Although China has prohibited the use of cryptocurrencies, stablecoins may play a role in the expansion of its national currency.Despite China’s ban on decentralised cryptocurrencies, Circle CEO Jeremy Allaire believes stablecoins can help China’s digital yuan spread.
Allaire, the CEO of the company behind the USD-backed stablecoin In a recent interview with the South China Morning Post, Coin indicated that a yuan-based stablecoin could be China’s best shot for encouraging the adoption of its national currency.
“If eventually the Chinese government wants to see the RMB [yuan] used more freely in trade and commerce around the world, it may be that stablecoins are the path to do that more than the central bank digital currency.”
China pushed down on cryptocurrency use in 2021, while also paving the way for the trial, testing, and issuance of its digital yuan central bank digital currency (CBDC). The Chinese government reported that approximately 13 billion digital yuan were in circulation as of January 2023.
Interestingly, the digital yuan website promises that the currency would replace the dollar, Tether, and all other stablecoins, while also stating that the CBDC will not be a stablecoin. The website allows users to swap cryptocurrencies for digital yuan using MetaMask or its own conversion gateway.
Allaire acknowledged that China is unlikely to warm to the use of decentralised cryptocurrency and suggested that Hong Kong’s progressive approach towards the crypto sector could imply covert support from the mainland.
The Circle CEO also stated that while moves by various governments and central banks around the world to develop CBDCs that move away from “legacy technology into more modern distributed ledger technology” are positive, they should not be misconstrued as a move towards accepting decentralised and self-sovereign systems:
“There’s a whole bunch of things that are useful from that, but I view that as very different from the work that the private sector does to innovate on the public internet.” Nonetheless, the digital yuan is crossing Chinese borders. As previously reported by Cointelegraph, Singapore-based cryptocurrency-friendly bank DBS has built a digital yuan merchant solution that allows Chinese enterprises to accept CBDC payments.
Clients in mainland China can use the service to receive or collect digital yuan and have payments processed straight to their yuan-based bank accounts.