcoin volume is located in China, and having such large volumes start moving on the global markets excited lots of investors to start buying while BTC was cheap.
The anticipation was misplaced though. Xi’s announcement had absolutely nothing to do with cryptocurrencies. It was targeting blockchain and blockchain only. More specifically, it was targeting the Distributed Ledger Technology as it was going to be used for China’s digital currency.
As for the Chinese digital currency, it seems like it’s starting to finally tap into the Chinese reality of more traditional markets such as Forex. Let’s try and see what kind of regulations this could cause in the future and if China will start dominating the East even more in terms of finances.
China’s increased influence through the new regulation
As already mentioned SAFE’s edition of the blockchain technology was not anything to be surprised about. The country’s major banks and even tech companies have been preparing for such addition and are ready to start connecting themselves to the system as well.
The initial “trading processes” on this new system will be done through fiat Yuan, and later change to the CBDC (Chinese Bank Digital Currency) as soon as it is released.
The thing to consider here is the People’s Bank of China has already announced a few commercial banks and tech companies that will be receiving a large quantity of these currencies in order to help them spread on both institutional and retail levels.
What this means is that the banks will start giving out loans in CBDC, and tech companies like Tencent, Alipay, Alibaba and etc. will start accepting and processing payments with the digital currency.
Considering that all of these banks and companies combined have nearly 800 million people registered, it’s safe to say that the CBDC will take off.
Digital currency to change fiat currency
Foreign market experts have also commented on the new development, a notable one is ForexNewsNow that tried to understand the changes that it will have in the Asian markets:
“Normally, it’s extremely hard to promote a foreign Forex company in China due to their very strict financial regulations in the country.
In the past it was simply impossible to sign people up digitally as the government was not supporting any of those transactions, and considering that none of the companies were located in China, it was impossible to sign them up through cash as well.
Now though, even if the Chinese government still has that resentment towards the FX market outside its borders, it will have to allow some kind of trading in order to cement their new CBDC in the global economy.
Yes, the CBDC will be directly tied to the Yuan, which means that there will be not too much opportunity to gain a profit there, but there’s always the guarantee that the government will try to keep it as low as possible.
The Chinese traders will finally have the opportunity to sell their Yuan or CBDC in this case when the prices do jump up a little bit as they expect the exchange rate to correct itself soon enough.
It’s a very easily manipulatable system for large retail investors or institutions, which is why we think that serious regulation is going to follow the CBDC trade. As for cryptocurrencies, it’s extremely unlikely that the People’s Bank of China will allow any kind of liquidity through their digital currency”.
Comments such as these can be found almost all around the world. Experts are anticipating mass price manipulations all over the world for the CNY, but ultimately doing so through the CBDC.
It’s in China’s interest to spread the popularity of their new currency, which is why they are very likely to allow some regulatory absence in the first couple of years of its launch.