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RMB-Based Stablecoin Coming for Cross-Border Trade

A public blockchain is set to pilot a Renminbi (RMB)-based stablecoin for cross-border trade as part of Shanghai Free Trade Zone initiative. 

Conflux Network, considered to be China’s only regulatory compliant third generation public chain, is rolling out the initiative through the launch of Shanghai ShuTu Blockchain Research Institute by the 112-year old Shanghai Maritime University. 

The Institute is a branch of the Conflux Tree-Graph Institute for blockchain R&D. The network prides itself as being the world’s first in terms of system performance and to have proven to process more than 3,000 transactions per second – or 75x the speed of the Ethereum blockchain.

Its new R&D Institute is to research and carry out applications in the construction of international payment channels for offshore RMB on Conflux; the construction of a free trade financial blockchain standard system; building shipping blockchain technology standards and developing technological ecology for industry and enterprise success.

The RMB is China’s official currency while the e-Yuan is the unit of the currency centralized through the People’s Bank of China (PBoC). Conflux’s offshore digital RMB is to be unregulated and decentralized. 

The stablecoin’s introduction is coming out as the PBoC releases a report that says China will increase the use of the RMB in cross-border e-commerce. According to a local report, the expansion in the use of the currency is to push forward the RMB internationalization, seek RMB-denominated investment and financing and improve its use for settlement and clearing.

The latest China Monetary Policy Report published on Saturday Sep 18 shows that the country’s GDP grew by 12.7% year on year in H1 2021, averaging 5.3% over the past two years – 7.9% growth registered in Q2. It states that the PBoC “will continue to advance RMB internationalization stably and prudently by launching the pilot program of high-quality opening-up of cross-border trade and investment, further facilitating use of the RMB in cross-border trade and investment, and steadily advancing convertibility of the RMB under the capital account.”

Meanwhile, on the other side of the RMB internationalization narrative, some analysts on Lawfare blog, where actions taken or contemplated to protect the US interact with its laws and legal institutions, share a different view. Its authors, which include Yaya Fanusie, a former CIA analyst, believe that China’s progress in the digital RMB is more about an ambition to harness data than it is about advancing its currency. 

In the article published together with Brookings, they maintain that the digital RMB – though not capable of competing directly with the U.S. dollar in the short term – is China’s national data strategy in action. They note that the new system that the digital currency will introduce could lead to Chinese-led innovation within the global financial system.

They urge the US to act on promoting central bank digital currency innovation that also protects privacy to avoid a world where ”a digital economy with Chinese Communist Party characteristics” would exist.
However, in his opening remarks at the Virtual Conference on Fintech and the Global Payments Landscape-Exploring New Horizons, PBoC Governor, Yi Gang, notes that China will continue to strike “the delicate balance between development and regulation” to support the platform economy. This will be through strengthening their international competitiveness while strict and fair regulation as well as data ownership rights and privacy protection are pursued.

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