THIS MATERIAL IS A MARKETING COMMUNICATION.
The Launch of China’s Digital Currency
China’s Digital Currency Push
After more than a year’s pilot runs, China’s digital currency, known as e-CNY, made its international debut for global users during the Winter Olympics. E-CNY (previously known as DCEP, or Digital Currency Electronic Payment) is a form of central bank digital currency (CBDC) and the People’s Bank of China has been working on it since 2014. More and more use cases are arising by including commercial banks and internet companies (such as Tencent’s WeBank pay and Alibaba’s MyBank) in a dual-tier system.
At the current stage, e-CNY is designed as a fiat currency to replace cash and coins already in circulation, and it is 100% backed by reserves in the central bank with no interest accrual. Some of the interesting features of e-CNY include: 1) it can be both account based and value based (hence you do not need to have a bank account to use e-CNY); 2) it has low costs (no charge on exchange and circulation); 3) it has managed anonymity (as e-CNY follows the principle of “anonymity for small value and traceable for high value”); 4) it does not require internet access; and 5) it is programmable (i.e. it has smart contract capability such as token function, prefund issues, etc.).
The rollout of e-CNY has been going on well on the merchant side. As of December 2021, there had been 8.1 million outlets that use e-CNY and 261 million retail e-CNY wallets had been opened, representing nearly 20% of China’s population. (CLSA, February 2022) Having said that, most consumers in China are still more familiar with Alipay and WeChat pay. With more features such as “red pockets” and “cash coupon” being rolled out, and more promotions from banks in the future, we believe the adoption rate of e-CNY could gradually pick up.
In the near term, the e-CNY rollout will lead to upgrade demand not just for various banking facilities and devices (i.e. ATM, VTM, STM, etc.), but also for banks’ clearing systems and e-wallets, as well as software for DCEP operators and partners.
Central Banks Worldwide Develop Digital Currencies
The Chinese government has very strong incentives to promote its digital currency as policy makers can monitor fund flows more closely and thus make monetary policy and other important policies more effective. In addition, e-CNY helps enforce regulations such as anti-money laundering and anti-tax evasion.
Though the central bank has no plan nor timetable to test e-CNY in cross-border payments at present, it allowed foreigners attending the Winter Olympics in Beijing to use e-CNY.
Many other major central banks are also exploring central bank digital currencies. The European Central Bank launched a digital euro project in July 2021, and is in a two-year "investigation phase" to study the digital euro's design, feasibility and impact on the market. The Federal Reserve also released a paper on digital dollars in January 2022.
A 2021 survey of 65 central banks by the Bank for International Settlements showed that 86% of them were developing digital currencies. Some 14% of the banks said they were running pilot projects, while 60% were experimenting at the proof-of-concept stage (DW, Deutsche Bank, January 2022). Central banks collectively representing a fifth of the world’s population are likely to issue a general purpose CBDC in the next three years (CLSA, February 2022).
With central banks in major countries speeding up pilot projects of their CBDCs, we expect the development of digital currencies to accelerate in the coming years when more mature infrastructure, compliance and regulations are in place.
Disclaimer & Information for Investors
No distribution, solicitation or advice: This document is provided for information and illustrative purposes and is intended for your use only. It is not a solicitation, offer or recommendation to buy or sell any security or other financial instrument. The information contained in this document has been provided as a general market commentary only and does not constitute any form of regulated financial advice, legal, tax or other regulated service.
The views and information discussed or referred in this document are as of the date of publication. Certain of the statements contained in this document are statements of future expectations and other forward-looking statements. Views, opinions and estimates may change without notice and are based on a number of assumptions which may or may not eventuate or prove to be accurate. Actual results, performance or events may differ materially from those in such statements. In addition, the opinions expressed may differ from those of other Mirae Asset Global Investments’ investment professionals.
Investment involves risk: Past performance is not indicative of future performance. It cannot be guaranteed that the performance of the Fund will generate a return and there may be circumstances where no return is generated or the amount invested is lost. It may not be suitable for persons unfamiliar with the underlying securities or who are unwilling or unable to bear the risk of loss and ownership of such investment. Before making any investment decision, investors should read the Prospectus for details and the risk factors. Investors should ensure they fully understand the risks associated with the Fund and should also consider their own investment objective and risk tolerance level. Investors are advised to seek independent professional advice before making any investment.
Sources: Information and opinions presented in this document have been obtained or derived from sources which in the opinion of Mirae Asset Global Investments (“MAGI”) are reliable, but we make no representation as to their accuracy or completeness. We accept no liability for a loss arising from the use of this document.
Products, services and information may not be available in your jurisdiction and may be offered by affiliates, subsidiaries and/or distributors of MAGI as stipulated by local laws and regulations. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Information for EU investors pursuant to Regulation (EU) 2019/1156: This document is a marketing communication and is intended for Professional Investors only. A Prospectus is available for the Mirae Asset Global Discovery Fund (the “Company”) a société d'investissement à capital variable (SICAV) domiciled in Luxembourg structured as an umbrella with a number of sub-funds. Key Investor Information Documents (“KI(I)Ds”) are available for each share class of each of the sub-funds of the Company.
The Company’s Prospectus and the KI(I)Ds can be obtained from www.am.miraeasset.eu/fund-literature . The Prospectus is available in English, French, German, and Danish, while the KI(I)Ds are available in one of the official languages of each of the EU Member States into which each sub-fund has been notified for marketing under the Directive 2009/65/EC (the “UCITS Directive”). Please refer to the Prospectus and the KI(I)D before making any final investment decisions.
A summary of investor rights is available in English from www.am.miraeasset.eu/investor-rights-summary/.
The sub-funds of the Company are currently notified for marketing into a number of EU Member States under the UCITS Directive. FundRock Management Company can terminate such notifications for any share class and/or sub-fund of the Company at any time using the process contained in Article 93a of the UCITS Directive.
Hong Kong: It is intended is for Hong Kong investors. Before making any investment decision to invest in the Fund, Investors should read the Fund’s Prospectus and the information for Hong Kong investors (of applicable) of the Fund for details and the risk factors. The individual and Mirae Asset Global Investments (Hong Kong) Limited may hold the individual securities mentioned. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Securities and Futures Commission.
Singapore: It is not intended for general public distribution. The investment is designed for Institutional investors and/or Accredited Investors as defined under the Securities and Futures Act of Singapore. This document is issued by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Monetary Authority of Singapore. Please consult with your professional adviser for further information on the availability of products and services within your jurisdiction.
Australia: The information contained in this document is provided by Mirae Asset Global Investments (HK) Limited (“MAGIHK”), which is exempted from the requirement to hold an Australian financial services license under the Corporations Act 2001 (Cth) (Corporations Act) pursuant to ASIC Class Order 03/1103 (Class Order) in respect of the financial services it provides to wholesale clients (as defined in the Corporations Act) in Australia. MAGIHK is regulated by the Securities and Futures Commission of Hong Kong under Hong Kong laws, which differ from Australian laws. Pursuant to the Class Order, this document and any information regarding MAGIHK and its products is strictly provided to and intended for Australian wholesale clients only. The contents of this document is prepared by Mirae Asset Global Investments (HK) Limited and has not been reviewed by the Australian Investments & Securities Commission.
Swiss investors: This document is intended for Professional Investors only. This is an advertising document. The Swiss Representative is 1741 Fund Solutions AG, Burggraben 16, CH-9000 St. Gallen. The Swiss Paying Agent is Tellco AG, Bahnhofstrasse 4, CH-6431 Schwyz. The Prospectus and the Supplements of the Funds, the KI(I)Ds, the Memorandum and Articles of Association as well as the annual and interim reports of the Company are available free of charge from the Swiss Representative.
UK investors: This document is intended for Professional Investors only. The Company is a Luxembourg registered UCITS, recognised in the UK under section 264 of the Financial Services and Markets Act 2000. Compensation from the UK Financial Services Compensation Scheme will not be available in respect of the Fund. The taxation position affecting UK investors is outlined in the Prospectus. This document has been approved for issue in the United Kingdom by Mirae Asset Global Investments (UK) Ltd, a company incorporated in England & Wales with registered number 06044802, and having its registered office at 4th Floor, 4-6 Royal Exchange Buildings, London EC3V 3NL, United Kingdom. Mirae Asset Global Investments (UK) Ltd. is authorised and regulated by the Financial Conduct Authority with firm reference number 467535.
Copyright 2024. All rights reserved. No part of this document may be reproduced in any form, or referred to in any other publication, without express written permission of Mirae Asset Global Investments (Hong Kong) Limited.