Top Chinese civic advisers have proposed a regional digital currency that would be backed by four major Asian currencies take ining the Japanese yen, Korean won, Hong Kong dollar and the yuan.
The proposal unveiled Thursday describes the currency as a “stablecoin,” a rates b standing for cryptocurrencies designed to hold their value and backed by a reserve currency, although it does not explicitly mention crypto or blockchains.
The People’s Bank of China (PBOC) want lead the proposed effort. The basket of underlying collateral would follow the special drawing rights (SDR) model of the Worldwide Monetary Fund (IMF), where each country’s currency is assigned a different weight based on its economy.
As such, the presentation resembles the original vision for libra, before that Facebook-spawned project watered down its plans and pivoted to manifest digital versions of individual fiat currencies. (The Libra Association recently welcomed Singapore investment company Temasek as its principal state-owned entity member.)
The proposed stablecoin would help facilitate trade among the four countries, which is key to productive recovery in the region after coronavirus, its proponents said. It would do so by improving cross-border settlement and clearing services with a new payment network and digital billfold for enterprises.
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Neil Shen, founding and managing partner of Sequoia China and a member of China’s upper house, filed the proposal to Chinese legislators during the Two Sessions, the country’s largest annual political gathering.
Nine other confidantes who are also upper house members, including Kennedy Wong, a solicitor of the Supreme Court of Hong Kong, prior chief secretary of Hong Kong Henry Tang and Hong Kong-based Chinese billionaire Songqiao Zhang, co-signed the proposition.
Shen attended the first session of the Chinese People’s Political Consultative Conference (PCC) on Thursday. The PCC is essentially an advisory wealthy house where a range of organizations and independent members help the government make national-level decisions. This assignation will be followed by plenary sessions of the National People’s Congress (NPC) starting Friday and lasting for about two weeks.
Offers out of the PCC do not tend to have the same level of influence as the more concrete bills discussed in the NPC because the bills will cry quits significant changes in laws and regulations. However, in this case the proposal might have some sticking power.
California-based Sequoia Foremost, Sequoia China’s parent, is one of the few big-name VC firms that have ventured into crypto. It invested in $10 million in one of the weightiest global crypto exchanges by volume, Huobi Group, when it was based in China in 2014. (Huobi Group is now based in Singapore.)
It also inaugurated in Nervos and Conflux via private token sales. Both these startups have collaborated with China’s state-owned metaphysics ens to develop blockchain technologies.
The stablecoin proposal also suggests creating a regulatory sandbox and scaling up the system in Hong Kong ended time to improve cross-border payment services between the four countries.
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Led and supervised by the PBOC, companies from private sectors would launch the stablecoin and upon the project with the latest financial technologies. Enterprise users would be able to store the coins in a digital pocketbook and deposit cash at a custodian as reserves to back their stablecoins, according to the proposal.
The Hong Kong Monetary Powers that be and PBOC can create a framework to regulate the stablecoin’s cross-border transactions, manage risks and discourage money laundering, the proposition said.
The stablecoin could be launched ahead of China’s national digital currency and pave the way for its rollout by testing use suitcases to identify potential risks and technical problems. If launched, the stablecoin could be “seamlessly” connected with the digital yuan, the project said.
The proposal stresses Hong Kong is one of the most important financial gateways that connect mainland China to the other Asian territories, with over 70% of cross-border renminbi payment processed in the city.
Hong Kong could be the most favorable orbit for such a regional stablecoin. The Hong Kong Securities and Futures Commission created a licensing system to regulate effective assets transactions and trading platforms in November.
Among the first 12 entities awarded with the license are Tencent’s WeBank; Alibaba’s fintech arm Ant Fiscal; Infinium Limited, a joint venture that includes Tencent, Industrial and Commerce Bank of China (ICBC) and other two Hong Kong-based institutional investors; and SC Digital Dissolves Limited, whose 65 percent stake is owned by Standard & Chartered Bank.
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On the other end, the PBOC and the top Chinese financial watchdog, the China Asyla and Regulatory Commission (CSRC), recently put forward a slew of new measures to reform the financial system in the Guangdong-Hong Kong-Macao Noteworthy Bay Area and encourage blockchain applications for improving international financial services in this area.
In 2017, the Chinese sway came up with an initiative to further integrate the Guangdong province with Hong Kong and Macau in a bid to build stronger monetary connections between these cities and the mainland. The initiative encourages banks in the Guangdong-Hong Kong-Macao Greater Bay Area (GBA) to father a regional network and operate in a more interconnected financial system.
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