By Brenda Collins
China is arguably at the forefront of Central Bank Digital currency development as reports showed that the country has been executing several pilot projects for its proposed digital yuan. However, the Circle CEO thinks Yuan-based stablecoin is preferable to digital yuan.
According to the report, Jeremy Allaire, the chief executive officer and co-founder of USDC issuer, Circle Financial, recently urged the Chinese government to consider adopting Yuan-based stablecoin rather than CBDC.
The advice reportedly surfaced during a recent interview the CEO had with the South China Morning Post at a time when China continues to show great effort to build its CBDC, digital yuan.
During his speech, Allaire pointed out some of the benefits the proposed yuan-based stablecoins could offer the international trade and commerce of the country.
He said stablecoins could help China authorities to facilitate the global adoption of the yuan. Although he admitted that CBDCs complement Stablecoins and vice versa, he, however, claimed that stablecoins offer unique benefits than CBDCs.
In addition, the CEO said if the country’s government wants its currency to be used more frequently in global trade and commerce, stablecoins are the best way to achieve that goal and not CBDC.
Stringent Yuan Convertibility Rules Restricts Its Global Adoption
Furthermore, he continued that stablecoins have the unique ability to maintain the component and stability of a traditional currency while simultaneously offering the basic benefits of digital assets.
Also, China would be able to improve its currency’s global usability and promote seamless international transactions by leveraging the stablecoins backed by yuan, according to the CEO of Circle.
Although Jeremy Allaire provides a potential alternative to central bank-issued digital currencies, it is, however, important to highlight the challenges that accompany adopting the use of stablecoins in China.
The major issue is that China currently has an active economic policy that strictly prohibits the conversion of the yuan. As such, experts deduced that the country most likely wants its restrictions and rules regarding the fiat currency to remain firm instead of pursuing total currency convertibility which would call for a significant level of changes to the country’s transaction settlement method.
In addition, Allaire’s suggestion pointed out that stablecoins and CBDC have a complementary nature. He added that if local banks integrate blockchain tech into their banking system, they would receive a lot of benefits from the action.
Furthermore, the CEO mentioned the difference between the role of central banks in issuing CBDCs and the innovative work on the internet managed by his private sector.
Despite China’s Ban, Hong Kong Continues To Embrace Crypto Tech
Allaire suggested that it would be a great idea if central banks would adopt a more trendy decentralized ledger innovation to replace their existing legacy technology system.
He said the Central banks would benefit a lot from that. However, he admitted that the private sector applies a unique effort different from what the authorities do to build on the public platform.
Arguably, China is one of the leading countries in Asia and across the world regarding the development of central bank digital currency. The nation has reportedly carried out a lot of pilot schemes and trials to ascertain the use cases of the proposed digital yuan.
According to the report, the Chinese government aims to create a centralized virtual currency that would improve financial inclusion, enhance transaction payment efficiency and facilitate general regulatory control.
Meanwhile, in 2021, China placed a ban on its citizens to prevent them from venturing into any activities or business that is related to cryptocurrency.
Currently, the mainland in the country maintains the strict stance of the regulators against the rapidly growing crypto industry. They refuse to open up the market for crypto activities.
However, the Hong Kong government is reportedly positive on crypto and bent on developing a global hub for web3 and crypto technology. Allaire also revealed that the monetary regulators of Hong are planning to regulate stablecoins too.
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