SHANGHAI IS NOT STARVING
e-CNY provides a roadmap, Top 10 CBDCs, Stablecoin Trust Act, and Sanctions
Shanghai is not starving and it’s not a zombie apocalypse, the best ever digital yuan podcast, 80% of Central Banks are looking at CBDCs, the US Stablecoin Trust act is just in time, the digital yuan as a roadmap for the digital euro and sanctions. Wow-what a week!
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1. Shanghai is not starving and it's not a zombie apocalypse
Friends and family are writing to ask if I’m starving and whether I have food. In short, we are well and the news that Shanghai is starving to death is news to me and most of my friends here in Shanghai. Who can blame them for being concerned with headlines like this?
The news coming out of the West is clear, Shanghai is starving to death as though the zombie apocalypse arrived.
Frankly, I don’t know what to say, yesterday free food was delivered to everyone in my compound as it was to most residents in my area. I know this to be factual because I write to friends in groups on WeChat and I can physically observe the deliveries to other compounds in my area from my 28th-floor windows.
My food delivery, is hardly the stuff of dreams but with a 5 kilo sack of rice no one is starving. To the left are free boxes of traditional Chinese medicine used to reduce fever and covid symptoms.
With 25 million residents in Shanghai, it is clear that my experience is not shared by all. Clearly, some have been left out and I do not dispute or make light that there are those who are genuinely suffering. Still to say that an entire city is starving based on the undisputed hardships of a few is disingenuous.
Shanghai's initial response and preparations could have been better. They grew complacent due to past success.
Shanghai’s response to these lockdowns should have been better and the Shanghai vice mayor readily admits this. There are without question people who endured great hardship within Shanghai and I do not deny this one bit. Still, my point is that the experiences of this smaller group do not equate to mass starvation along the lines of a zombie apocalypse.
This video is a favorite on twitter with 1.5 mn views, and is reported here in the Sun as truth when it is total rubbish. Link to Sun Video
Please be aware that many of the videos circulating on Twitter are fake. Yes some are undoubtedly real and disturbing, check carefully before you believe them.
The news and misinformation about Shanghai are actually quite disconcerting. Take the video above and watch it carefully. We don’t know where or when this video was shot but it’s not a supermarket, it’s a courier package distribution center. Then listen to the voices, are these the voices of starving people? They sound happy. Just use common sense, do you see any food?
The most absurd comments I’ve seen are that the Chinese army, which was sent to Shanghai to help with testing and running quarantine hospitals, is being used in Shanghai to put down riots and insurrections. I will not even show a picture or clip because they are so deplorable.
New lockdown scheme as of Sunday morning April 10. Under the new scheme some 40% of Shanghai will be reopened with restrictions that they stay within their district.
So what's really going on? The biggest news broke this morning with the launch of the new lockdown scheme shown above. So there is a clear system for ending lockdown and the prospect of lockdown "with no end in sight" as proclaimed in the headline above is over. So I can happily claim the headline is wrong with both of its claims. My compound had a case of covid in the last round of testing so I’ve got one more week for sure where I can’t leave the house, then hopefully another week of lockdown where I can go into the garden. Pray that there are no more new cases in my compound as this will restart the clock.
In this post, I talk more about Shanghai’s lockdown and why I still think that it is important for Shanghai to try. I understand that China’s zero covid policy is controversial, but for now, I think the potential loss of life outweighs the significant costs.
My post on LinkedIn for those interested in reading more:
2. The best e-CNY podcast ever!
At 56:12 I launch in a monologue where, in a single take, I explain why we need CBDCs now and why there is a crisis of vision surrounding CBDCs! Please have a listen! Link to podcast on Provoke FM
🔥MUST LISTEN: “China’s CBDC Dominance” is the absolute best discussion I have ever had about CBDC! (and I've had a lot of them) 🔥
Brett King is a fintech legend that needs little introduction. His podcast “Breaking Banks” is a must for all fintech aficionados and his most recent episode of this podcast devoted to the digital yuan is simply fantastic.
This is without question the best hour on China’s CBDC that you’re going to hear. This podcast has something for everyone. From "man on the street interviews," to in-depth commentary on where China's e-CNY is going from industry greats.
Frankly, no one has done a program quite like this before and only Brett could pull it off!
3. PwC on the top 10 CBDCs and Stablecoins
💥80% of central banks are considering launching a CBDC with 3 live, and 28 pilots, while stablecoins have a market cap of USD 190 Bn but have SHOCKING accounting deficiencies!💥
The PWC Global CBC Index is a great read, it provides a fabulous overview of the top 10 retail and wholesale CBDC projects.
Download report here: PwC Global Index and Stablecoin Overview 2022
The three live CBDCs are: Nigeria’s e-Naira, The Bahamas Sandollar, and The Eastern Caribbean’s D-Cash. Note that for astute readers who think I’ve left out Cambodia’s Project Bakong, I have bad news. Bakong has now been reclassified as a payment system and is no longer considered a CBDC. Despite the demotion Bakong soldiers on!
The top 10 CBDC nations! Kudos to the top 10!
I have to say what PwC cannot. The gap between the top 6 and the bottom 4 is massive and bigger than it appears on the graph! The top 5 will likely launch within a year or early next. The bottom 6 will be years behind.
Uruguay, for example, tested its CBDC in 2018 but has since given up almost completely. Sweden and Korea have active projects and I would think they would have beat Uruguay in the ranking. Japan and Ghana also have advanced CBDC programs and why neither made the top 10 is a surprise to me.
I have no words to express my sorrow now that Ukraine’s far advanced efforts are on hold due to war. The e-hryvnia project was well advanced and in a better world would likely have launched in a few years.
On the wholesale CBDC listing, PwC missed a golden opportunity to highlight the work of the BIS Innovation Hub. Seven of the top 10 wholesale CBDC nations listed are working in concert with the BIS Innovation Hub! To say that the BIS’s Innovation hub has the biggest influence in rebuilding our future financial system is not an exaggeration.
BIS Innovation Hub is working with Thailand, Hong Kong, Singapore, France, South Africa, UAE and Switzerland!
While PwC credits BIS throughout the listing but I think the separate acknowledgment of their work would have been appropriate!
PwC did a great job in putting in stablecoins, but to be frank, they were surprisingly mute on the controversies surrounding accounting. It is a glaring omission as though PwC’s legal department wouldn’t go for it!
The shocker is that PwC was mute on the fact that of the top 10 stablecoins 4 have no accountants on record! And to make matters worse, Tether the No 1 coin has an accountant whose reports are in question.
If that isn’t a shocker nothing is!!! Think about this for a moment and ask yourself does it make sense that five of the top ten stablecoins have deficient accounts?
4. US Stablecoin Trust Act
The Stablecoin Trust Act💥 arrives, the first of a series of proposed laws regulating stablecoins in the US.
The US is going to use stablecoins to go “cashless” long before it ever uses a CBDC and the Stablecoin Trust Act gives us a good idea of what stablecoin regulations are going to look like.
For the record, I like stablecoins but believe them to be inferior to a true central bank issued digital dollar. That said, privacy advocates prefer them because they avoid gov’t involvement with payment. In the end the US will have both.
The Act's big breakthrough is that it creates a “national limited payment stablecoin issuer” under 3 regulatory regimes:
1️⃣ A traditional bank charter
2️⃣ A new OCC federal license
3️⃣ A state-based money transmitter
What the act gives us:
◼️ Clarity on “cash and cash equivalents” for collateral and disclosure.
◼️ Existing banks will get “equal treatment” and may issue stablecoins but must keep a segregated legal entity.
◼️ Stablecoins will not be considered securities and are exempt from securities regulation.
◼️ Mandates that the Office of Comptroller of Currency create a licensing program.
◼️ Privacy, like existing accounts, non-public information can only be collected by a search warrant or voluntarily provided.
◼️ Access to the Fed's master account system
Now if you think that stablecoin regulations are not necessary you’re mistaken. Just look at algorithmic crypto “stablecoin” Neutrino which broke its dollar peg this week. Does that look stable to you? By the way, I’ll leave a more complete discussion on algorithmic stablecoins for another day, but they remind me of the faith in mathematics so many had for AAA-rated CDOs in the 90s. We all know how that ended!
Neutrino broke its dollar peg earlier this week and is now trading at around $0.97 amid alegations that it is a Ponzi scheme.
5. China’s digital yuan is a roadmap
"Digital Currencies in Asia: Lessons for Europe" If you want to have some fun listen in to my truth bomb 💣 on Stablecoins (1:09.34)
“China’s digital yuan is serving up a CBDC roadmap,” but look to Japan as well for leadership!
This 🔥MUST SEE🔥 panel discussion video and 🔥MUST READ🔥 article will explain why China and Japan are roadmaps!
First, let me thank Global Government Fintech and editor Ian Hall for a beautiful article that pulls out and highlights many of my comments from the panel discussion. I am pleased to be the "fintech expert" in the article title.
Link to article here: China’s digital yuan serving up CBDC ‘roadmap’: fintech expert
Second, a thank you to the Digital Euro Association headed by Jonas Gross and panel participants: Masaki Bessho, Markus Heckel, Oriol Caudevilla and Hiromi Yamaoka.
The panel discussion was appropriately titled: “Digital Currencies in Asia: Lessons for Europe.” The video covers not just China but Japan's significant CBDC efforts!
Many don’t know much about Japan’s significant CBDC research. This week Japan is progressing onto “Phase 2” CBDC testing even though it has not yet made a launch decision. This testing will include tests of anti-money laundering programs, protecting the privacy of the users, and ensuring that the CBDC ecosystem is safe from cybercriminals.
Let me give it to you straight: The European Central Bank has to look toward Asia for CBDC inspiration. 💥China, Japan, Singapore, and Hong Kong are where it's at for CBDCs.💥
The ECB isn't going to get any help from the US Fed. That’s more true today than a year ago when I wrote "Cashless" and proclaimed China a roadmap.
6. Sanctions: How long, to what end and what next?
The weaponization of Finance is a new kind of war where “shock and awe” plays out in financial markets and obscure systems like SPFS and CIPS.
“This is a very new kind of war — the weaponisation of the US dollar and other western currencies to punish their adversaries.”
This FT article is a “long read” but the best I've seen on the uncharted territory of large-scale sanctions. Link
While few among us dispute the necessity to “do something” we still need to assess the cost of sanctions and likelihood of their success.
◼️ What are the risks?
“The central bank sanctions could prompt a backlash against the dollar’s dominance in global finance. In the five weeks since the measures were first imposed, the Russian rouble has recovered much of the ground it initially lost and officials in Moscow claim they will find ways around the sanctions.”
The “shock and awe” which first brought the ruble to its knees seems to have worn off and is a warning. Never before have sanctions been tried on a country the size of Russia. Cutting it off from global trade would seem impossible.
◼️ What is the strategy?
“Western governments have not defined what Russia would need to do for sanctions to be lifted, .....is the objective to inflict short-term pain on Russia to inhibit the war effort or long-term containment?”
With no end date in sight, nations dependent on Russia are left in a lurch. India and Brazil concluded that their people are better served by breaking sanctions to reduce the pain to their domestic population rather than let their effects multiply to the breaking point.
◼️ Do sanctions work?
“The threat of economic pain may not have deterred Putin from invading." ...... “Even when they work, sanctions take a long time to have an impact.”
Sanctions did not stop Russia during its Crimean campaign. And those same sanctions did not stop Russia now. So assuming that further sanctions will stop Russia from achieving its goals, however nefarious, would seem a stretch.
Clearly, patience is necessary, but as time drags on failure becomes more likely, Iran is the best example.
◼️ Who pays?
“However, the economic pain from the crisis is being unevenly felt, with Europe suffering a much bigger blow than the US.”
The EU is bearing the brunt of sanctions through higher energy costs. But the UN has already raised alarm about the impact of sanctions on food security in the developing world. Coinciding with growing inflationary pressure. Starvation knows no sanctions.
The likelihood that these sanctions will “work” in that they will alter Russia’s barbaric attack seems low.
That isn’t to say that sanctions should be lifted, they should not.
Still, we need to recognize sanctions limits, temper our resolve and ask: How long? To what end? and What next?
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Rich Turrin is the international best-selling author of "Cashless - China's Digital Currency Revolution" and "Innovation Lab Excellence." He is an Onalytica Top 100 Fintech Influencer 🌍 and an award-winning executive previously heading fintech teams at IBM following a twenty-year career in investment banking. Living in Shanghai for the last decade, Rich experienced China going cashless first-hand. Rich is an independent consultant whose views on China's astounding fintech developments are widely sought by international media and private clients.