Circle CEO Jeremy Allaire recently suggested that Beijing should consider the option of permitting Chinese Yuan (CNY)-backed stablecoins to facilitate the internationalization of its currency.
Circle CEO Allaire Proposes Yuan-Backed Stablecoins as a Viable Option Over CBDCs in China
In an interview with the South China Morning Post, Allaire expressed the view that stablecoins could be a more effective means than central bank digital currencies (CBDCs) to promote the broader usage of the RMB in global trade and commerce.
Allaire emphasized that while he considers stablecoins to be a superior choice, he believes they can work in tandem with CBDCs. He acknowledged the importance of central banks upgrading their systems using modern distributed ledger technology but distinguished this from the private sector’s role in innovating on the public internet.
Despite Allaire’s proposition, it is anticipated that Chinese authorities would approach such a plan with caution, as capital controls and restrictions on yuan convertibility are fundamental aspects of China’s economic policy. In 2022, the International Monetary Fund’s First Deputy Managing Director, Gita Gopinath, highlighted that for China to challenge the dominance of the US dollar, it would need to open its capital markets and allow for full currency convertibility.
Other experts have also observed that China is likely to maintain its existing regulations rather than pursue complete convertibility or challenge the dollar’s position. Brad Setser, a former senior advisor to the US trade representative during the Biden administration, predicted that China may gradually increase the use of the yuan in trade with commodity-exporting nations but might encounter challenges in significantly altering its trade settlement structure.
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