China goes full digital with its currency market

China is starting to double down on its decision to implement the blockchain in their country’s economy.

Most of the industries in China are already poised to receive this update, especially the banking sector as well as some major tech companies.

However, The Chinese Communist Party is not going to stop just there as it wants the CBDC (Chinese Bank Digital Currency) to spread as much as possible all over the world. What this means is that they want to have the CBDC being traded on the Forex market.

In order to achieve this goal, the CCP has commissioned the SAFE (State Administration of Foreign Exchange) to start its implementation of the blockchain technology introduced by the ruling party.

Naturally, SAFE did so immediately and is now announcing that the change has been implemented in more than 19 Chinese provinces. Considering that the coverage was so quick, we can expect all of China to be blockchain-adapted by the end of 2019 if the CBDC is released before then.

China’s strenuous but positive relations with Fintech

The Chinese Communist Party is in no way against the implementation of Financial Technologies in its digital economy. In fact, they have been openly supporting tech companies such as Alibaba and Tencent as they started to transform their business models more towards finances rather than just regular products.

Naturally, Alibaba will remain a wholesale marketplace while Tencent will stay as the biggest Chinese tech company, but the move towards finances by both of these companies simply cannot be ignored.

Many experts believe that China’s affiliation with Fintech is due to the ease it brings to surveillance and control. In this case, it’s hard to not agree as any digital payment is much harder to hide than an offline payment.

China was having serious issues with money laundering through physical cash. However, by switching 90% of the local economy towards the digital platform, the government will be aware of almost every single transaction a citizen makes, thus preventing any money laundering in the future.

It may seem that the CCP is poised to implement Fintech as fast as possible, but the fastest-growing sector of this industry, namely cryptocurrencies are still taboo in Mainland China.

China’s relationship with cryptocurrencies

It is no secret that China is one of the, if not the largest crypto hubs in the world. Most of the mining operations take place in the Mainland, and thousands, if not millions of crypto holders are waiting for the ban lift to start injecting their frozen cryptos into the market.

However, the decentralized nature of cryptocurrencies has made them an undesirable asset for the Chinese Communist Party to deal with, thus resulting in the ban of trading as well as the issuance of new coins, aka ICOs.

Mining operations still continue, but on a much smaller volume, thus limiting the financial capabilities of the mainland.

Another major contributor towards the aversion against cryptocurrencies was the cryptocurrency margin exchanges, that offer leveraged trading, and were starting to pop all over cities like Shanghai, Beijing and some in Guangzhou.

The Chinese history of dealing with leveraged exchanges is a bit strenuous and there’s a good reason for it as well.

Why China hates leverage

The economic growth of China in the late 90s and early 2000s was astronomical. The country was reaching numbers never seen before, but it was starting to take a toll on the local population as well.

You see, the more new companies are being created, and the more they are starting to dominate some of the largest markets, the more likely it is a specific group of people to start mindlessly investing in them.

That’s right, the Chinese government’s aversion towards leverage started with their own citizens investing too much on the stock market, and losing nearly everything during the 2008 stock market crash.

The way this new digital currency can change the world

In a sense, the Chinese Communist Party has started a domino effect when it comes to digital currencies. Having one of the world’s largest economies develop a new currency simply demands others to follow suit or risk being left behind on the trade deals they can get with the country.

You see, China knows about its authority in the world when it comes to international trade. They know that almost every single country needs something for them. Therefore they will try addressing these needs through the payment of Chinese Digital currencies, thus making it one of the most dominant currencies in the world.

Currently, the spotlight is on the USD, but it could quickly move to the CBDC if nothing challenges China.

In order to do so, both the European Union and the United States have started looking into the blockchain technology to hopefully find a solution. The EU is ready to start working on digital currencies themselves, while the United States is looking for experienced staff in this department to being research.

Overall, we all have China to thank for initiating the digital economy race.