China has been proactively working on digital currency sector and they have been bringing in new innovation and notion to the sector. Very recently a piece of news has gone disclosed that political advisors of China want a regional digital currency which will be backed by four major Asian currencies including Japanese yen, Korean won, Hong Kong dollar and the yuan.
Not being explicitly mentioned whether it is crypto or blockchains, the currency was entitled as a stablecoin, a new class of cryptocurrencies that attempts to offer price stability and are backed by a reserve asset which have gained traction as they try to offer the instant processing and security or privacy of payments of cryptocurrencies and the volatility-free stable valuations of fiat currencies.
China’s central bank is supposed to lead the project and the basket of underlying collateral would follow the special drawing rights (SDR) model of the International Monetary Fund (IMF). The vision behind this proposal is right akin to Facebook-led Libra. By improving cross-border settlement, the proposed stablecoin will help in economic recovery in four countries.
During the China’s largest annual political gathering Two Sessions, the proposal to Chinese legislators was presented by Neil Shen, founding and managing partner of Sequoia Capital China. After the proposal was made, nine other advisors co-signed the proposal. Shen was present in the first session of the Chinese People’s Political Consultative Conference (PCC) and the PCC actually assists the government in making national-level decisions.
Sequoia Capital is an American venture capital firm which invested $10 million in Huobi, the largest crypto exchange by volume. It also invested in Nervos and conflux via private token sale to develop blockchain technologies in China. Maybe, there is necessary to create a regulatory sandbox and scaling up the system in Hong Kong for improving cross-border payment services between these four countries.
On the basis of the directive of the proposal, companies from private sectors being supervised by the PBOC will launch the stablecoin and develop the project. All the regulatory-typed functions would be performed by the Hong Kong Monetary Authority and PBOC. Upon launch, the stablecoin could be seamlessly connected with the digital yuan.
Hong Kong is to play a vital role as financial gateways among these Asian four countries and most favorable jurisdiction for such a regional stablecoin. The Hong Kong Securities and Futures Commission created a licensing system to regulate virtual assets transactions and trading platforms in November. Some kinds of planning were taken by the China Securities and Regulatory Commission (CSRC) and the PBOC to encourage blockcahin technology and reconstruct the financial system in the Guangdong-Hong Kong-Macao Greater Bay Area.