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China to Pay State Employees in Digital YuanChina is making its biggest push yet to facilitate greater use of its central bank digital currency (CBDC), the digital yuan (e-CNY).©Pexels/RODNAE ProductionsThe eastern city of Changshu is gearing up to commence paying state employees in the city in e-CNY. According to an announcement made by the city’s finance bureau on Sunday, the civil servants will start to receive e-CNY as payment in May. The measure will also impact journalists working for state media, medical staff, technicians and schoolteachers.Advancing a cashless societyThrough a proliferation in the use of digital money such as that offered via WeChat Pay and AliPay, China is already well on its way towards being a cashless society. However, this latest move with the e-CNY is another major step in that direction.In a separate announcement on Sunday, the administrators of the city of Xuzhou, which like Changshu is also located within Jiangsu province, said that Xuzhou is in the process of publishing a pilot scheme which will set out a means for promoting China’s e-CNY digital currency. Meanwhile another Jiangsu province city, Suzhou, was one of the first locations in China to run a digital yuan pilot scheme in April 2020.Previously local government authorities in cities like Shenzhen and Beijing have experimented with using the currency, offering free digital yuan to citizens to spend, in an effort to popularize the digital currency.Changshu had already been using the currency for the best part of a year to make overtime payments to 4,900 state enterprise employees. Additionally, the city administrators had introduced it to pay subsidies, including payments to tech companies, payments related to housing and transport for local government workers. While there’s every likelihood that this latest measure could be applied on a province-wide basis, there has as yet been no direct confirmation of such an eventuality.Privacy concernsThe Chinese government maintains that further introduction of the e-CNY will lead to an improvement for citizens in terms of privacy. Beijing maintains that the large tech platforms like WeChat Pay and AliPay will have no access to the transaction data of individuals and companies. However, that data will find itself directly in the hands of the Chinese government. Given the totalitarian nature of governance in China, it’s hard to imagine how that could be a positive outcome for Chinese society.International currencyOriginally known as DCEP, work on the digital currency began in China in 2014. The Chinese are among a growing list of countries that are understood to be unhappy with the need to use US dollars for international trade given that the dollar is the global reserve currency.That discontent has grown further as a direct response to greater use of sanctions by the United States, and particularly the seizure of Russian sovereign funds held in dollars. Furthermore, the weaponization of the SWIFT payments system exemplified through the exclusion of countries like Russia and Iran is also believed to have been a catalyst for greater development of the e-CNY.

Japan’s financial authority has decided to regulate cryptocurrencies under the Financial Instruments and Exchange Act, classifying them as financial instruments. According to a report by The Asahi Shimbun, the Financial Services Agency (FSA) intends to include this reclassification in an amendment scheduled for submission during next year’s regular Diet session. Under the revised framework, local crypto exchanges will be required to provide detailed disclosures on the 105 tokens they handle. This includes the existence of issuers, underlying technologies such as blockchain, and price volatility risks. The proposed regulations will also subject these classified cryptocurrencies to insider trading rules. Issuers and individuals affiliated with exchanges will be prohibited from trading based on material non-public information, such as the suspension of trading or an issuer’s potential bankruptcy.Photo by Karola G on PexelsToken coverage in JapanAlthough the regulatory list contains 105 tokens, data from the Japan Virtual and Crypto Assets Exchange Association (JVCEA), cited in a New Economy report, indicates that Japanese exchanges currently list 119 cryptocurrencies, leaving unclear how the remaining digital assets will be regulated.  To enhance investor protection, the FSA will mandate specific disclosure requirements for issuers that use token launches for fundraising. These entities will be required to report on their latest business activities and future issuance plans annually. This legislative push follows a discussion paper published by the FSA in April, which proposed dividing crypto assets into two distinct categories. The first category includes tokens issued for raising capital, while the second comprises established cryptocurrencies that are not primarily used for issuer fundraising, citing Bitcoin (BTC) and Ethereum (ETH) as primary examples. Tax cut from 55% to 20%In parallel with these regulatory changes, the FSA plans to request tax reforms similar to those applied to traditional stock trading. Under Japan’s current tax code, taxes on cryptocurrency gains can reach as high as 55%. The agency proposes reducing this rate to a flat 20% in next year’s tax reform. Responding to the news on X, Changpeng Zhao, the founder and former CEO of Binance, welcomed Japan’s initiative to lower crypto taxes. However, he noted that the proposed 20% rate remains high compared to other jurisdictions, many of which do not levy capital gains taxes on crypto at all. Crypto ETF CFDs set to closeThe government’s move to tighten regulations is already reshaping the financial product landscape. One immediate impact is visible in contracts for difference (CFDs) linked to crypto ETFs. As reported by FinanceFeeds, IG Securities, the Japanese subsidiary of the London-listed IG Group, announced changes to its offerings. The firm will stop accepting new orders for CFDs tied to BlackRock’s iShares Bitcoin Trust and its Ethereum equivalent on Dec. 1. Open positions are scheduled to be automatically closed on Jan. 31 of next year. If clients do not settle their holdings prior to this date, the final settlement will be calculated based on the official closing price of that final day. This discontinuation adheres to an FSA decision that derivatives referencing Bitcoin or Ether ETFs must be regulated as crypto-related derivatives rather than standard ETF products. These instruments, now under the crypto-related derivative classification, fall under stricter rules regarding investor protection, operational oversight, and licensing. Japan’s latest regulatory and tax initiatives reflect a broader effort to bring clarity and investor protection to the country’s growing crypto market. As the framework evolves, the industry will be watching how the new rules influence participation and market structure. With lower taxes and stricter oversight on the horizon, both investors and exchanges may need to adjust, potentially reshaping liquidity and Japan’s overall appeal while prompting trading platforms to rethink their product offerings. 

China’s leading science foundation has initiated a research program to examine the effects of stablecoins, reflecting concerns that such digital currencies could pose a risk to the nation’s financial system and its fiat currency. According to the South China Morning Post, the National Natural Science Foundation of China (NSFC) is now offering grants for studies focused on stablecoins and the creation of cross-border monitoring frameworks. The foundation expressed that the unmonitored circulation of private stablecoins, particularly those pegged to the U.S. dollar, could weaken capital controls and present a potential challenge to the yuan. This initiative emerges as governments around the world, from the U.S. to regional financial centers, are actively developing rules for the digital asset sector.Photo by  Christian Lue on UnsplashStrategic research and internal debateThe NSFC will fund the projects with grants valued between 200,000 and 300,000 yuan ($28,042 to $42,063). Researchers are expected to complete their work within a year and deliver policy recommendations on how China can manage the challenges posed by global stablecoins and contribute to digital finance governance. The deadline for applications is Oct. 9. This research program is set against a backdrop of internal discussion in China regarding the possible launch of a yuan-backed stablecoin. While some economists support the idea of boosting the yuan's international profile, Bloomberg noted that former central bank governor Zhou Xiaochuan has advised caution. He recently said the high efficiency of China's current payment systems and warned that financial stability could be threatened by speculation in the stablecoin market. Analysts believe any state-sanctioned yuan stablecoin would likely be confined to offshore markets and tied to the offshore CNH. Global regulatory landscapeChina’s examination of stablecoins is part of a broader global trend of increased regulatory focus on the asset class. In Hong Kong, a new ordinance took effect on Aug. 1, creating a mandatory licensing system for stablecoin issuers under the oversight of the Hong Kong Monetary Authority. Other Asian nations are also taking action. South Korea’s government is reportedly exploring a model for a won-pegged stablecoin involving a consortium of banks and non-bank entities. Separately, Cointelegraph reported that Kyrgyzstan has introduced legislation outlining a regulatory framework for such assets. Developments are also accelerating in the U.S., where the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act was signed into law, creating a federal structure for stablecoin oversight. On a commercial level, a Minnesota-based credit union, St. Cloud Financial, intends to introduce its own stablecoin later this year, a move highlighted by Cointelegraph. This token, named Cloud Dollar (CLDUSD), is designed to integrate with the credit union's banking system to facilitate faster and cheaper transactions for its members within a regulated environment.