HashKey Report Outlines Risks of Liquid Staking

China Unveils Blockchain-Powered Data ExchangeChinese government officials have announced the launch of a data exchange leveraging blockchain technology during the 2023 Hangzhou Summit in China on Wednesday.According to local media reports, the Hangzhou Data Exchange, introduced at the summit held in Hangzhou, aims to facilitate seamless buying and selling of Web3 data across enterprises. The event garnered participation from over 300 companies, including tech giants Alibaba Cloud and Huawei, marking a significant step towards embracing decentralized technology for data management.Photo by Xiaolin Zhang on UnsplashEnabling Web3 data tradingIt’s understood that the Hangzhou Data Exchange has been established with the aspiration of revolutionizing the trading landscape for enterprise information technology data by harnessing the capabilities of distributed ledger technology. Officials emphasize that the platform’s implementation will ensure that transactions conducted through the exchange remain unalterable and traceable.Chen Chun, the Director of the National Laboratory of Blockchain and Data Security, provided insights into the exchange’s advanced features, stating that it integrates research blockchain, privacy computing, and other cutting-edge technologies to establish a secure and confidential environment for sharing and utilizing data across departments and regions.Hangzhou’s digital economy sector has demonstrated significant growth, surpassing 500 billion Chinese yuan (equivalent to $69 billion) in 2022. This accounted for nearly 27% of the city’s total GDP. It suggests that the city is putting a strategic focus on technological development and innovation.Complex blockchain strategyChina’s stance on blockchain technology has been complex. While the Chinese authorities have been rigorous in regulating private blockchain enterprises, they have simultaneously championed government-led blockchain initiatives.President Xi Jinping, during the inauguration of the 2023 Shanghai Cooperation Organization Conference (SCO), highlighted the significance of central bank digital currencies (CBDC) in expanding the use of local currencies for settlements among SCO member countries. In a move to stimulate domestic spending, the Chinese government recently distributed over 100 million yuan worth of digital yuan CBDC to its residents.China’s promotion of its digital yuan has been unrivaled. Over the course of recent months, various initiatives have been launched to further the use of the CBDC. These initiatives have included paying state employees with the currency in Changshu, integration of the currency into the education system in Jiangsu province, and the installation of digital yuan ATMs in Hainan, among many other such projects.Likewise, when it comes to metaverse development, a series of initiatives have been established recently. Henan province established a metaverse fund in May to support metaverse-related projects. In the same month, a National Blockchain Center was established to develop talent within the sector. Around the same time frame, the city of Zhengzhou announced proposals geared towards supporting the growth and development of metaverse companies.The unveiling of the Hangzhou Data Exchange underscores China’s ongoing determination to harness blockchain’s potential, in this case relative to enhancing data trading and management within the Web3 ecosystem.

Taiwan has built a prototype platform that potentially could provide for a central bank digital currency (CBDC). In light of that development, there are plans afoot to hold a number of hearings and forums in 2025 relative to CBDC development. In a report cited by local news media, Taiwanese Central Bank Governor Yang Chin-long stated that the development of a CBDC is not an international competition. Yang is not motivated by a desire to be the first to launch a CBDC on the basis that such a thing doesn’t ensure a successful outcome.  At the outset, Taiwan intends to introduce a non-interest bearing CBDC although this may be revised as further development and rollout progress. The system may encompass the use of both anonymous and registered digital wallets, the report suggests.Photo by Timo Volz on UnsplashWholesale CBDCReports last year had disclosed that the retail CBDC prototype supports 20,000 transactions per second. The central bank also plans to develop a wholesale CBDC (wCBDC) proof of concept to support three sets of functionality which it plans to test via a unified ledger, developed with the assistance of Taiwan’s commercial banks.  According to feedback from the office of the Taiwanese parliament’s finance committee provided to The Block, Yang is due to present the report on the current state of progress relative to a CBDC on July 10 at the Legislative Yuan, Taiwan’s parliament. While no projected timeline has been provided for CBDC issuance, Yang emphasized that Taiwan’s CBDC project is a long-term affair. He disclosed that the Central Bank of the Republic of China (Taiwan) will take a three pronged approach to the new digital currency. In the first instance, the wCBDC will be used for for the purpose of interbank settlement relative to tokenized deposits.  In practice, this will mean that when a payee transfers a tokenized deposit to another party, the other party will receive the money instantly. However, in the background, the payee’s bank will need to transfer funds to the second party’s bank. Taiwan’s central bank also plans to trial the settlement of tokenized asset transactions. Settlement of securities in this way is seen as an opportunity to minimize risk when compared with commercially issued stablecoins. Such tests will be similar in nature to the wholesale digital ledger technology (DLT) trials carried out in recent times by the European Union (EU).  Purpose bound money trialLastly, the Republic of China plans to trial purpose bound money (PBM), a concept which covers the middle ground between programmable payments and programmable money. PBM was introduced in a whitepaper in 2023 by the Monetary Authority of Singapore (MAS). It enables the sender to specify certain conditions relative to the digital currency being sent. This may include a validity period and further specification as to how the money can be spent. This development represents the latest installment in an ongoing pipeline of announcements from various central banks with regard to CBDC project milestones. Last month, Qatar’s central bank announced the launch of the first phase of its CBDC project.

An analysis of data recently published as part of Chainalysis’ Global Cryptocurrency Adoption Index demonstrates that Hong Kong has recorded a year-on-year crypto transaction value growth rate of 85.6%.  On that basis, the territory accounts for the sixth-largest crypto economy in the world. Furthermore, Hong Kong ranks 30th in terms of global crypto adoption. That’s an improvement of 17 places, as it was ranked 47th in 2023. Regulatory framework aiding crypto adoptionAn excerpt from the 2024 Geography of Cryptocurrency Report by Chainalysis was published on September 18. It found that the steps taken in the Chinese autonomous territory in terms of laying down a regulatory framework for digital assets has led to this uptick in transactional activity, due to the increased adoption of digital assets by institutions.  Over the course of the past eighteen months, Hong Kong has launched crypto trading licensing. Earlier this year, exchange-traded funds (ETFs) were given the green light, with the subsequent launch of Bitcoin and Ethereum ETF products.  On the topic of ETF’s, Kevin Cui, CEO of digital asset trading platform OSL said that “as market conditions improve, we are seeing indications of a growing institutional interest that could lead to increased capital inflows in the near future.” Meanwhile, the Chinese autonomous territory is working towards the establishment of regulations that cover the issuance and trading of stablecoins.lil artsy on PexelsHong Kong key to Chinese crypto resurgenceIn terms of crypto adoption, mainland China ranked 11th this year, dropping down one place by comparison with last year. The report notes the complicated history China has had with cryptocurrency in recent years, given that a crypto trading ban remains in place. However, last year’s report pointed to the strong usage of centralized crypto exchanges by mainland China residents, which suggests that the ban has either been ineffective or poorly enforced.  The Chainalysis report speculates that “Hong Kong may finally influence China to re-open its doors to crypto.” This is not the first time that Chainalysis has made such an assertion. In last year’s report, it made a similar claim, suggesting that the development of Hong Kong as a crypto industry hub would lead to a softening in the stance of mainland China towards crypto. This year’s report suggests that mainland China residents have turned to over-the-counter (OTC) platforms in order to access crypto as a means towards preserving their wealth. The report quoted Ben Charoenwang, associate professor of finance at the INSEAD Asia Campus as stating: “Nowadays, if you want to move money out of China through traditional unofficial means like using mules, fees can be as high as 25 to 30 percent. The increasing use of OTC crypto in China suggests that people are looking for faster options to move money.” The report finds that five of the top 50 grassroots adopters of crypto, South Korea, China, Japan, Hong Kong and Taiwan, are located in East Asia. South Korea leads the region in terms of the most crypto value transacted metric. Chainalysis suggests that South Korea’s strong interest in altcoins signals that it will remain a leader in the region from a cryptocurrency innovation perspective.