Overview Of The E-CNY, China’s Digital Yuan

One of the most interesting areas in studying China and Bitcoin is the Digital Yuan. This guide summarizes the latest updates on the Digital Yuan (e-CNY) project as we enter 2024.

What is the e-CNY/Digital Yuan?

The Digital Yuan is China’s version of a central bank digital currency (CBDC). This means the central bank is directly involved in issuing accounts to individuals. The Digital Yuan is a retail CBDC, designed for use by the general public, unlike wholesale CBDCs that are used by banks. It is intended to replace cash, does not bear any interest, and is pegged 1:1 with the Chinese Yuan.

Where Can You Use the e-CNY?

Specific merchants accept the e-CNY, and it is also used in public transit systems in major cities like Beijing. During the Winter Olympics, it was one of the three accepted forms of payment.

Can I Buy Digital Yuan?

No, you can’t buy Digital Yuan unless you are in one of the 29 pilot areas in China. If you are abroad and don’t have access to the Chinese app store, you won’t be able to get it. More detailed guides explain the 29 areas where you can get the Digital Yuan.

If you try to buy Digital Yuan on an iPhone, you will be denied if your phone location isn’t in one of the pilot areas. However, if you are in one of these areas, there is now a guide for foreigners to onboard the system. Alipay and WeChat Pay also allow registration with international credit cards. This is part of China’s broader effort to attract international visitors, including offering visa-free access for certain countries in 2024.

Is the Digital Yuan an Alternative to Bitcoin?

The Digital Yuan is China’s answer to Bitcoin, a cryptocurrency that the Chinese state has tried to ban. Research for the Digital Yuan started around 2014, with the Digital Currency Research Initiative beginning in 2016. However, there are significant differences between the Digital Yuan and Bitcoin.

1. Privacy Tiers: Even though there are privacy tiers, the Central Bank requires personal identifiers to use the system. Even at the lowest tier, you need to provide a phone number, which in China, is tied to your real ID.
2. Vendor Selection: The central bank chooses all vendors, and the code is closed-source and cannot be verified online. Initially, the bank experimented with decentralized ledger technology but now uses a centralized ledger. This has cybersecurity implications, as the software is maintained by the government, with access to user data. Unlike Bitcoin, there is no way to verify the code publicly or develop additional features.
3. Transaction Data: The central bank selectively releases transaction data, so the network’s status is unclear. From available data, many wallets don’t transact often, and we have to rely on statistics from the People’s Bank of China.
4. Price Determination: Bitcoin’s price is determined by the market, while the Yuan is semi-pegged to the US dollar. Some prefer this to avoid volatility, but it may mean missing out on long-term gains that exceed the risk.

Current Status of the Digital Yuan in 2024

The Digital Yuan has been rolled out in 29 cities. Despite the “pilot” language used by the Chinese state, it’s clear that the Digital Yuan is set for full-scale implementation. It is part of how China’s central bank tracks the monetary supply. Although the pilot included expiring funds, adoption is slow. Public stats confirm that the Digital Yuan isn’t very popular. Anecdotal evidence, like reports from the South China Morning Post, indicates that most people prefer Alipay and WeChat Pay.

While the payment volume has grown, reaching $250 billion in the first half of 2023, it still represents just 0.16% of all Chinese monetary volume. This is an uptrend from the $14 billion reported in the first two years of the e-CNY’s start.

Hong Kong has piloted e-CNY acceptance, with guides and favorable mentions in state media, showing China’s intent to fully roll out the e-CNY.

Privacy Implications of the Digital Yuan

The privacy tiers of the Digital Yuan mean that the central bank controls personal identifiers and knows each account balance. The Digital Yuan offers an offline version with hardware smart cards that can transmit value over NFC, but these cards can only hold small amounts.

The Central Bank likely knows each balance and wallet account, along with personal information needed to create those accounts. It can also expire funds, as seen with the airdrops used to trial the e-CNY.

Goals of the Chinese State with the Digital Yuan

The Digital Yuan is not intended to replace Alipay and WeChat Pay. However, China has had issues with the tech sector, detaining founders, and preventing IPOs. The banking system, which works closely with regulators, provides a stable backdrop for the Chinese financial system. China’s main goal with the e-CNY is to create another domestic payment option.

The Digital Yuan was introduced to prevent monetary substitution from Libra and cryptocurrencies like Bitcoin. A paper from the People’s Bank of China cites cryptocurrencies as tools that “pose potential risks to financial security and social stability.”

China is also piloting Project M-Bridge with the BIS Innovation Hub, which involves wholesale CBDCs interfacing with other central banks. The project includes the UAE and Saudi Arabia’s central banks and aims to internationalize the Yuan. China’s strategy is to export digital cash standards to other governments and improve cross-border payments for critical commodities.

By understanding the e-CNY, its uses, and its implications, we can see how China is shaping the future of digital payments. The Digital Yuan represents a significant move towards a cashless society, with both benefits and challenges. Whether it becomes a popular alternative to existing payment systems remains to be seen, but it certainly marks a significant development in the global financial landscape.

Tether Freezes $29.62 Million in Tron Address Linked to Cambodian Ruling Family

Introduction

Stablecoin issuer Tether has frozen $29,620,000 in USDT held in a Tron network address. This address is linked to an online bazaar used by scam operators in Southeast Asia, including the Cambodian ruling Hun family.

The Frozen Funds

On July 13, 2024, Tether froze the TRON address TNVaKW, holding over $29.62 million in USDT. Blockchain data analysis firm Bitrace confirmed that this wallet is tied to Huione Guarantee, an online marketplace owned by a conglomerate connected to Cambodia’s ruling family. Bitrace’s analysis showed that the address was activated on July 9, 2024.

Who is Huione Guarantee?

Huione Guarantee is an online marketplace owned by a Cambodian conglomerate. This group is linked to the ruling Hun family of Cambodia. According to Bitrace, Huione Guarantee has facilitated at least $11 billion in transactions. Many of these transactions are linked to scams like pig butchering, sextortion, and other cybercrimes. They mainly use USDT for payments, making it easier to move money quickly and anonymously.

Why Tether Froze the Address

Bitrace suggests that Tether froze the TRON address because of its ties to illicit activities. The address was likely assisting in laundering funds for crimes such as fraud and crypto theft. By freezing the address, Tether aims to prevent further criminal activities.

The Role of Blockchain Analytics Firms

Blockchain analytics firms like Bitrace and Elliptic play a crucial role in identifying and tracking illicit activities on the blockchain. These firms analyze blockchain data to uncover patterns and connections between addresses and transactions. In this case, Bitrace and Elliptic both identified the suspicious activities linked to Huione Guarantee and its related addresses.

The Impact of the Freeze

Despite Tether’s action, Huione Guarantee continues its operations. Bitrace reports that Huione has activated a new business address, TQuFSv, and transferred 114,800 USDC from the frozen TNVaKW address. Additionally, their old business address, TL8TBp, is still operational. This means that Huione Guarantee can still receive and move funds through these other addresses.

Cybercrime and Crypto Scams

Huione Guarantee has been linked to various cybercrimes and crypto scams. These include pig butchering scams, sextortion scams, and other fraudulent activities. In pig butchering scams, victims are tricked into investing in fake schemes, while sextortion scams involve threatening individuals with the release of private information unless they pay a ransom. These scams often use cryptocurrencies like USDT to facilitate transactions, making it difficult for authorities to trace the funds.

The Importance of Freezing Illicit Addresses

Freezing addresses involved in illicit activities is essential to prevent further crimes. By freezing the TRON address linked to Huione Guarantee, Tether has made it more challenging for the group to continue its fraudulent activities. This action also sends a message to other scam operators that their activities can be tracked and stopped.

Tether’s Role in the Crypto Ecosystem

As a stablecoin issuer, Tether plays a significant role in the crypto ecosystem. USDT is widely used for various transactions due to its stability and liquidity. However, this also makes it attractive to criminals who want to move large sums of money quickly and anonymously. Tether’s actions to freeze illicit addresses help maintain trust in the stability and security of its stablecoin.

The Future of Blockchain Security

The collaboration between Tether, blockchain analytics firms, and other stakeholders is crucial for enhancing blockchain security. By working together, they can identify and stop illicit activities more effectively. As technology evolves, so will the methods used by criminals. Therefore, continuous efforts and advancements in blockchain analytics are necessary to stay ahead of cybercriminals.

Conclusion

Tether’s decision to freeze $29.62 million in USDT linked to a Tron address associated with the Cambodian ruling family highlights the ongoing battle against crypto-related fraud and cybercrime. With the help of blockchain analytics firms like Bitrace and Elliptic, illicit activities can be identified and stopped, ensuring a safer and more trustworthy crypto ecosystem. Despite the challenges, actions like these are essential in maintaining the integrity of the crypto market and protecting users from scams and frauds.

Inflation-Battered Argentinians Are Turning to Crypto

Inflation has hit Argentina hard. With an inflation rate of 276%, Argentinians are struggling. This high inflation has made everyday life difficult, and people are looking for ways to protect their money. One solution many are turning to is cryptocurrency. This article explores why Argentinians are adopting crypto, the risks involved, and the government’s response.

The Impact of Inflation on Argentina

Inflation has become a big part of life in Argentina. It’s as common as the famous Argentine barbecues, or asados. In the past year alone, inflation has reached 276%. This has changed how people live and what they eat. For example, beef, a staple in Argentina, has become too expensive for many. People are now eating cheaper proteins like pork and chicken.

With prices expected to rise by up to 600% this year, many Argentinians can no longer afford beef. This high inflation is also causing people to lose faith in the Argentine peso, the local currency. Instead, they are looking for more stable options like the U.S. dollar and now, cryptocurrencies.

The Rise of Black-Market Dollar Exchange

For decades, Argentinians have used black-market establishments called “cuevas” or “arbolitos” to exchange their pesos for U.S. dollars. These black-market exchanges often offer better rates than the official ones. However, they are not without risks. People can get ripped off or even receive fake currency.

Today, the black-market rate is 41% higher than the official rate of 954 pesos to the dollar. These risks have pushed people to look for safer and more reliable options. One of these options is cryptocurrency.

Why Argentinians Are Turning to Crypto

Cryptocurrency is becoming a popular way for Argentinians to protect their money. In fact, Argentina has the highest crypto adoption rate in the Western Hemisphere. Out of 130 million visitors to the world’s largest crypto exchanges, 2.5 million came from Argentina, according to a Forbes study with SimilarWeb.

Argentinians are not looking to get rich quick with cryptocurrencies. Instead, they are mostly buying and holding Tether (USDT), a stablecoin. USDT is a synthetic dollar with a market value of $112 billion. This stablecoin is popular because it is pegged to the U.S. dollar, offering a sense of stability.

The Risks of Using Stablecoins

While stablecoins like Tether might seem like a safe bet, they come with their own set of risks. Argentina has no regulations to control the crypto industry. The most trustworthy crypto exchanges in the world are not the ones most used by Argentinians. For instance, exchanges like Binance, eToro, BingX, HTX, and Bitget are popular in Argentina but are not highly trusted globally due to poor internal controls and lack of regulation.

Government Response to Cryptocurrency

Argentina’s new libertarian president, Javier Milei, is open to the idea of dollarizing the economy. He wants to create a system where people can choose which currencies to use for transactions. He believes this will lead to using the peso less and less until the country fully adopts the U.S. dollar. However, stablecoins like Tether are still a risky option as the government does not provide any safeguards for crypto users.

Crypto Adoption and Regulation

Argentina has the highest crypto adoption rate in the Western Hemisphere. A study by Chainalysis showed that Argentina leads Latin America in raw transaction volume, with an estimated $85.4 billion in value received up to July 2023. However, their preferred token, USDT, has a complicated history. Tether, the company behind USDT, has never produced an audit and has faced fines for falsely claiming that USDT was fully backed by U.S. dollars.

The risks also extend to the exchanges and marketplaces servicing Argentina. None of the top five crypto providers in Argentina are highly trusted globally. Binance, which receives the most traffic from Argentina, has been involved in money-laundering cases and has no home-country regulator.

Challenges for Ordinary Argentinians

For ordinary Argentinians, understanding these risks is difficult. Even tech-savvy individuals struggle. Fernando Apud, a software engineer, found that many crypto platforms do not disclose basic information such as whether they are registered to do business in Argentina.

When Forbes asked Binance about its status in Argentina, the company said it was “in close contact with authorities” but had not registered in Argentina. Other exchanges like eToro and Bitget gave similar responses, highlighting the lack of regulatory oversight in the country.

Local Crypto Solutions

Besides the major exchanges, Argentinians can also use local firms like Lemon and Buenbit. These companies offer prepaid cards that allow users to buy and spend crypto. However, they also operate in a regulatory gap. According to Chainalysis, Lemon Cash has about two million of Argentina’s five million crypto users.

The Future of the Argentine Economy

Argentinians are tired of dealing with the peso’s depreciation. Since the country ended its one-to-one peg to the dollar in 2002, the peso has lost significant value. Years of overspending and debt defaults have plagued the currency, and the situation worsened with the COVID-19 pandemic.

President Javier Milei is trying to reverse these policies. He has implemented measures like laying off public sector employees, suspending public works, removing energy subsidies, raising taxes, and reducing federal revenue sharing. These unpopular moves have led to protests but are seen as necessary to fix the economy.

The Persistent Flight to Dollars

Even if Argentina’s economy improves, the years of economic mismanagement mean that the flight to dollars, both paper and digital, will likely continue. The government has taken some steps to protect its citizens, like the CNV’s registration requirement for crypto firms. However, this is not enough to address the deeper issues.

Conclusion

Inflation has severely impacted Argentina, pushing many to adopt cryptocurrencies as a way to protect their wealth. While stablecoins like Tether offer some stability, they come with significant risks due to the lack of regulation. The government’s efforts to stabilize the economy and regulate the crypto market are ongoing, but it will take time to see significant changes. For now, the flight to digital dollars continues as Argentinians seek to safeguard their financial future.