China Begins Hong Kong ‘Cross-Border’ Digital Yuan Pilot


The US-based crypto exchange Kraken is in hot water with regulators over an alleged violation of securities rules related to the selling of “unregistered securities.”

The Securities and Exchange Commission’s (SEC) probe into whether Kraken did offer unregistered securities to US consumers is now at an “advanced stage,” Bloomberg reported on Wednesday, adding that the probe could lead to a settlement in “coming days.”

The report was based on information from an unnamed source “with knowledge of the matter.”

Kraken or its CEO Jesse Powell has so far not commented on the report.

Unclear ramifications

Despite the source saying a settlement could be imminent, it remains unclear which digital assets the probe relates to.

So far, US regulators, including the SEC and the CFTC, have only declared Bitcoin to be a commodity, making the regulatory status of other digital assets unclear.

According to Bloomberg, the outcome of the probe, and any potential actions taken against Kraken, could have significant ramifications for the crypto industry in the US. It is believed that any settlement in the case could put pressure on other companies to also make deals with the SEC.

The report noted that the SEC on several occasions, has said that most tokens offered by crypto exchanges are indeed securities and, therefore, should be subject to SEC regulations. Still, it also stressed that probes like this one don’t always lead to enforcement action against a company.

Kraken is headquartered in San Francisco and currently ranks as the world’s third-largest spot crypto exchange by trading volume, according to CoinMarketCap.

Crackdown on staking?

In recent days, rumors have circulated in the crypto industry that US regulators could be about to crack down on the staking of cryptocurrencies that are facilitated by US exchanges.

According to Coinbase CEO Brian Armstrong, the rumor is that the SEC wants to “get rid of crypto staking in the US,” which he called “a terrible path” for the country.

Shenzhen, China, has begun a retail-focused “cross-border” digital yuan pilot with Hong Kong.

China Banking and Insurance News (via JRJ) reported that the event is the brainchild of the central People’s Bank of China (PBoC) and the Luohu District local government. Luohu is located close to Hong Kong’s New Territories.

The PBoC and Luohu are promoting the event with a token giveaway. Almost $1.5 million tokens will be given away in Luohu during the course of the event. Token recipients will be able to spend their digital yuan holdings in “multiple sectors.” These reportedly include “restaurants, hotels, supermarkets, jewelry, and home appliances.”

But the PBoC has capped transaction sizes at 999 yuan (around $145).

Hong Kong’s currency is the Hong Kong dollar.

Similar pilots are also planned for the territory of Macau, whose currency is the Macanese pataca.

Cross-border Credentials: Will China’s Digital Yuan Be Used in International Trade?

The PBoC has previously claimed that the digital yuan is intended as an “M0” cash and bank card alternative – and not as a tool of international trade.

But this narrative appears to have shifted in recent months, with the PBoC starting to talk up the token’s possible cross-border payment credentials. Should the Hong Kong and Macau pilots prove successful, the PBoC may well look to expand the use of the coin.

Interest in the digital yuan appears to be growing in Russia. Moscow could seek to use the coin to trade with Beijing – particularly if it can develop interoperability solutions for its own forthcoming digital ruble.

In September last year, a major commercial bank, the Industrial Bank, launched a digital yuan wallet business for users based in Hong Kong, Macau, and Taiwan.

Shanghai Securities News reported that the Shenzhen branch of the PBoC has – to date – spent around $83 million on digital yuan giveaways and other promotional activities for the token, in conjunction with local government organs.

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