China Enters Crypto By Creating Their Own Centralized Digital Currency | Global FOMO

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China's New Digital Asset

It was another eventful evening here in crypto land. Binance celebrates their second birthday, so let’s give a quick shout out to CZ and the team for leading the crypto industry to new highs, better infrastructure, and increased liquidity. In other news China has finally decided to enter the emerging market, and probably not how expected.

In this article we are going to dive into China’s potential upcoming plans for their new central coin, what this could mean for the crypto market, and some projects that might benefit from the news.

Nothing should be taken as financial or investment advice. Enjoy the ride.

China’s New Digital Asset

China diving head first into the crypto movement is momentous news for the market. Previously, it would have been assumed that Russia would launch a state run digital asset before any other country due to the Oligarchs influence in the space and Putin’s relationship with Vitalik, the founder of Ethereum. Although, it seems China may beat them out of the gate with their very own state run digital asset provided by the People’s Bank of China.

Anthony Pompliano, Co-founder & Partner at Morgan Creek, broke the news about China early today, July 9th. This news is not entirely surprising to some though as the Central Bank of China has been promoting this for years as discussed by one Twitter user.

What Does This Mean For China

China’s central bank easily holds over $3 trillion in foreign asset reserves on average. Although, it can be assumed that China has a different purpose in mind for a state run currency then to simply convert foreign reserves into digital gold. You see, the main reason China has remained distant from the crypto market is due to the limited ability to control it. China will not participate in any market that can potentially disrupt their economy or traditional market system.

By creating their own internal digital asset, China can now effectively manage and control the crypto market state side. Chinese regulatory bodies could achieve this by continuing to ban any foreign stablecoin and fiat pairing to Bitcoin, Ethereum or any stable liquidity base pairing used to enter into the market. This means the country will possibly continue to limit foreign exchange activity and exposure to Chinese investors to keep them from independently entering the market.

At the same time, any domestic exchange will more than likely have to hold reserves through the Central Bank of China utilizing the new digital asset. China can effectively regulate anyone who enters or exits crypto state side and tax them during the crypto to fiat conversion. Additionally, the utility of the centralized currency will enable China to freeze, change, or even revoke funds if deemed necessary.

Finally, by controlling the market flow the Central Bank will become the gate keepers to the decentralized world enabling limited control of an uncontrollable asset class. This is heavily speculative, but at a minimum this new digital asset should open some of China to the market domestically.

China Wants An Efficient Payment System

The other massive utility of a state run cryptocurrency is the immense speed you save by sacrificing the decentralized nature of most public chains.

Without the need of nodes communicating and holding a global ledger systems while achieving consensus, a centralized currency bypasses this and can reach insane levels of transactions per second. This will ultimately save millions and possibly billions in transaction fees over time if utilized properly in China for micro transactions, domestic transfers, and ultimately machine to machine payments.

Similar to IOTA’s mission, this digital asset could eventually supplement the upcoming need for machine to machine transactions. This could potentially save time and reduce friction across the network as China edges ever closer to a machine based economy. Remember, China is ahead of most of the world in this aspect. They utilize A.I. facial recognition technology for just about everything over there from payments, to travel, and even to using the bathroom. With the A.I. field surging, soon they will need a payment system for robots that perform services like driving, cleaning, and building as well.

Projects That Will Benefit

Besides the economic impact and opening of crypto trading, native projects should receive a boost in domestic support.

Moving forward, any project hosted in China could have a serious competitive advantage due to China’s inclination to keep wealth state side. Specifically, two projects come to mind: High Performance Blockchain (HPB) and NEO. Both digital currencies has suffered since the 2017 spike losing a considerable amount of their total market cap ratio to other assets. With the new avenue for investors, projects hosted in China could see a considerable amount of pressure leading into the next bull market to out preform other cryptos.