First Mover Asia: A Chinese alternative to dollar-based stablecoins? BTC remains above $20,000 | Cryptocurrency

The token is a version of Chinese currency designed for offshore use; other cryptos are mixed in light trade.

Hello. Here is what happens:

Price: Bitcoin holds over $20,000; other cryptos are mixed.

Insights: China’s CNH token looks promising as an alternative to dollar-based stablecoins, but the challenges in expanding its use are enormous.

Prices

Bitcoin (BTC): $20,415 +0.4%

Ether (ETH): $1,104 -2.2%

The biggest winners

Asset Teleprinter Returnal DACS sector
Spotted POINT +4.7% Smart contract platform
Chain link LINK +4.6% Computing
avalanche AVAX +4.1% Smart contract platform

The biggest losers

Asset Teleprinter Returnal DACS sector
Earth LUNA −5.1% Smart contract platform
Ethereum ETH −1.5% Smart contract platform
Stellar XLM −1.1% Smart contract platform

Bitcoin Holds Over $20,000; Other cryptos are mixed

Despite some Monday midday declines, bitcoin stubbornly clung to the roost above $20,000 that it recovered over the weekend.

The largest cryptocurrency by market capitalization was recently trading at around $20,400, roughly flat over the past 24 hours. Bitcoin surged on Sunday after a break in the steady stream of bad economic, geopolitical and industrial news that plagued all digital assets, though markets remained choppy.

“Bitcoin is still being whipped by winds of concern as investors flee the cryptocurrency world in their race away from risky assets,” wrote Susannah Streeter, senior investment and market analyst for financial services firm Hargreaves Lansdown. .

Ether, the second-largest crypto by market capitalization, was down around 2%, changing hands just above the $1,100 position it reclaimed on Sunday evening. Other major altcoins were mixed with FTT up over 9% at one point, but XLM and XRP down slightly. DOGE rose earlier in the day after Tesla founder Elon Musk tweeted that he would “continue to support Dogecoin” but was in the red by the afternoon.

Stock markets were closed and crypto trading was light as the United States celebrated the June 19 holiday. Major stock indexes elsewhere were mixed with Japan’s Nikkei down fractions of a percentage point, but Hong Kong’s Hang Seng edged higher after China left its one- and five-year lending rates unchanged. The European Stoxx 600 rose 0.9%, despite a report that German producer prices rose 33% last month.

Investors remain concerned about inflation, geopolitical unrest and the prospect of a global recession. Brent crude oil, a measure of energy markets whose price has risen sharply since Russia invaded Ukraine, is trading at $114 a barrel, up more than 46% since the start of the month. the year.

Cryptos received good news when the CEO of Hong Kong-based cryptocurrency exchange Hoo.com tweeted early Monday that his company would be opening withdrawals for some tokens after announcing in a blog post on Sunday that it would delay withdrawals by 24 to 72 hours. The mood about cryptocurrency was still optimistic.

“The HODLer mentality is truly being tested and those who have yet to bail may be as tempted as they have ever been,” wrote Craig Erlam, senior market analyst for forex broker Oanda. , in an email.

Hargreaves Lansdown’s Streeter noted that although cryptos have suffered from “extreme volatility in the past, it looks like this decline is not going to be reversed anytime soon and a crypto winter may be setting in.”

Markets

(Closed Friday, June 17)

S&P 500: 3,674 +0.2%

DJIA: 29,888 -0.1%

Nasdaq: 10,798 +1.4%

Gold: $1,838 0% (Monday, June 20)

Knowledge

The challenges of expanding the use of CNH currency are formidable

The best thing for the dominance of the US dollar has been the emergence of crypto, especially stablecoins. The $156 billion stablecoin sector is almost entirely dollar-denominated. As stablecoins become an instrument of international trade, all of this has only strengthened the dollar’s hegemony over a new part of the global economy.

Beijing is perpetually annoyed by the dollar’s dominance over the global economy, because it means American rules reign supreme. A recent episode with Huawei, exports to Iran and a dollar-denominated loan come to mind.

But can a solution be found in a stablecoin based on CNH, a version of the Chinese currency designed exclusively for offshore use? Although theoretically intriguing, expanding the use of CNH would be difficult.

Capital controls and stablecoins

Given the Chinese country’s capital controls, where only $50,000 in foreign currency can be purchased per entity, there is a demand for tether (USDT) and USDC from anyone who needs to send a significant amount of capital to outside the country.

Despite the difficulty capital controls create for international business in China, it remains a pillar of the People’s Bank of China (PBoC) fiscal policy because of the stability it creates for the yuan. A currency that is not freely convertible is more stable because it is not exposed to the same market forces as freely convertible currencies such as the US dollar, euro, Canadian dollar or Japanese yen.

But that means that despite China’s status as the world’s second largest economy, and arguably the largest, the global share of the yuan is not commensurate with that status. Since it cannot be used overseas, the yuan accounts for only about 2% of global payments.

At the same time, Beijing wanted a way to access foreign capital while maintaining capital controls over the yuan. So, in 2010, it launched the CNH, an “offshore” version of the Chinese yuan initially offered in Hong Kong and then in Singapore and Luxembourg, to lead the “Dim Sum” bond market – bonds denominated in yuan issued by companies. domestic Chinese companies that are designed to exist outside of Chinese capital controls in order to attract international capital.

Remember that CNH is not a real currency; there’s really no use for it other than buying and trading ‘dim sum’ bonds.

Making a stablecoin out of this currency, as the CNH coin offers, is going to be difficult. The entire market capitalization of the dim sum bond market, the primary use case for CNH, has a market capitalization of just over $80 billion, roughly the same size as USDT at its peak. .

Ultimately, there may not be enough CNH issued to create a stablecoin that is a serious challenger. This is not a problem unique to CNH, as attempts to create a stablecoin from the Singapore dollar have also hit the wall of supply.

Important events

The 4th Annual NFT Industry Event (NFT.NYC)

Forum Point Zero in Switzerland

8:00 a.m. HKT/SGT (12:00 UTC): Speech by Philip Lowe, Governor of the Reserve Bank of Australia

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First Mover Asia: A Chinese alternative to dollar-based stablecoins? BTC remains above $20,000 | Cryptocurrency


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