Russia's central bank tests stablecoins, Sichuan regulates Bitcoin mining

Event: Recently, Russia's central bank, the Bank of Russia, has begun testing stablecoins linked to real assets in the regulatory sandbox and is closely monitoring their potential and impact. Sichuan Ganzi has issued a plan to regulate Bitcoin mining activities. The Shenzhen Stock Exchange released the Shenzhen Blockchain 50 Index on December 24.

The Russian Central Bank has begun testing stablecoins in a regulatory sandbox, keeping a close eye on the potential and impact of central bank digital currencies. Russian news agency Interfax reported that Russia's central bank, the Bank of Russia, has begun testing stablecoins pegged to real assets in a regulatory sandbox, but the governor of the Central Bank of Russia, Elvira Nabiullina, said the bank does not believe that these stablecoins will be used as a means of payment or as an alternative currency, but is learning about the potential uses of stablecoins. The Russian Central Bank is also continuing to explore the possibility of issuing its own central bank digital currency (CBDC), the digital ruble, but is also keeping a close eye on the possible problems and consequences. Stablecoins are a type of cryptocurrency pegged to another asset in order to prevent volatility associated with the crypto market. The typical representative is the USDT pegged to the US dollar issued by Tether. Since Facebook launched the Libra development plan, digital currencies represented by stablecoins have received high attention from the global financial market. This year, the People's Bank of China has also actively proposed the digital currency DCEP plan, and then central banks in countries such as France have also clearly expressed their interest in this. We believe that stablecoins based on central bank digital currencies and pegged to various assets are expected to receive higher attention from the global financial market.

Sichuan further regulates Bitcoin mining activities to ensure the healthy development of the industry. On December 24, Ganzi Tibetan Autonomous Prefecture of Sichuan Province issued a document titled "Our Prefecture Actively Prepares for Peak Winter Power Supply". In terms of implementing power restriction measures, it issued the "Ganzi Prefecture Work Plan for Cleaning Up and Rectifying Bitcoin Mines", which regulates the direct power supply behavior of power companies and urges power generation companies to give priority to guaranteeing unified dispatching indicators and social power supply during the dry season. This move aims to further regulate Bitcoin mining activities and promote the healthy development of the industry while ensuring the stability of social power supply.

Shenzhen Stock Exchange launches Blockchain 50 Index, and the capital market's attention continues to increase. The market will look forward to more new indexes and fund products to broaden the way for capital to enter the market. On December 24, the Shenzhen Stock Exchange's official website issued an announcement stating that the Shenzhen Blockchain 50 Index will be released on December 24, 2019. The announcement shows that the Shenzhen Blockchain 50 Index uses companies listed on the Shenzhen Stock Exchange whose business areas involve the upstream, midstream and downstream of the blockchain industry as the sampling space, and sorts them from high to low according to the average daily total market value in the past six months, and selects the top 50 stocks to form the sample stocks. The index adopts free float market value weighting, and the sample stocks are regularly adjusted on the next trading day of the second Friday of June and December each year. Ping An Bank, Midea Group, Suning.com, Anne Shares, SF Holdings, Sifang Jingchuang, BGI, etc. have been selected as blockchain 50 samples. Since the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) launched Bitcoin futures in December 2017, the capital market has been paying more and more attention to blockchain-related assets. On September 23 this year, the Bakkt platform under the Intercontinental Exchange (ICE) launched the world's first physically settled Bitcoin futures. Subsequently, the US Securities and Exchange Commission (SEC) paid more attention to Bitcoin ETFs and Ethereum (ETH) futures, and the market also placed considerable expectations on them. The release of the Blockchain 50 Index by the Shenzhen Stock Exchange provides a platform and tools for the capital market to participate in and support the development of the blockchain industry. Previously, in order to help the development of emerging technology industries, the Shenzhen Stock Exchange has released the Shenzhen Information Technology Index (399620) and the Shenzhen Telecommunications Index (399621). It can be expected that more blockchain-related sector index products and even ETFs are expected to be accelerated, providing convenience for capital entry.

Risk warning: regulatory policy uncertainty and blockchain infrastructure development failing to meet expectations.

Event: Recently, Russia's central bank, the Bank of Russia, has begun testing stablecoins pegged to real assets in a regulatory sandbox and is closely monitoring their potential and impact. The Shenzhen Stock Exchange released the Shenzhen Blockchain 50 Index on December 24.

The Russian Central Bank has begun testing stablecoins in a regulatory sandbox, keeping a close eye on the potential and impact of central bank digital currencies. Russian news agency Interfax reported that Russia's central bank, the Bank of Russia, has begun testing stablecoins pegged to real assets in a regulatory sandbox, but the governor of the Central Bank of Russia, Elvira Nabiullina, said the bank does not believe that these stablecoins will be used as a means of payment or as an alternative currency, but is learning about the potential uses of stablecoins. The Russian Central Bank is also continuing to explore the possibility of issuing its own central bank digital currency (CBDC), the digital ruble, but is also keeping a close eye on the possible problems and consequences. Stablecoins are a type of cryptocurrency pegged to another asset in order to prevent volatility associated with the crypto market. The typical representative is the USDT pegged to the US dollar issued by Tether. Since Facebook launched the Libra development plan, digital currencies represented by stablecoins have received high attention from the global financial market. This year, the People's Bank of China has also actively proposed the digital currency DCEP plan, and then central banks in countries such as France have also clearly expressed their interest in this. We believe that stablecoins based on central bank digital currencies and pegged to various assets are expected to receive higher attention from the global financial market.

Sichuan further regulates Bitcoin mining activities to ensure the healthy development of the industry. On December 24, Ganzi Tibetan Autonomous Prefecture of Sichuan Province issued the article "Our Prefecture Actively Prepares to Meet the Peak Winter Power Supply Work". In terms of implementing power restriction measures, it issued the "Ganzi Prefecture Cleaning and Rectifying Bitcoin Mines Work Plan", which regulates the direct power supply behavior of power companies and urges power generation companies to give priority to guaranteeing unified dispatching indicators and social power supply during the dry season. This move aims to further regulate Bitcoin mining activities and promote the healthy development of the industry while ensuring the stability of social power supply. The National Development and Reform Commission's guidance catalogue for industrial structure adjustment, which was announced on November 6 this year, will delete virtual currency mining, which was listed as an eliminated industry in the draft for comments. We believe that since Bitcoin mining mostly uses abandoned electricity, the regulatory authorities are expected to further regulate related industries to ensure the overall healthy development of the blockchain industry.

Shenzhen Stock Exchange launches Blockchain 50 Index, and the capital market's attention continues to increase. The market will look forward to more new indexes and fund products to broaden the way for capital to enter the market. On December 24, the Shenzhen Stock Exchange's official website issued an announcement stating that the Shenzhen Blockchain 50 Index will be released on December 24, 2019. The announcement shows that the Shenzhen Blockchain 50 Index uses companies listed on the Shenzhen Stock Exchange whose business areas involve the upstream, midstream and downstream of the blockchain industry as the sampling space, and sorts them from high to low according to the average daily total market value in the past six months, and selects the top 50 stocks to form the sample stocks. The index adopts free float market value weighting, and the sample stocks are regularly adjusted on the next trading day of the second Friday of June and December each year. Ping An Bank, Midea Group, Suning.com, Anne Shares, SF Holdings, Sifang Jingchuang, BGI, etc. have been selected as blockchain 50 samples. Since the Chicago Board Options Exchange (CBOE) and the Chicago Mercantile Exchange (CME) launched Bitcoin futures in December 2017, the capital market has been paying more and more attention to blockchain-related assets. On September 23 this year, the Bakkt platform under the Intercontinental Exchange (ICE) launched the world's first physically settled Bitcoin futures. Subsequently, the US Securities and Exchange Commission (SEC) paid more attention to Bitcoin ETFs and Ethereum (ETH) futures, and the market also placed considerable expectations on them. The release of the Blockchain 50 Index by the Shenzhen Stock Exchange provides a platform and tools for the capital market to participate in and support the development of the blockchain industry. Previously, in order to help the development of emerging technology industries, the Shenzhen Stock Exchange has released the Shenzhen Information Technology Index (399620) and the Shenzhen Telecommunications Index (399621). It can be expected that more blockchain-related sector index products and even ETFs are expected to be accelerated, providing convenience for capital entry.

2. News from various governments: At present, the top-level design of central bank digital currency has been basically completed, and the next step will be to continuously optimize it

China: As of December 30, digital currency has basically completed top-level design, standard setting, function development, joint debugging and testing under the premise of adhering to dual-tier issuance, M0 substitution and controllable anonymity. In the next step, we will follow the principles of stability, safety and controllability, reasonably select pilot verification areas, scenarios and service scope, continuously optimize and enrich functions, and steadily promote the issuance and application of digital legal currency. On December 29, the Guangxi Autonomous Region Government issued a notice on the "Supporting Policies for Promoting the High-quality Development of the China (Guangxi) Free Trade Pilot Zone", and issued "30 measures" to support the development of the free trade pilot zone, including rewards for blockchain and other enterprises according to their economic contribution. On December 28, the Hainan Provincial Development and Reform Commission, the Provincial Department of Industry and Information Technology and others publicly announced the progress of the inspection and rectification, pointing out that the first officially licensed blockchain pilot zone in China should be built, attracting more than 70 blockchain frontier enterprises such as Huobi Group and Baidu Blockchain Laboratory. On December 27, Wuxi, Jiangsu officially issued and implemented the "Implementation Opinions on Accelerating the High-quality Development of the Digital Economy", pointing out the cultivation of frontier industries such as blockchain. On December 24, the Shanghai Xujiahui Science and Technology Commission announced the construction of the world's first "big data + AI + blockchain" smart business district. Through blockchain technology, the customer points system of multiple merchants in Xujiahui is connected, and the points exchange, consumption, and settlement are put on the chain, so that the points of multiple merchants can be connected, and a universal membership system for the business district can be established to enhance user activity and increase the richness of items exchanged in the points mall.

United States: The Committee of Sponsoring Organizations of the US False Financial Reporting Committee (COSO Committee, US COSO Committee) will issue guidance on internal control of blockchain technology in the first quarter of 2020, aiming to strengthen internal control of blockchain technology in areas such as supply chain management and financial services. According to The Bock Crypto, the New York Department of Financial Services (NYDFS) is building a RegTech solution to enhance its regulatory capabilities.

Germany: Under a law that will take effect on January 1, 2020, Germany will require digital asset custodians to be licensed. Every company that currently custody cryptocurrencies and targets German customers must announce its intention to obtain a license to the German Financial Supervisory Authority (BaFin) by April 1 and submit an application by November 1.

France: The French Financial Markets Authority (AMF) recently issued new regulations on the Digital Asset Service Provider (DASP) license, as well as guidelines for applying for a non-mandatory license and notifying the AMF of internal cybersecurity operations. To apply, digital asset service providers must send the AMF a two-year business plan, a list of digital assets provided, a list of regions in which they operate, and an organizational chart. The license is optional for crypto companies operating in France. The French government only stipulates that crypto custodians and any company engaged in fiat-to-cryptocurrency exchange services must register with the AMF for anti-money laundering and counter-terrorist financing reasons. French regulators have also issued specific rules for cryptocurrency custodians, cryptocurrency exchanges, and cryptocurrency broker-dealers.

Japan: Financial regulator the Financial Services Agency (FSA) said in a response to a public message that virtual currency ETFs cannot be created and sold in Japan.

South Korea: The Ministry of Strategy and Finance of South Korea stated that the taxable items in the current tax law do not include cryptocurrencies. In addition, cryptocurrencies obtained through airdrops are not subject to the income tax law. However, the Ministry of Strategy and Finance's position is that it plans to levy taxes on cryptocurrencies by revising the tax law. On December 27, the Bank of Korea announced that in order to better study digital assets, it decided to set up a special working group to focus on the study of central bank digital currencies (CBDCs).

Bahamas: On December 24, the Central Bank of the Bahamas announced the launch of a digital currency pilot on December 27. Starting from Friday (December 27) local time, residents of Exuma Island can join the Central Bank of the Bahamas' "Project Sand Dollar". They will receive mobile wallets, and the Bahamian government believes that mobile wallets will facilitate the future of island chain payments.

Uzbekistan: On December 24, the National Agency for Project Management of Uzbekistan recently adopted amendments to the regulatory regime, significantly limiting the options for local individuals to use cryptocurrencies. The revised regime has banned residents from purchasing cryptocurrencies on the country's licensed digital asset exchanges. Cryptocurrency holders can only sell their tokens, provided that they were not acquired through anonymous transactions.

Paraguay: On December 25, Paraguay's anti-money laundering government agency announced an investigation into the national cryptocurrency industry and prepared to implement FATF anti-money laundering supervision. The specific regulatory laws and regulations for the first batch of cryptocurrencies in the country will be issued in the first half of 2020.

3. Industry chain related dynamics: BTC transaction volume decreased by 6.8% month-on-month

(The following source website data is updated to December 28, and the Bitcoin mining revenue data has not been updated this week)

Last week, BTC had 2.04 million new transactions, down 6.8% from the previous month; ETH had 4.01 million new transactions, down 5.6% from the previous month.

Last week, the average daily computing power of BTC reached 94.3EH/s, a decrease of 1.5% from the previous month; the average daily computing power of the ETH network reached 152.8TH/s, a decrease of 5.9% from the previous month.

Last week, the BTC mining difficulty across the entire network was 12.95T, up 0.4% from the previous month; last week, the average mining difficulty across the ETH network was 2.52T, down 4.9% from the previous month.

4. Last week’s market review: Chainext CSI 100 fell 0.72%, and ETH performed best among the sub-sectors

Risk Warning

Uncertainty in regulatory policies. Currently, blockchain is in its early stages of development, and there is a certain degree of uncertainty in the regulation of blockchain technology, project financing, and tokens in countries around the world, so there is uncertainty in the development of industry company projects.

The development of blockchain infrastructure has not met expectations. Blockchain is the core technology for solving supply chain finance and digital identity problems. Currently, blockchain infrastructure cannot support high-performance network deployment. The degree of decentralization and security will have certain constraints on high performance. There is a risk that the development of blockchain infrastructure will not meet expectations.