In a recent interview with the South China Morning Post, Jeremy Allaire, Circle CEO, the company behind the USD Coin stablecoin, expressed his belief that stablecoins could play a significant role in promoting China’s Digital Yuan. While China has imposed strict regulations on decentralized cryptocurrencies, Allaire suggested that a yuan-based stablecoin could be the most effective method for increasing the adoption of China’s national currency.
Allaire stated, “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 has been actively pursuing the development and implementation of its Digital Yuan, also known as the central bank digital currency (CBDC). In 2021, the country cracked down on the use of cryptocurrencies while simultaneously making progress with the digital yuan project. As of January 2023, the Chinese government reported that around 13 billion digital yuan were in circulation.
Interestingly, the official website for the Digital Yuan claims that the currency will replace the US dollar, Tether, and other stablecoins. However, it also clarifies that the CBDC itself will not function as a stablecoin. The website offers users the option to exchange their cryptocurrencies for digital yuan through MetaMask or the platform’s own conversion portal.
Allaire acknowledged that China is unlikely to embrace decentralized cryptocurrencies fully, but he pointed out that Hong Kong’s positive stance on the crypto industry could indicate subtle support from the mainland. The progressive attitude of Hong Kong towards cryptocurrencies might reflect a more open approach within the region.
Circle CEO Weighs in on CBDCs, Emphasizes Distinction from Decentralized Systems
In a recent statement, Circle CEO shared his perspective on the growing trend of governments and central banks worldwide adopting Central Bank Digital Currencies (CBDCs). While applauding the shift towards modern distributed ledger technology, he cautioned against interpreting it as an embrace of decentralized and self-sovereign systems.
During a conference, Circle CEO stated, “Moves by various governments and central banks to develop CBDCs that utilize more modern distributed ledger technology are undoubtedly positive. However, it is crucial to recognize that this differs significantly from the innovative work conducted by the private sector on the public internet.”
The Circle CEO’s remarks highlight the distinction between CBDCs and the advancements made by private companies in decentralized systems. While CBDCs may leverage distributed ledger technology, they remain under the control and jurisdiction of the respective central authorities.
Meanwhile, the digital yuan, China’s CBDC, continues to expand its presence beyond national borders. DBS, a Singapore-based bank known for its crypto-friendly stance, has introduced a digital yuan merchant solution. This solution enables Chinese businesses to accept payments in the digital yuan.
The merchant solution offered by DBS permits clients based in mainland China to receive and collect digital yuan payments, with the settlements seamlessly transferred to their yuan-denominated bank accounts. This development further facilitates the cross-border circulation of China’s CBDC, supporting its adoption in international transactions.