Stablecoin or CBDC: Circle CEO Proposes Better Alternative for China

Demand for CBDCs continues to soar as many countries roll out their CBDCs. According to the Atlantic Council, a CBDC tracker, 130 countries are exploring CBDCs, while 19 of the G20 countries are at an advanced stage. While these countries are still in the process, China is one of 11 countries that have fully launched.

China started CBDC testing in April 2020, and the government first focused on four cities: Chengdu, Shenzhen, Suzhou, and Xiongan. Later, the digital yuan pilot program expanded to other cities and even spread to the top 5 largest regions.

Since then, there has been an impressive adoption of CBDC, e-RMB, or e-RMB, driven by China’s efforts. But recently, the CEO of Circle said that China needs a yuan-backed stablecoin more than a central bank digital currency.

CNY-Backed Stablecoins Can Accelerate Chinese Currency Globalization More Than CBDC, Jeremy Allaire

Circle is the cryptocurrency company behind the dollar-pegged USDC stablecoin. The company’s CEO, Jeremy Allaire, was interviewed by the South China Morning Post in which he suggested that China use a stablecoin instead of a CBDC.

“If the Chinese government ultimately wants to see the renminbi used more freely in trade and commerce around the world, a stablecoin might do that better than a central bank digital currency,” Allaire said in an interview.

Allaire said the use of a stablecoin pegged to the Chinese offshore yuan (CNH) would increase the currency's use in global commerce and trade. Allaire also noted that mainland China may be skeptical about fully embracing the cryptocurrency industry, which would make his proposal difficult to implement.

Regarding the full adoption of digital assets in Hong Kong, Allaire said: "The reality is that other major financial markets around the world are also embracing digital assets, and the world's largest financial institutions are also embracing digital assets. Therefore, for Hong Kong to play a role, it must be like this." Do."

Allaire also spoke about how stablecoins perform when many countries launch central bank digital currencies. Private stablecoins drive innovation, and CBDCs are just complementary, the CEO said.

Allaire added, “It would be great if central banks were to upgrade their systems from traditional technology to more modern distributed ledger technology.”

Circle’s stablecoin USDC is currently hovering around $1 on the daily chart. | Source: USDCUSD Price Chart via TradingView.com

Hong Kong Plans to Regulate Stablecoins

The Circle CEO also pointed to Hong Kong regulators’ efforts to regulate the stablecoin industry. Additionally, the Hong Kong Monetary Authority (HKMA) has launched plans to introduce stablecoin regulation by 2024.

Also, during the China Conference: Hong Kong Forum, the Secretary for Financial Services and the Treasury, Mr Hui Chengyu, reiterated his commitment to roll out the regulation.

Hong Kong’s Securities and Futures Commission has also begun developing a supplementary regulatory framework for stablecoins, the South China Morning Post reported.

Finally, there is still hope for the development of Web3 in the Hong Kong Special Administrative Region. Notably, the Hong Kong government announced on June 30 the formation of a working group to provide recommendations for forays into the Web3 space.