The Chinese government has announced plans for a major governmental overhaul, which includes the introduction of a new national financial regulator. The move is part of a broader reform agenda for party and state institutions in China. Xi Jinping, China’s President, called for the move earlier. Here’s what we know so far:
- On Tuesday, March 7, the Chinese government announced that it would abolish the China Banking and Insurance Regulatory Commission (CBIRC) and move its responsibilities to a brand new administration. This focus on regulatory responsibilities in a single agency could improve oversight. This way, it would also streamline the financial sector in China.
China’s New Financial Regulator
The new financial regulator will “strengthen institutional supervision, supervision of behaviors and supervision of functions,” according to the plan. It will take over some functions of the central bank and securities regulator. The legislature is set to vote on the plan for institutional reform on Friday, March 10.
Currently, China’s financial industry is mainly under the supervision of the People’s Bank of China (PBOC). However, the CBIRC and the China Securities Regulatory Commission also oversee the financial industry. There was no specific mention of reforms for the crypto industry in the announcement. However, in February, an ex-adviser to the PBOC called upon regulators in Beijing regarding crypto. According to the ex-adviser, the institution should reconsider its harsh ban on crypto. FYI, China banned nearly all crypto transactions in 2021. Nevertheless, the government has been spending millions developing its own central bank digital currency (CBDC), the digital yuan. According to official reports, over 500,000 merchants are using digital yuan throughout China.
Developments in the Digital Yuan
One of the most recent updates on the Digital Yuan project, China’s CBDC pilot, was the incorporation of new smart contract functionality. Additionally, the pilot has new use cases, including buying securities and offline payments. China is also establishing of the National Blockchain Technology Innovation Center in February. Per reports, the NBTIC is a state-supported institution that aims to speed up the country’s industry via blockchain technology.
Ultimately, through the new regulatory framework, China expects to improve oversight and coordination in regulating financial activities. The consolidation of regulatory responsibilities into a single agency is likely to increase efficiency and better coordination.