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Does DCEP need smart contracts?

2021.06.03 Matthew Lam

BitMart suspends futures trading for Chinese users, while a former PBoC director suggests DCEP needs smart contracts — China Market Watch

Cryptocurrency exchanges are continuing to withdraw their offerings to Chinese traders following the recent crypto-trading crackdown in China. For instance, cryptocurrency exchange BitMart listed China as a restricted business area and has suspended futures trading for users in the country.

Meanwhile, Nasdaq-listed cryptocurrency mining company Canaan Inc. released its financial results for the first quarter of 2021. The Hangzhou-based company claimed its earnings were not affected by the recent cryptocurrency mining ban in China.

Yao Qian, the former director of the People's Bank of China, suggested that the country's digital currency, DCEP, should incorporate smart contract functionalities to run on blockchains, such as Ethereum and Facebook's Diem, in the future.

Here's everything you may have missed regarding these stories, and more, in this week's edition of China Market Watch from OKEx Insights. 

BitMart suspends futures trading for Chinese residents

BitMart included China as a restricted business area and has suspended futures trading services for Chinese users on June 3. The restriction applies to users who registered their accounts with a Chinese mobile phone number or residential address.

Key takeaways

  • BitMart claims its business decision is a result of the tightened cryptocurrency regulations in China. 
  • Once the futures trading restrictions become effective, Chinese users cannot open new futures positions and cannot transfer assets to their futures wallets.
  • With cryptocurrency exchanges in China starting to halt services, crypto traders in the country are reportedly seeking local over-the-counter platforms as alternatives.

Canaan Inc. sees limited impact on earnings

Canaan Inc.'s Nangeng Zhang discussed the company's latest financial statement with analysts during an earnings call. The CEO acknowledged that domestic mining companies sold their machines to overseas miners after China tightened cryptocurrency mining regulations. However, Canaan's earnings were not affected — as most customers are large-scale institutions and professional mining companies.

Key takeaways

  • Canaan received large upfront payments from professional mining companies for their machines. This provided them with stable revenue and mitigated negative effects from the recent sell-off.
  • Canaan believes that the cryptocurrency mining regulation in China is constructive to the industry — as regulations mitigate financial fraud and reduce investment risks for individuals.
  • Canaan continued to expand its mining operations outside of China. The Hangzhou-based mining giant recently deployed its first batch of BTC mining machines in Kazakhstan.

Former PBoC director sees need for DCEP smart contract functionality

Yao Qian believes that DCEP should evolve from being simply a digital form of the Chinese yuan. The former PBoC director suggested the central bank digital currency incorporate smart contract functionality and run on other platforms, such as Ethereum and Facebook's Diem, in the future.

Key takeaways

  • If DCEP enabled smart contract functionality, the PBoC could offer a digital yuan to users directly. This would facilitate greater financial inclusion, as users without bank accounts could access digital currency.
  • Security incidents arising from smart contract vulnerabilities and the ambiguous legal status of smart contracts are the main obstacles.

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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.