China Close to Launching Its Own Digital Currency

China’s central bank – People’s Bank of China (PBoC) – has announced that is nearly ready to issue its own sovereign digital currency, according to a senior official.

Mu Changchun, deputy director of the People’s Bank of China’s payments department, has revealed that the bank’s virtual currency was “almost ready” for release. The news was announced by Mu at the China Finance 40 Forum over the weekend.

According to the news report, researchers have successfully developed a prototype that adopts blockchain architecture after five years of research and it is “close to being out.” However, details about the launch have yet to be known.

China’s central bank will reportedly launch its digital token through a two-tier system, with PBoC on an upper level and commercial banks on a secondary level as legitimate issuers.

Mu further explained that issuing a digital currency using a pure blockchain architecture would be difficult to achieve in a country as big as China due to the fact that retailers require high concurrency performance. The bank said it wouldn’t rely on blockchain exclusively, and would instead maintain a more neutral stance on which technology it decides to use.

According to Mu, this will improve accessibility, enhance adoption rates amongst the public as well as promote innovation amongst commercial entities. In addition to that, the digital currency is designed to be suitable for small-scale retail high-frequency business scenarios.

Mu has stressed that the institution’s aim is for the digital currency to replace M0, or cash in circulation, rather than M2, which would generate credit and impact monetary policy. The digital currency would also support the Yuan’s circulation and internationalization, he said.

According to patents registered by the PBoC, consumers as well as businesses would download a mobile wallet and exchange their yuan for the digital money, which they could use to make and receive payments. It is further indicated the wallet would store a digital currency issued by the central bank or any authorized central entity that is encrypted like a cryptocurrency with private keys, offers multi-signature security and is held by users in a decentralized way.

Currently, there are 52 patents filed under the name of the Digital Currency Research Lab of the PBoC, with the latest published in October 9th 2018, having been submitted on March 26th 2018.

Meanwhile, the news comes as global central bankers take a skeptical view on Facebook’s cryptocurrency project – Libra. Earlier in July, former governor of the PBoC Zhou Xiaochuan claimed that Libra poses a threat to payments systems and national currencies and he believed it should come under central bank oversight to prevent potential foreign exchange risks and protect the authority of monetary policy.

Singapore and Canada Central Banks Trial Cross Border Payments via DLT

There has been recently a growing number of central banks taking a serious interest in blockchain and distributed ledger technology. As a testament to that, the Bank of Canada and the Monetary Authority of Singapore (MAS) have recently concluded a successful experiment on cross-border and cross-currency payments using central bank digital currencies.

In a joint statement published on May 2nd, the central banks of Singapore and Canada have successfully used their blockchain networks to send each other digital currency. This marks the first such trial between two central banks, and subsequently has great potential to increase efficiencies and reduce risks for cross-border payments.

Nowadays, cross-border payments are often slowly and costly, and they rely on a correspondent network, which is subject to counterparty risk as well as inefficient liquidity. As such, the Bank of Canada and MAS have partnered up to make the cross-border payment process cheaper, faster and safer by using Distributed Ledger Technology (DLT).

As part of the experiment, the Monetary Authority of Singapore sent funds to the Bank of Canada without a third party. The two central banks have successfully linked up their respective experimental domestic payment networks, which are MAS’ Project Jasper and Bank of Canada’s Project Ubin, which are built on two different DLT platforms.

The project teams used a technique called Hashed Time-Locked Contracts (HTLC) to connect the two networks and allow Payment versus Payment (PvP) settlement without the need for a trusted third party to act as an intermediary. JPMorgan and accounting giant Accenture have both assisted the banks in the development of the platforms to make the trade possible.

In a press release, MAS fintech officer Sopnendu Mohanty, has stated:

“The next wave of central bank blockchain projects can make further progress by bringing technology exploration together with policy questions about the future of cross-border payments.”

He further added that that was indeed a challenge for both institutions and they would gladly welcome other central banks, who wish to join this global collaboration with the goal of bringing benefits to consumers, businesses and the broader financial industry.

Following the successful conclusion of the experiment, both institutions have released a joint summary report that suggests different design options for cross-border settlement systems.

The report further suggests areas of research in DLT interconnectivity mechanisms and alternative network models. As this project serves opportunities for further collaboration amongst central banks, financial institutions as well as fintech firms, the Bank of Canada and MAS would like to encourage the global financial community to build on these findings and work together to make international payments better, faster and cheaper.

Bitcoin’s Price Spikes On Local Exchanges In Iran

Most recently, Iran has announced their decision that from now cryptocurrency mining will be recognized as a separate industry. This has come to light as a consequence of intense pressure of the economy after having implemented monetary sanctions enforced by the USA.

Subsequently, the Central Bank of Iran, which regulates Iranian foreign exchanges and monetary policies, has already started working on drafting new policies regarding this new development. Meanwhile, the secretary of Iran’s Supreme Council of Cyberspace, Abolhassan Firouzabadi, has announced that the new policy is set to be drafted over the next three weeks. In a statement to IBENA, he cites that this new development is a promising change within the Iranian market as it will strengthen Iran’s relations with trade partners and allied countries. Moreover he has pointed out that the new cryptocurrency industry has already been recognized by many governmental branches and authorities such as the Central Bank, Ministry of Communications and Information Technology, Ministry of Industry, Mining and Trade, Ministry of Energy and the Ministry of Economic Affairs and Finance.

In the meantime, the price of Bitcoin was circa $24 000 (converted) on some of the Iranian exchanges. Exir, an exchange platform, has indicated a fee of 1,020,000,000 IRR for 1(one) Bitcoin, surpassing by far its previous highest value of $20 000. Currently, the price of BTC on international exchanges is $7000. The price of Ethereum has also been inflated as a result of the news breaking out, rising to $900, whilst it currently trading at the price of $280.

U.S. Sanctions Leads To Economic Destabilization

After the sanctions imposed by the USA came into effect this August, the Iranian Rial has drastically fallen in value in comparison to the US dollar, thus causing dissidence for many as this has pushed many European markets to remove themselves from the Iranian economic platform. President Donald Trump was very absolute and definitive about his decision, this leading to a lot of countries having to choose between Iran and the US.

Solely the announcement of said sanctions has forced more than 100 companies to withdraw from the Iranian market immediately, as the situation in the country becomes uncertain and precarious due to the riots and protests of the people. Since then, the Rial has continually decreased in value, forcing the Rial on the verge of hyperinflation. Venezuela is another instance when a country is being torn apart by the political instability and hyperinflation therefore takes the decision to combat this by turning to virtual currencies such as Bitcoin or DASH.