As Washington rolls out stablecoin rules, voices in Beijing are warning that it's time to catch up or risk being left behind.
Beijing may finally be warming up to stablecoins, but not without hesitation. In a sign that China may be reconsidering its digital currency strategy, the South China Morning Post reported that a state media article published this week urged policymakers to stop delaying and focus on "adapting to the trend of stablecoins," referring to the article published by the Securities Times, a financial publication affiliated with the People's Daily.
The article called on Chinese authorities to begin developing yuan-backed stablecoins and establishing regulations, as the United States has just passed a stablecoin bill, giving regulators the green light to issue dollar-pegged digital currencies.
Chinese analysts and officials appear concerned that this US precedence could deepen the US dollar's dominance in digital trade and put the yuan at a disadvantage.
The article described stablecoins as an "emerging payment instrument," and while they pose risks, they offer numerous advantages that cannot be ignored. Citing a broad consensus among industry experts, the article added, "RMB-backed stablecoins should be developed sooner rather than later."
No direct competition
This is precisely what worries China. The Securities Times reported: "For China, which is promoting the global use of the yuan, proactive regulation of stablecoins, thus facilitating its internationalization, may be the best solution."
The article joins a wave of voices urging Beijing to take action in recent months, particularly as trade tensions with Washington continue to escalate.
Liu Xiaochun, deputy director of the Shanghai Institute of Finance, told the newspaper that yuan-based stablecoins could help China balance innovation and financial security. However, he reportedly stressed the need not to attempt to "compete directly" with dollar-backed currencies. Instead, the focus should be on "supporting emerging economies" and expanding the use of the yuan in a more regulated manner.
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Meanwhile, Hong Kong has already taken a step forward. It is scheduled to launch a licensing system for stablecoin issuers in August. However, on the mainland, cryptocurrency trading remains prohibited, and regulators have shown little interest in changing this anytime soon.
In contrast, the United States is moving forward. Last week, the Senate passed the GENIUS Act, a bill that establishes the ground rules for issuing stablecoins, requiring reserves and compliance with anti-money laundering laws. The vote received bipartisan support, although some Democrats, including Senator Elizabeth Warren, warned that the bill is too lenient on potential conflicts of interest, particularly those related to Trump's cryptocurrency projects.
Growing concerns
However, voices in the cryptocurrency industry welcomed the move. In support of the Genius Act, Christian Catalini, founder of the Cryptoeconomics Lab at MIT, told ABC News that it "opens the door wide" to competition and innovation, with consumers seeing real benefits.
Analysts at China International Capital did not overlook the ramifications of this decision. In a note issued this week, they noted that most stablecoins are still pegged to the US dollar. They wrote that this alone strengthens the dollar's position, reducing costs and facilitating dollar transactions, which in turn encourages increased use of the US currency internationally.
The China International Capital note noted that the growing popularity of these digital dollars could increase global demand for US Treasuries. However, they also pointed to potential downsides: rising geopolitical tensions and concerns about US debt levels could eventually undermine confidence in the dollar. This could present an opportunity for other digital currencies, including perhaps a yuan-backed stablecoin.
Zhou Xiaochuan, former governor of the People's Bank of China, expressed this concern last week at the Lujiazui Forum in Shanghai. He warned that the rise of stablecoins could accelerate the "dollarization" of parts of the global economy.
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