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New decentralized stablecoin in China targets international trade

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As financial authorities around the globe become increasingly concerned about stablecoin regulation, a jurisdiction in China is preparing to pilot a new yuan-pegged stablecoin for international trade.

Chris Banbury, head of global operations at permissionless blockchain project Conflux, told Cointelegraph on Sept. 21 that the firm will provide its technology to launch an offshore renminbi (RMB) stablecoin pegged to China’s central bank digital currency (CBDC), the digital yuan.

“This is going to be pegged to the digital yuan in price only with no formal integration,” Banbury noted, adding that the project will be exploring how the token trades against other currencies.

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The new stablecoin project will facilitate international trade in Shanghai’s Lin-gang Special Area after the Chinese government granted the free economic zone permission to explore free trade with an offshore RMB stablecoin in July.

“While the use case for the offshore RMB stablecoin has been approved by the government of China and Shanghai, the pilot program is not endorsed by or connected with the government,” Banbury noted.

In contrast to popular stablecoins like Tether (USDT) and USD Coin (USDC), the upcoming offshore RMB stablecoin will not be a private stablecoin because it is fully decentralized, Banbury said. The executive said that the new stablecoin is called the “offshore RMB stablecoin” because its functionality will be limited to global trading:

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“The term ‘offshore’ refers to the RMB’s use for international trading purposes — not domestic trading. The digital yuan is used exclusively for domestic purposes. As such, the offshore RMB is not an ‘offshore yuan.’ The digital yuan is for domestic purposes overseen by the People’s Bank of China.”

According to Banbury, the offshore RMB stablecoin is being held through the Shanghai ShuTu Blockchain Research Institute, a branch of the Conflux Tree-Graph Institute for blockchain research and development. The stablecoin has not yet received a dedicated ticker as the development team is still determining when to launch, he added.

One of the world’s first nations to debut a CBDC, China has continued to crack down on cryptocurrency trading and mining, with local authorities shutting down multiple mining farms and suspending crypto trading transactions this year.

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‘New Blow’ as Large Crypto Exchanges Are Told to Pay British Tech Tax

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Crypto exchanges operating in the United Kingdom – including the likes of Coinbase â€“ will be forced to pay a recently created tech tax – with the British tax body, HM Revenue and Customs (HMRC), declaring that cryptoassets “are not financial instruments.”

The British Treasury last year announced the launch of a new 2% sales charge on online vendors, search engines and social media providers with global revenue of over USD 666.4m and domestic sales above the USD 33.3m mark.

Per the Telegraph, the tax office has informed crypto exchanges that they are subject to the levy, which was created in a bid to make sure the likes of Google and Amazon â€“ who have been criticized for finding tax workarounds in the UK – contribute more to the Treasury’s coffers.

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The same media outlet noted that although Coinbase’s UK operations had reported sales worth just under USD 24m, “the company recently reported that global revenues had quadrupled, meaning it is likely to pass the UK threshold in 2021.”

However, the tax may be short-lived, at least in its current form: earlier this year, the G20 agreed to create a streamlined tax essentially aimed at global tax giants. The measure will force some of the world’s biggest companies to cough up some USD 150bn in extra tax revenue each year.

Last month, the BBC reported that G20 chiefs had agreed to create a global minimum tax rate of 15% for large companies, and would enforce the measure starting in 2023.

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In the meantime, however, the British “tech tax” is still in place – and Coinbase is likely to have to pay it.

HMRC’s ruling that cryptoassets “are not financial instruments” is key. Financial providers are exempt from the tax, but the tax body’s insistence that tokens “do not qualify as commodities or money” means that crypto trading platforms cannot slip through the net.

The same media outlet quoted the crypto pressure group CryptoUK as claiming that it was “unfair” to classify crypto “differently to other financial assets” – particularly as the UK tax body’s American counterparts largely consider coins to be commodities.

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CryptoUK director Ian Taylor was quoted as calling the move “a new blow” to crypto exchanges, who were already reeling from “arduous” licensing measures announced by the regulatory Financial Conduct Authority â€“ ultimately leading to higher fees for exchange customers.

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Crypto Exchanges Facing “Digital Tax” Blow in U.K.

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Cryptocurrencies are neither currencies nor commodities, according to Her Majesty’s Revenue and Customs

Cryptocurrency exchanges have to pay a 2% digital services tax in the U.K., according to a Sunday report by The Daily Telegraph.

They do not qualify for an exemption granted to financial marketplaces since the Her Majesty’s Revenue and Customs office doesn’t recognize cryptocurrencies as “financial instruments.”

The tax on the local revenues of large tech companies was introduced in April 2020.

CryptoUK, a crypto lobbying group, is not happy about the lack of the exemption since it would further stifle the industry.

The U.K. arm of the Coinbase exchange is expected to easily surpass the revenue threshold of £25 million ($33 million) due to the crypto trading boom in 2021.

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However, HMRC is adamant that crypto assets cannot be classified as either commodities or currencies.  

In October, European governments forged a deal with the U.S. to establish a new global tax regime to eschew America’s retaliatory tariffs.

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Bitpanda New Partner Lydia’s 5.5M Users Will be Able to Invest in Crypto

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Major French mobile financial services app Lydia is slated to offer its 5.5m users exposure to a wide range of crypto assets after a partnership with the Austrian crypto exchange Bitpanda.

As part of the deal, Lydia will integrate Bitpanda’s digital asset investment product, dubbed ‘White Label Solution,’ to allow its customers to invest 24/7 in more than 100 digital assets, including cryptocurrencies, fractional stocks, exchange-traded funds (ETF), and precious metals.

Founded in 2013, Lydia is a daily financial “super-app” said to be used by a third of the French 18 to 35 year olds. The app has raised a total of USD 131m in two funding rounds in 2020, though it did not disclose valuation.

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“With Lydia trading, our ambition is to widen access to investment assets, to make it accessible to everyone whether they are simply curious, beginner investors or experts,” said Cyril Chiche, the app’s CEO and co-founder.

“Our goal is to reimagine what it means to invest, by making simple, easy-to-use financial products for everyone,” Eric Demuth, Bitpanda co-founder and CEO, was quoted saying.

Bitpanda raised USD 170m earlier this year in a Series B funding round and earned a valuation of USD 1.2bn, becoming Austria’s first tech unicorn. In its Series C funding round, however, the exchange raised USD 263m, earning a valuation of USD 4.1bn.

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Meanwhile, the exchange has been aggressively expanding its presence across Europe. Just recently, Bitpanda unveiled a partnership with Fabrick, an Italian open finance provider, that will offer digital asset trading services to Italian banks and fintechs. 

The exchange has also hired former JPMorgan executive Joshua Barraclough as CEO of its advanced trading platform Bitpanda Pro.

“We are confident that this is just the beginning: we are committed to offering everyone investment options for any budget and risk appetite,” Demuth added.

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