China

Malaysia enlists China to help end USD dependence for trade

More proposals and currency concepts are emerging as Asia ramps up its efforts to distance itself from U.S. dollar hegemony.

China and Malaysia are considering moving forward on discussions regarding an Asian Monetary Fund, with a distancing from the  U.S. dollar hegemony becoming a greater priority in the region.

On April 4, Malaysian Prime Minister Anwar Ibrahim reportedly said China was open to a proposal to set up an Asian Monetary Fund.

The concept of the Asian-focused fund was floated at a forum on the Chinese island province of Hainan last week, according to Bloomberg.

According to Ibrahim, China’s President Xi Jinping welcomed discussions on a proposed agency to help the two nations — and others in the region — distance themselves from the U.S. dollar and the International Monetary Fund (IMF).

Malaysia is among several Asian nations trying to detach itself from dollar dependence. Its central bank is working with the People’s Bank of China to conduct trade in their own currencies.

In late March, China and Brazil agreed to transact solely in their national currencies, cutting out the greenback completely.

An Asian Monetary Fund was initially considered in the 1990s, but Ibrahim thinks that now is the time, stating:

“Now with the strength of the economies in China, Japan, and others, I think we should discuss this — at least consider an Asian Monetary Fund, and, secondly, the use of our respective currencies.”

Also, in late March, a Russian state official spoke of a new currency for the BRICS alliance, as reported by Cointelegraph. It would be another effort to distance itself from the dollar, incorporating the burgeoning economies of Brazil, Russia, India, China and South Africa.

In October 2022, Chinese government researchers proposed a digital currency based on a basket of Asian currencies.

On April 4, South China Morning Post Columnist Alex Lo opined additional reasons for dollar distancing could exist.

Related: ‘Surgical removal’ of crypto will only weaken USD dominance, commentators say

Lo said more countries want to move away from the U.S. dollar, not just for economic reasons, but to “escape the clutches of the gangsterism of U.S. foreign policy, which in the past two decades has weaponized its global dollar dominance with increasing abandon.”

The end of the dollar as the world’s reserve currency could severely impact its value compared to other currencies and crypto assets. It could have a knock-on effect on the $133 billion stablecoin market, which is dominated by dollar-pegged stablecoins.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Midjourney AI users find workaround amid ban on Chinese President’s images

Midjourney AI bans the creation of Chinese President Xi Jinping’s images, but users find ways to create deepfakes.

Midjourney, an artificial intelligence (AI) service that generates images from natural language descriptions, recently banned the making of pictures of Chinese President Xi Jinping, much to the dismay of its users. However, the ban has not deterred its users from finding a workaround by creating deepfakes of Xi, which are manipulated digital representations produced by sophisticated machine-learning techniques.

Last week, Midjourney took action to prevent the proliferation of deepfakes on its platform by disabling access to its free trial version. Although the platform still allows the creation of images featuring world leaders, the Chinese President is notably excluded. Any attempt to generate an image with his likeness or even mention his name in a prompt is strictly prohibited by Midjourney.

According to a tweet by a user of the text-to-image AI generator, “It is still possible with /imagine, if you provide the full URL of an existing photo of Xi in the prompt. Or you can use /blend with two existing photos.” Another user said there was the alternative of using MidJourney v5’s blend function between two images but expressed fear of it being policed eventually.

An AI-generated image of Pope Francis wearing a puffer coat caused controversy over the advancement of fake imagery. Source: Twitter

Critics, like Sarah McLaughlin, senior scholar at the Foundation for Individual Rights and Expression (FIRE), have argued that the ban constitutes a form of censorship, undermining the fundamental principles of free speech and expression.

Related: Italian regulator draws criticism for blocking AI chatbot ChatGPT

In messages exchanged on the chat service Discord last autumn, Midjourney’s founder and CEO, David Holz, revealed that the firm had received complaints from local users about “various topics in different countries,“ prompting them to block numerous related words. However, according to chat logs examined by The Washington Post, Holz refrained from listing the prohibited terms to prevent unnecessary controversy.

In his Discord comments, Holz mentioned that the prohibited words were not solely connected to China. Nonetheless, he recognized that China was a particularly sensitive matter, as political humor might put Chinese users at risk. Holz attempted to explain the reasoning behind his actions by stating, “Our decision was not motivated by financial gain, and in this scenario, it is evident that ensuring access to this technology for Chinese individuals is for the greater good.“

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Crypto Biz: A spotlight on Binance, Galaxy Digital swings to profit, China’s blockchain push

Binance handles fear, uncertainty and doubt surrounding its business future following a lawsuit from U.S. authorities.

Regulators in the United States have a fresh target on their radar: Binance. The Commodity Futures Trading Commission (CFTC) has sued the world’s biggest crypto exchange by trading volume for regulatory violations. Accusations range from insider trading to concealing office locations around the world to evade authorities’ oversight. 

Binance denies the claims, suggesting another court battle between crypto firms and U.S. regulators is just around the corner. On another front, Binance’s U.S. arm must wait to close its $1 billion deal for Voyager Digital’s assets until the Department of Justice decides whether to appeal to Voyager’s bankruptcy plan.

Beyond the courts, signs that the crypto winter is fading away are on the horizon. Billionaire Mike Novogratz’s Galaxy Digital turned a profit after a $1 billion loss in 2022. Meanwhile, China keeps developing its fintech industry, with a strong emphasis on blockchain.

This week’s Crypto Biz examines how Binance is coping with ongoing fear, uncertainty and doubt (FUD) about its business, and how companies are navigating Web3 opportunities and challenges.

Binance CEO CZ rejects allegations of market manipulation

Binance CEO Changpeng “CZ” Zhao rejected accusations of market manipulation in response to a CFTC lawsuit, labeling it “an incomplete recitation of facts.” According to Zhao, Binance “trades” in several situations, mainly to convert its crypto revenue to cover expenses in fiat or other cryptocurrencies. The exchange’s CEO also acknowledged that he has two personal accounts at Binance: one for Binance Card and one for crypto holdings. “I eat our own dog food and store my crypto on Binance.com. I also need to convert crypto from time to time to pay for my personal expenses or for the Card,” he added. Zhao said Binance has a 90-day no-day-trading rule for its staff and refuted claims that they engage in insider trading.

Galaxy Digital swings to profit after $1B net loss in 2022

Galaxy Digital, the digital asset investment firm founded by billionaire Mike Novogratz, has swung to a profit after a net loss of $1 billion in 2022, with a preliminary pre-tax income of $150 million from Jan. 1, 2023, to March 24, 2023, according to the company. Novogratz says the results are from strategic moves “opportunistically” taken during the past months and Bitcoin’s (BTC) price recovery. Similarly to other companies operating in the crypto space, Galaxy found 2022 to be a challenging year. In August, it dropped plans to go public in the United States after terminating a $100-million deal to acquire digital asset custodian BitGo. Later in November, the firm disclosed $77 million of exposure to bankrupt cryptocurrency exchange FTX, with $48 million likely locked in withdrawals. 

Disney reportedly scraps its metaverse division

The metaverse is on its way out, at least for Disney. A restructuring plan designed to cut operating expenses by $5.5 billion and lay off 7,000 employees over two months led the entertainment giant to ditch its metaverse division. All of the metaverse division’s 50 or so members will not be offered new employment contracts, except for Michael White, who led the broader consumer products unit. Unfavorable economic conditions and increased competition in the streaming sector were two main factors that led to the decision. Disney’s former and current chief executives, Bob Chapek and Robert Iger, once considered the metaverse a bullish investment opportunity.

China to upgrade national blockchain standards by 2025

Despite China’s stance on cryptocurrencies, the country’s officials have been actively developing its fintech industry, with a strong focus on blockchain technology. The Ministry of Industry and Information Technology, a watchdog for the Chinese fintech industry, has announced its plan to improve standards for blockchain technology development by 2025. The ministry has published a draft of its guidelines and invites public opinions on the blockchain development from “all walks of life.” This move aligns with China’s five-year plan for “National Economic and Social Development and Vision 2035,” in which blockchain is listed as a target to “grow stronger.”

Crypto Biz is your weekly pulse of the business behind blockchain and crypto, delivered directly to your inbox every Thursday.

Is a housing crisis underway? Why crypto investors should care

Cointelegraph analyst and writer Marcel Pechman explains if there is a housing crisis underway and why crypto investors should be paying attention.

The show Macro Markets, hosted by crypto analyst Marcel Pechman, which airs every Friday at 12 pm ET on the Cointelegraph Markets & Research YouTube channel, explains complex concepts in layman’s terms and focuses on the cause and effect of traditional financial events on the day-to-day crypto activity.

In today’s episode, Pechman discusses the housing crisis, especially after the United States Case–Shiller Index dropped for the seventh straight month. Increased mortgage rates certainly played a part, considering 15-year financing rose to 5.6% from 3.7% in March 2022. 

However, Pechman explains why commercial properties represent a much more immediate risk, as business rapidly decreases during recessions. Moreover, corporate layoffs usually cause a cascading effect as fewer companies compete for commercial properties.

At the same time, delinquency naturally increases as businesses are forced to refinance their debt at a much higher cost. The video explains how the commercial property crisis could spill into regional banks and cites to multibillion-dollar defaults that occurred over the past couple of months.

During a brief recap, Pechman explains how cryptocurrencies relate to the housing market and why the sector does not provide reliable inflation protection.

The Macro Markets’ next segment focuses on the France–China liquid natural gas (LNG) trade settled directly in yuans, bypassing the U.S. dollar as a global settlement layer. However, Pechman points out how inefficient and unreliable this system is, as commercial banks and companies based in France are not allowed to carry yuans.

The show concludes by showing how Bitcoin (BTC) and cryptocurrencies resemble broader commodities trading, as most of its volume happens in USD. Thus, even if a small part of the trade goes through other currencies, the USD markets retain the indicative price rates.

If you are looking for exclusive and valuable content provided by leading crypto analysts and experts, make sure to subscribe to the Cointelegraph Markets & Research YouTube channel. Join us at Macro Markets every Friday at 12:00 pm ET.

Russia talks up prospects of BRICS countries developing new currency

A top Russian official has reportedly claimed that the countries of the BRICS alliance — Brazil, Russia, India, China and South Africa — are working on creating their own currency.

A new world order could be emerging as economic powerhouses increase their efforts to distance themselves from US dollar hegemony.

According to reports, a top Russian official has claimed that the BRICS alliance is working on creating its own currency. BRICS is an acronym for five leading emerging economies: Brazil, Russia, India, China and South Africa.

State Duma Deputy Chairman Alexander Babakov made the comments at the St. Petersburg International Economic Forum event in New Delhi, India, according to local reports.

Babakov reportedly stressed the importance of both nations working towards a new medium for payments, adding that digital payments could be the most promising and viable.

He also said the currency could benefit China and other BRICS members, and not the West.

“Its composition should be based on inducting new monetary ties established on a strategy that does not defend the U.S.’s dollar or euro, but rather forms a new currency competent of benefiting our shared objectives.”

Babakov also reportedly postulated that the new currency would be secured by gold and other commodities such as rare-earth elements.

Countries in the grouping. Source: Library of Congress

This week, former Goldman Sachs chief economist Jim O’Neill called on the BRICS bloc to expand and challenge the dominance of the dollar. In a paper published in the Global Policy journal, he wrote that “the U.S. dollar plays a far too dominant role in global finance.”

A BRICS currency is not a new concept. In 2019, Cointelegraph reported that members of the bloc were discussing the creation of a new digital currency for a unified payments system.

Related: 5 ways CBDCs could impact the global financial system

In a related development this week, China and Brazil reached a deal to trade in their own currencies. The move will remove the U.S. dollar as the intermediary, further empowering both nations to distance themselves from the world’s reserve currency.

According to reports, the agreement will enable China and the biggest economy in Latin America, Brazil, to conduct trade and financial transactions directly. Chinese yuan will be exchanged directly for the Brazilian real and vice versa instead of going through the greenback.

China is racing ahead with its central bank digital currency project, and crypto adoption in Brazil is growing following the legalization of it as a payment method in the country late last year. Meanwhile, Uncle Sam remains determined to continue its war on crypto as financial regulators tighten the screws on the embryonic industry.

Magazine: Unstablecoins: Depegging, bank runs and other risks loom

Hong Kong fund plans to raise $100 million for crypto investment

The new Hong Kong-based equity fund will focus on the regional market and embrace Web3 startups.

As Hong Kong is again opening up to the crypto market, local investors are launching a $100 million fund to finance the digital industry. The new fund, ProDigital Future, will aim at early-stage Web3 companies oriented at the regional market. 

According to a Bloomberg report from March 30, ProDigital Future has finished its half-year fundraising period with about $30 million in its pockets. However, it plans to raise $100 million by the end of 2023.

The fund is led by Ben Ng, a partner at Hong Kong-based equity firm SAIF Partners, and Curt Shi, a long-time tech investor from China. At this point, Sunwah Kingsway Capital Holdings and Golin International Group have already hopped in to support the fund.

So far, Shi told journalists that the fundraising process has been “relatively smooth,” although the investors are cautious about putting their money into crypto projects. Reportedly, Hong Kong investors and some family offices from China, Australia and Singapore also participated in ProDigital Future.

The fund will “embrace Hong Kong and its policies” but intends to be present in Australia and Singapore, “as well as in Europe and the United States.”

ProDigital Future has already invested in six digital-asset projects with metaverse company GigaSpace and One Future Football, a digital football league from Australia currently operating in stealth mode.

Related: OKX plans Australian expansion, citing ‘huge appetite’ for crypto

In October 2022, the government of Hong Kong floated the idea of introducing its own bill to regulate crypto. On Feb. 20, Hong Kong’s Securities and Futures Commission released a proposal for a licensing regime for cryptocurrency exchanges, set to take effect in June.

The regime suggests a necessary licensing procedure, demanding that potential market players meet several prerequisites, including the safe custody of assets, Know Your Customer, Anti-Money Laundering and Combating the Financing of Terrorism regulations.

Binance concealed ties to China for years, even after 2017 crypto crackdown: Report

Documents reviewed by the Financial Times show that Binance kept staff and operations in China despite announcing its departure in 2017.

Binance CEO Changpeng “CZ” Zhao and other senior executives have been for years concealing the crypto exchange ties with China, according to documents obtained by the Financial Times.

In a report on March 29, FT claims that Binance had substantial ties to China for several years, contrary to the company’s claims that it left the country after a 2017 ban on crypto, including an office still in use by the end of 2019 and a Chinese bank used to pay employees.

“We no longer publish our office addresses . . . people in China can directly say that our office is not in China,” Zhao reportedly said in a company message group in November 2017.

Employees were told in 2018 that wages would be paid through a Shanghai-based bank. A year later, personnel on payroll in China were required to attend tax sessions in an office based in the country, according to FT.

Based on the messages, Binance employees discussed a media report that claimed the company would open an office in Beijing in 2019. “Reminder: publicly, we have offices in Malta, Singapore, and Uganda. […] Please do not confirm any offices anywhere else, including China.”

The report backs up accusations made in a lawsuit filed on March 27 by the United States Commodity Futures Trading Commission (CFTC) against the exchange, claiming that Binance obscured the location of its executive offices, as well as the “identities and locations of the entities operating the trading platform.”

Related: Here’s why CFTC suing Binance is a bigger deal than an SEC enforcement

According to the lawsuit, Zhao stated in an internal Binance memo that the policy was intended to “keep countries clean [of violations of law]” by “not landing .com anywhere. This is the main reason .com does not land anywhere.”

In response to the FT report, a Binance spokesperson told Cointelegraph that the company “does not operate in China nor do we have any technology, including servers or data, based in China,” adding that “we strongly reject assertions to the contrary.” They continued: “To be clear, the Chinese government, like any other government, has no access to Binance data except where we are responding to lawful and legitimate law enforcement requests.”

Binance spokesperson also stated:

“While we did have a customer service call center based in China to service global Mandarin speakers, those employees who wished to remain with the company were offered relocation assistance starting in 2021.” 

According to the exchange, anonymous sources are citing ancient history and “dramatically mischaracterizing events. This is not an accurate picture of Binance’s operations.”

With daily trading volume of over $8.5 billion, Binance is the world’s largest cryptocurrency exchange. The company claims it has never been registered or incorporated in China and does not operate there. Its 8,000 full-time employees live across Europe, the Americas, Middle East, Africa and Asia-Pacific, according to Binance.

Magazine: 4 out of 10 NFT sales are fake: Learn to spot the signs of wash trading

Sam Bankman-Fried charged with bribing Chinese officials: Court docs

The former FTX CEO is in hot waters once again, as he is facing a new 13-count indictment from authorities in the United States.

FTX cryptocurrency exchange founder and former CEO Sam Bankman-Fried, or “SBF,” is facing a new 13-count indictment from authorities in the United States.

According to a court filing by United States attorney Damian Williams, one of the new SBF’s charges includes an alleged $40million bribe to a Chinese government official in a new superseding indictment.

In section 105 of the filing, the complaint claims that SBF and other related parties “directed and caused the transfer of at least approximately $40 million in cryptocurrency intended for the benefit of one or more Chinese government officials.” According to the allegations, the transaction was made in order to influence and induce Chinese officials to unfreeze cryptocurrency accounts at FTX’s affiliate firm, Alameda Research. The accounts reportedly held more than $1 billion worth of cryptocurrency.

According to the filing, Chinese law enforcement authorities froze certain Alameda accounts on “two of China’s largest crypto exchanges” in or around early 2021. The FTX founder was aware of the freeze and tried numerous methods to unfreeze the accounts, including attempting to transfer cryptocurrency to fraudulent accounts in an effort to circumvent China’s freeze orders.

“After months of failed attempts to unfreeze the accounts, Samuel Bankman-Fried discussed with others and ultimately agreed to and directed a multi-million-dollar bribe to seek to unfreeze the accounts,” the court filing notes. After the accounts were unfrozen at the direction of SBF, Alameda used unfrozen cryptocurrency to fund additional Alameda trading activity, the U.S. government found.

Related: SBF banned from using online messengers under new bail agreement

It appears to be unclear what Chinese cryptocurrency exchanges Alameda was using in early 2021 as China officially banned crypto exchanges from providing services in the country back in 2017. As previously reported, China enforced a blanket ban on crypto in September 2021.

FTX founder Bankman-Fried faces a trial set for Oct. 2, 2023, on criminal charges of stealing billions of dollars in FTX customer funds facilitated through Alameda Research. He is also alleged to have made large illegal political donations. He pleaded not guilty to eight criminal counts, which could result in 115 years in prison should he be convicted.

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China to upgrade national blockchain standards by 2025

The Chinese government has been proactively pursuing advancements in its blockchain sector and aims to upgrade its industry development standards by 2025.

Chinese officials have been actively developing its fintech industry, with a strong focus on blockchain technology, despite the country’s stance on cryptocurrencies.

On March 28, the Ministry of Industry and Information Technology, a watchdog for the Chinese fintech industry, said it intends to improve standards for its blockchain technology development by 2025.

The information comes from a draft of its guidelines published on the ministry’s website, which also calls for public opinion on blockchain development from “all walks of life.“

China plans to have clarification on the level of design for its blockchain and distributed ledger technology standards system by sometime this year, giving the public until April 28 to make any further input on the draft.

This development aligns with China’s 5-year plan for “National Economic and Social Development and Vision 2035 of the People’s Republic of China,” in which it set a 2025 deadline for certain technological developments.

Such developments include digital industries, in which blockchain is listed as a target to “grow stronger, and the quality of such industries as communications equipment, core electronic components, and key software will be improved.“

Related: China’s Hainan to boost NFT oversight as digital yuan trial ramps

In February, China announced plans for a new national blockchain research center. The center aims to connect Chinese universities, developers and blockchain businesses to research core blockchain technologies to push industry expansion.

In September 2022, the Chinese government claimed that the country makes up around 84% of all blockchain applications filed worldwide. However, it was revealed that only 19% of all filed applications received approval.

Nonetheless, the Chinese blockchain industry is active. According to a national white paper, China has over 1,400 companies operating in its blockchain industry.

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Binance launches internal investigation following KYC bypass rumors

Following allegations that Binance employees and volunteers have helped users bypass KYC protocols, the crypto exchange says it is launching an internal investigation.

A recent CNBC investigation claimed that Binance employees and volunteers were assisting Chinese users in bypassing Know Your Customer (KYC) and other security protocols. 

Speaking to Cointelegraph, a spokesperson from Binance stated that employees are “explicitly forbidden” from supporting users in circumventing any laws or policies. The spokesperson also said the company is taking action following the recent allegations.

“We have launched an investigation into employees who may have violated our internal policies including wrongly soliciting or making recommendations that are not allowed or in line with our standards.”

They went on to say that Binance has implemented “advanced detection tools” that allow the exchange to crack down on users in restricted jurisdictions, along with actively blocking VPNs from said areas.

According to the exchange, it is “extraordinarily rare” for workarounds to be possible. Binance claims to have “multiple manual and AI-driven processes” that help prevent users from bypassing critical security procedures.

“Furthermore, users who are found to have used any sort of workaround to avoid local law are restricted immediately.”

Changpeng Zhao, the founder and CEO of Binance, has made no comment on the situation at the time of writing, despite his regular commentary on social media. Previously, Zhao took to Twitter to address rumors that had spread via the Chinese messaging platform WeChat.

Related: Binance.US, Alameda, Voyager Digital and the SEC — the ongoing court saga

Prior to this incident, Binance had announced in February that it would delist low-trade-volume nonfungible tokens that were listed before the implementation of its new KYC rules. 

In October 2022, the exchange was hit with allegations that it had “swerved scrutiny” from regulators in the United States and the United Kingdom.

Previously, Binance has been open about its employee policies. In January, the exchange confirmed that its employees must adhere to a 90-day period prior to trading any digital assets to prohibit insider trading.

Magazine: US enforcement agencies are turning up the heat on crypto-related crime