An independent researcher from the People’s Bank of China (PBoC) argued that China must increase its research efforts in the stablecoin space and support upcoming companies that are exploring a yuan-pegged cryptocurrency.
YuanCoin to Arrive?
The views were written in an op-ed piece published on Oct. 9 by CN Finance, a magazine wholly-owned by PBoC, and written by Li Liangsong, a researcher at the bank.
Titled “A Brief Analysis of Stablecoins,” the report points out the recent launches of stablecoins like Paxos Standard and Gemini Dollar, which are pegged to the U.S. dollar and have shown great promise as a concept. Also, Liangsong observed the two crypto-products were regulated by authorities, signaling a shift in how cryptocurrencies are perceived.
The report expresses caution over the global implications of a USD-pegged stablecoin, arguing it could increase the dominance of the dollar in the global economy and have an adverse effect on fiat currencies issued by other major economies.
Liangsong highlighted the need to “double down” on stablecoin research and development efforts if their USD counterparts show promise, are recognized and prove their use in the traditional economy. He adds China should support domestic institutions, presumably Chinese crypto startups, to develop and issue yuan-pegged stablecoins.
Economic Implications Considered
The report pointed out stablecoin could present a threat to central institutions if they scale as much as fiat currencies. In the authors’ opinion, fiat currency could back stablecoins as collateral, instead of oil and gold, and never end up in the market circulation. Such a development could “limit the role of central banks in payment settlements and monetary policies.”
The report added:
“The evolution of this monetary system will likely be eventually achieved by a central bank-issued fiat digital currency.”
Taking his chance at the report’s suggestions, Star Xu, founder of OKEx –the world’s third-largest crypto-exchange by daily traded volume, stated on a Weibo post that his company is open to issuing a regulated stablecoin. However, Xu did not mention if the coin will be collateralized by the yuan while stressing the exchange’s U.S. subsidiary, OKCoin U.S. would carry out this development.
But, he believes the “trend of issuing a Chinese yuan stablecoin is inevitable. And OKCoin USA will participate in rolling out a regulated stablecoin.”
Meanwhile, authors of yuan-stablecoin story doused any optimistic rumors but pointing out there’s a long time to endure before a crypto-stablecoin becomes a prominent feature of the global economy.
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