The Latest Financial Stability Report from the People’s Bank of China
The People’s Bank of China has released its latest financial stability report, which includes a dedicated section on crypto-assets. This addition aims to address data gaps, regulatory arbitrage, and fragmentation in the crypto market. The report emphasizes that the cryptocurrency market only constitutes 1% of the global financial system and highlights potential risks such as hacker attacks, market manipulation, and governance issues in decentralized finance (defi).
Concerns over Crypto Market Instances
The report specifically mentions incidents like the collapse of the Terra ecosystem and the decline of the FTX exchange in 2022, illustrating potential vulnerabilities in the crypto market. These instances serve as examples of the risks associated with investing in cryptocurrencies.
China’s Digital Yuan Cross-Border Settlement
On the same day, the People’s Bank of China announced progress in utilizing its digital currency. The bank successfully executed a cross-border settlement for precious metals trading using the digital yuan. This involved transferring $14 million in cash from an international buyer and depositing it as digital yuan into an account at the Shanghai Gold Exchange.
Hot Take: China Prioritizes Stability and Regulation
China’s latest financial stability report reflects its commitment to addressing risks and regulating the crypto market. By including a dedicated section on crypto-assets, China aims to bridge data gaps and mitigate regulatory arbitrage. The report highlights specific incidents to emphasize potential vulnerabilities and risks associated with cryptocurrencies. Additionally, China continues to make progress in utilizing its digital currency, demonstrating its commitment to innovation in the financial sector.
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