What Will The Chinese Crypto Do To Bitcoin?
China’s long-fabled “cryptocurrency” launch is finally on the horizon.
According to Bloomberg, People’s Bank of China (PBoC) payments department deputy director Mu Changchun confirmed at the China Finance 40 Forum that the country’s cryptocurrency is nearing its release following a year of research and development.
Given Beijing’s history of antagonism toward decentralized cryptocurrencies, what does the impending launch of a PBoC-approved digital currency mean for bitcoin?
CHINA’S ‘CRYPTO’ PLAY IS ABOUT RESTRICTING FREEDOM
China, which has had strict capital controls in place for many years to restrict the outflow of the depreciating Chinese yuan, is expected to use the PBoC-issued cryptocurrency to exercise even stronger control over the national currency.
By utilizing a centralized blockchain network or a system modeled after the blockchain, replacing cash in circulation with a digital asset would enable the PBoC and the government of China to better monitor -and control – the flow of the yuan.
Cash – by nature – is anonymous in that it is difficult for the authorities to scrutinize offline transactions made in a peer-to-peer manner. A digital system would ease the process for regulators to oversee so-called suspicious transactions.
However, whether it can truly be described as a cryptocurrency remains a separate issue as a blockchain protocol, as seen in the structure of the Bitcoin network, often demonstrates a certain level of decentralization through the presence of nodes and open-source communities.
Regardless, China’s so-called “crypto” project is about restricting freedom – not enhancing it.
‘DIGITAL YUAN’ WON’T STUNT DEMAND FOR BITCOIN
In recent months, reports have indicated that major cryptocurrencies, including bitcoin and tether (USDT), have seen rising inflows from China.
Crypto research firm Diar stated that 62 percent of tether’s on-chain volume in the second quarter of 2019 came from China.
“Data provided to Diar by blockchain analysis firm Chainalysis highlights the magnitude of Chinese Tether demand with over $16Bn received by exchanges based in that market in 2018. This year the number has already surpassed an outstanding $10Bn, setting the stage for the biggest year yet. 2019 to date flows into exchanges catering primarily for Chinese traders beat the $7Bn of all the transactional value for 2017,” the report stated
The popularity of bitcoin in China reflects the growing interest in BTC as an alternative store of value. It’s clear that Chinese crypto users view BTC as a store of value – not an everyday payment tool – because efficient digital currency system platforms like Alipay and WeChat have already onboarded hundreds of millions of users in the region.
As such, the nation-backed cryptocurrency is highly unlikely to impose any impact on China’s stance towards bitcoin – or stunt investor demand for BTC.
SAFE HAVEN ASSET NARRATIVE
Still, it’s not clear whether bitcoin has definitely proven its value as a safe-haven asset.
Throughout August, as the bitcoin price slightly declined, the volume of the asset decreased, and its premium in major markets like China and South Korea dropped.
In South Korea, a major cryptocurrency market that accounts for a relatively large portion of global bitcoin volume behind the U.S. and Japan, bitcoin is trading at a rate that is lower by more than one percent when compared to the global average price. With increasing geopolitical risks and intensifying conflicts across the globe, analysts expect traditional safe havens like gold to outperform. Bitcoin has a chance to prove similar resilience.
3 Big Blockchain Firms Working Together On A DeFi Product That Pays Passive Income
In a special announcement made at the Unitize conference on July 6, Cosmos, Polkadot, and Terra revealed a new DeFi savings product called Anchor that aims to offer dependable interest rates on stablecoins deposits. The companies involved in the creation of Anchor plan to launch it across their respective blockchains at the end of Q3 this year and scale across to other PoS blockchains in the future. Do Kwon, founder and CEO of Terra, explained in a prepared statement:
“While DeFi staples such as Maker and Compound have been revolutionary in creating fully decentralized crypto money markets, the volatility of their interest rates makes them unsuitable to be used as a household savings product. DeFi mass adoption needs the creation of a fully decentralized savings account that offers dependable APR.”
Anchor’s smart contracts receive stablecoin deposits and use a portion of them to acquire staking positions on compatible Proof of Stake blockchains. Users will receive their passive income from these staking rewards. The initial governance for this platform will come from the Interchain Asset Association (IAA), a newly formed organization that sees Zaki Manian of Cosmos, Jack Platts of the Web3 Foundation, and Do Kwon of Terraform Labs collectively steering the ship.
Telegram Is Set To Shut Down The TON Testnet By August 2020
Although Telegram has terminated its blockchain project, Telegram Open Network (TON), in May 2020, the TON test net has been apparently running for almost one year. In a July 6 update, the official TON development group on Telegram announced that it would be discontinuing its support of the test network for TON. Remaining TON validators will be turned off by August 1. In the post, the TON official recommended network participants save all their relevant data and stop their testing processes. Despite the testnet being set to shut down less than a month from now, network participants will still be able to continue their experimentation after the testnet is terminated. In order to do that, users can install their own testnet validators, described in greater detail in three different how-to documents containing guidelines for the Full Node, the Validator, and Test Grams.
Telegram launched the TON testnet for explorer and node software on Sept. 6, 2019. In anticipation of its scheduled Oct. 31 launch last year, the company released an alpha version of an iOS wallet to work with its native token, the Gram. But Telegram’s TON plans were never fully realized, as the United States Securities and Exchange Commission suddenly deemed Telegram’s $1.7 billion ICO illegal in mid-October. After a long-running legal battle with U.S. regulators, Telegram agreed to shut down its TON project, as well as return $1.2 billion to investors in line with a court-approved final settlement. As officially announced by Telegram CEO Pavel Durov, the firm had already reimbursed more than $1.2 billion by June 25.
Binance Supports An Ontology Upgrade
Binance, one of the world’s biggest crypto exchanges, has announced on July 5 that it will support the upcoming Ontology 2.0 network upgrade. Ontology 2.0 will include the integration of a number of community-led upgrades to its MainNet. Binance says that it will end support of Neo Enhancement Protocol 5-based, or NEP5, ONT tokens deposits. Any future deposits of NEP5 ONT will not be credited to users’ Binance account, it indicates. Deposits and withdrawals of ONT will be stopped starting July 6 at 9 a.m. UTC. Users will be notified when the Ontology upgraded network becomes stable and deposits and withdrawals are reopened, says Binance.
The Ontology network upgrade will not result in a new token creation and ONG staking rewards for ONT will not be affected. Ontology uses a dual token (ONT and ONG) model. ONT is the coin and can be used for staking in consensus, whereas ONG is the utility token used for on-chain services. MainNet ONT started to release ONG as soon as Ontology MainNet went live two years ago. According to Ontology, from 9 to 12th June 2020, it will give its community the opportunity to have a say in the development of its governance and staking economic model, especially for the Triones node results. However, The Ontology Foundation’s first three-year bonus to the top 49 nodes and the distribution method remains unchanged.