China Launches National Blockchain Center to Develop Talent

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.

Calls for Regulation of Crypto Investment Management Firms Amidst Growing ConcernsThere have been recent calls in South Korea for crypto investment management companies to be subject to the Financial Investment Services and Capital Markets Act amidst concerns about potential regulatory blind spots negatively impacting crypto investors.Photo by Conny Schneider on UnsplashPushing for regulatory oversightKang Seong-hoo, chairman of the Korea Digital Asset Business Association (KDA) went into detail regarding the issue during a forum held by the association on Thursday to discuss the efficient use of technology and safety management in the era of the digital economy.He emphasized that dealings related to virtual asset management such as deposits, lending, and staking must be regulated by authorities under the Financial Investment Services and Capital Markets Act. This is due to the fact that crypto investment management companies are not within the purview of the Act On Reporting and Using Specified Financial Transaction Information or the Virtual Asset User Protection Act, the latter of which is set to take effect next year.The Act On Reporting and Using Specified Financial Transaction Information defines financial companies as those that provide services for selling, buying, exchanging, transferring, keeping, or managing virtual assets; or act as a broker, intermediary, or agent for these services. However, there is no mention of crypto management companies.Echoes of past crypto platform controversiesThese concerns are driven by the looming possibility of another debacle like the class-action lawsuits against crypto platforms like Haru Invest or Delio arising again as a result of regulatory gray areas. Two months ago, investors had filed a legal complaint after the two lenders unexpectedly suspended customer deposits and withdrawals, claiming that they suffered around KRW 50 billion (approximately $39 million at the time of the incident) in damages as a result.Furthermore, the Financial Intelligence Unit (FIU), a division under the Korean Financial Services Commission (FSC), recently stated in a report that virtual asset deposits, lending, and DeFi services do not fall under the obligations of the Act On Reporting and Using Specified Financial Transaction Information.“Given the context of the ongoing crypto winter since last year, the business model of virtual asset management companies, which is heavily reliant on arbitrage between exchanges, poses a high risk of incidents similar to the Haru Invest and Delio cases,” said Chairman Kang.“In order to ensure virtual asset user protection and market safety, authorities should promptly explore regulatory measures under the Financial Investment Services and Capital Markets Act for virtual asset management such as deposits, lending, staking, and the like.”

Dunamu reports Q3 slump amid interest rate hikes and economic slowdownDunamu, the operator of South Korea’s largest cryptocurrency exchange Upbit, posted a lackluster performance in this year’s Q3 due to a decrease in trading volume caused by ongoing interest rate hikes and an economic downturn.Photo by Алекс Арцибашев on UnsplashLagging performanceAccording to the Financial Supervisory Service (FSS), Dunamu’s consolidated operating revenue in Q3 was KRW 193 billion (approximately $150 million), marking a 29% decrease from the same period a year earlier (KRW 271.9 billion). Operating income came in at KRW 101.8 billion, and net profit was KRW 29.5 billion, down 39.6% and 81.6% from the same period last year, respectively.This underwhelming financial performance reflects the sluggish crypto market amid the nation’s economic downturn and the U.S. Federal Reserve’s interest rate hikes. The decrease in the exchange’s net profit in particular can be attributed to a loss in the valuation of crypto assets due to crypto price declines compared to the previous quarter.Positive outlookHowever, with the expected approval of the spot bitcoin exchange-traded fund (ETF) next year and the next Bitcoin halving, the market outlook is expected to improve gradually. Despite the current market conditions, Dunamu plans to continuously promote the mainstream adoption of blockchain services and explore new business ventures.“We will make efforts to revitalize the blockchain ecosystem and create an advanced investment environment,” Dunamu said. “We will strive to offer innovative services building on our unique technological capabilities.”