China is considering establishing an exchange for trading digital assets in Beijing. As part of the State Council’s plan to support financial services in the capital, the exchange will also serve to promote the use of the digital yuan.
Efforts to hasten the development of its central bank digital currency (CBDC) have been ramping up recently. For instance, the cabinet has asked for faster trials and compelled institutional banks to establish the necessary infrastructure with firms.
A digital yuan for digital dominance
These comprise the latest in China’s efforts to become the leading blockchain power in the world within the next five years by effectively nationalizing the industry through the banning of private cryptocurrencies and the promotion of the digital yuan. Earlier this year, China’s Ministry of Industry and Information Technology and the Office of the Central Cyberspace Affairs Commission jointly issued guidelines for blockchain development, hoping to make it the most advanced in the world by integrating it into the Chinese economy and society.
This helps to contextualize the efforts China has made over the past year to ban cryptocurrency trading and mining in the country, despite previously having the highest hash rate globally. Last month, the People’s Bank of China (PBOC) issued another statement on cryptocurrencies effectively banning any crypto-related business from operating in mainland China. It then added crypto mining firms to a “negative list” that banned any foreign investment into such enterprises. Additionally, China’s National Development and Reform Commission (NDCR) has added cryptocurrency mining to its blacklist.
China has been in the process of creating a virtual version of its legal tender since 2014. Several trials took place across multiple cities last year, which encouraged the use of the digital yuan between consumers and merchants. Although initial feedback had been unenthusiastic, authorities have continued to press on and a broader rollout is expected during the Winter Olympics being held next year in Beijing.
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