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Why crypto adoption is a threat to China – PBOC

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  • Wen Xinxiang a PBOC director gives reasons crypto adoption is a problem for China.
  • Mr.Wen says cryptos are a threat to traditional finance and banks.

An executive of the People’s Bank of China (PBOC), Wen Xinxiang, has explained why crypto adoption is a problem for the Asian country.

Mr Wen is the director of payment and settlement at the PBOC, expressed concerns over the growing popularity of cryptocurrencies and fiat-pegged stablecoins.

While speaking at a forum on Friday, the PBOC director highlighted several reasons crypto adoption is a problem for China. He pointed at the market value of Bitcoin at $800 billion and the total stablecoin market capitalization exceeding $120 billion.

With this, he noted that the major risk outlined with the crypto market is the fact that the industry is capable of operating separately from the traditional payment system supported by commercial banks and payment institutions.

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Other reasons Crypto adoption is a threat for China

Mr Wen noted that crypto adoption is an issue for payment services offered by banks as they weaken the power of clearing organizations.

The PBOC director also argued that the anonymity of cryptocurrencies makes it an attractive tool for facilitating illegal transactions such as money laundering.

He called for the improvement of the traditional financial system to enable it to compete with cryptocurrencies.

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Wen noted that the digital asset world faces a lot of challenges. Hence, the traditional finance system should outpace it such that cryptos eventually need to rely on traditional finance for survival.

Wen comments, reflection of China crypto stance

His comments are a reflection of what is happening in China with the crypto industry as the government there has intensified effort to crackdown on cryptocurrency trading and mining.

Local Chinese authorities have been shutting down multiple mining farms and suspending crypto trading transactions.

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Back in July, the PBOC was particularly about Stablecoin growth as he said the doors of development of the private attention system was alarming.

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Fidelity to Launch Spot Bitcoin ETF This Week

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Fidelity is aiming to launch its first spot Bitcoin ETF

Fidelity, an American multinational financial services corporation, is set to launch its first spot Bitcoin ETF in Canada this week, according to Bloomberg senior ETF analysts.

ETF launch

Fidelity is a multinational financial services corporation that was established in 1946, and it remains one of the largest asset management companies in the world with $4.9 trillion AUM with a total AVN of $8.3 trillion.

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According to Bloomberg analysts, the fund with FBTC CN is currently pending listing on the Canadian exchange and will be trading under the name Fidelity Advantage Bitcoin. Balchunas also notes that the new fund might possibly become the biggest asset management company that includes Bitcoin products.

Spot ETF as main advantage

While futures-backed Bitcoin ETFs are not something new for the market, the physically-backed exchange-traded fund would actually be a more convenient solution for Canadian investors who are willing to receive exposure to the cryptocurrency market and Bitcoin specifically.

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Compared to futures-backed funds, physical settlement Bitcoin products allow investors to receive direct exposure to the cryptocurrency market without facing high roll costs. Since Bitcoin-tracking funds utilize short-term one-month futures, they have to renew their contracts every month, which puts investors in an unfavorable position.

Due to funds operating with large volumes, the futures market faces significant buying power that puts futures contracts prices higher than the actual underlying asset. Such a market condition is called contango bleed when investors have to overpay for opening new positions on the market, which puts them at around a 20% annual loss.

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Former PayPal CEO’s Cryptocurrency Exchange Goes Live for Institutional Clients

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“Bullish” exchange backed by PayPal co-founder is set to launch for institutional investors.

The cryptocurrency exchange backed by Peter Thiel and Richard Li began operating for a batch of institutional investors on Tuesday. The start for institutional investors is only the first step before the full launch for private investors and traders.

The Bullish Exchange will offer Bitcoin, Ether and EOS tokens for trading against USD coins. With further development and expansion in the future, the exchange will broaden its digital assets offering for both institutional and retail investors.

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Exchange founders

Among the exchange’s first clients are firms like Virtu Financial (non-U.S. affiliate) and Hong Kong-based crypto finance firm Amber Group. The first company is an electronic market-making firm that is based in New York.

The new exchange, which is also backed by hedge fund managers Alan Howard and Louis Bacon, was established earlier in 2021. The exchange has numerous distinctive features that come from the world of decentralized finance, including automated market making, lending tools and portfolio management mechanisms that will help traders to properly handle their funds.

The chairman of Bullish exchange presented his product like a tool designed for investors who are looking for secure and efficient exposure to the digital assets market on a platform that will ensure funds safety from both the technical and legal sides.

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The exchange will initially use its own assets to add more liquidity to pools that would be used by automated lending and market-making mechanisms. The backend of Bullish exchange is powered by EOSIO—open-source blockchain software developed by Block.one.

Plans for the future

Bullish exchange is planning to further broaden its offering by going public on the New York Stock Exchange by merging with SPAC company Far Peak Acquisition Crop. The transaction between the two companies will set the exchange’s value at approximately $9 billion.

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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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