The popularization of stablecoins in China is expected to have no significant impact on existing payment services like WeChat Pay due to the superiority of the domestic payment system.

The domestic payment mechanism based on the "quasi-stablecoin" pegged to the Renminbi with very low costs helps maintain stability and is more efficient than international payment platforms. Meanwhile, Internet companies are actively developing stablecoins to tap into the cross-border payment market.

MAIN CONTENT

  • China's domestic payment system maintains efficiency thanks to the "quasi-stablecoin" mechanism pegged to the Renminbi and optimal costs.

  • New stablecoins have limited impact on current payment services but are expected to grow significantly in the cross-border payment field.

  • Internet companies hold a significant advantage in applying stablecoins due to user numbers, technological capabilities, and interconnected ecosystems.

What impact do stablecoins have on the current payment system in China?

Based on the CICC research report published in July 2023, popular stablecoins will not cause significant fluctuations for payment platforms like WeChat Pay. The domestic payment system is built on the "quasi-stablecoin" mechanism pegged to the Renminbi and legal reserves, maintaining stability in transactions with very low fees - only a few basis points.

This increases competitiveness compared to foreign platforms with higher fees from a few percent, ensuring users have a fast, cheap, and stable payment experience. Therefore, the need for independent stablecoins domestically is unnecessary, limiting the impact on existing payment services.

How do Internet companies leverage stablecoins in cross-border payments?

Internet businesses in China are actively deploying stablecoins to optimize international payments, especially in cross-border e-commerce. According to analyses, they have a significant advantage in three critical areas.

  • Diverse user scenarios: Platforms like Amazon have hundreds of millions of users with a complete payment ecosystem, easily promoting the adoption of stablecoins in global transactions.

  • Technological capabilities: Internet companies have strong development teams ready to leverage blockchain and stablecoins to enhance payment efficiency.

  • Ecosystem network effects: The closely linked model between B-end (supply chain) and C-end (retail payments) helps create a closed loop, increasing the attractiveness and utility of stablecoins.

"Internet companies represent the new frontier for stablecoin adoption due to their extensive user bases and technological prowess, positioning them well to lead cross-border payment innovation."
Quote from the Blockchain Technology Director, Chinese Financial Research Company, 2023

Why is the "quasi-stablecoin" domestic mechanism more effective than traditional stablecoins?

Unlike independent stablecoins, "quasi-stablecoins" in China's domestic payment system are directly pegged to the Renminbi and secured by legal reserves, ensuring higher stability. Transaction fees are only a few basis points, significantly lower than the few percent of many foreign platforms, providing a substantial competitive advantage.

As a result, domestic online payment services and e-wallets benefit from processing speed, low costs, and reduced price volatility risks. This helps them maintain a sustainable position in the Chinese payment market with over 1 billion users today.

How will stablecoins change the cross-border payment market?

According to studies and forecasts from financial experts, stablecoins could create breakthroughs for cross-border payments with the advantages of reducing costs and increasing transaction speeds. Internet companies are building stablecoin-based solutions to serve e-commerce, international remittances, and transnational financial services.

This creates a competitive advantage for platforms in the context of globalization, while leveraging a large user base and an existing closed ecosystem. Stablecoin projects aim to optimize user experience, minimize barriers, and reduce costs for international transactions.

"The future of cross-border payments lies in leveraging Stablecoin integrated with existing e-commerce ecosystems to maximize efficiency and user reach."
Opinion of the Product Development Director, Global Fintech Company, 2023

Comparison table of the pros and cons of domestic payment mechanisms and independent stablecoins

Criteria Domestic "quasi-stablecoin" mechanism Independent stablecoins Pegging Directly pegged to the Renminbi, legally secured Pegged to fiat currency or other assets, more volatility Transaction fees Very low (a few basis points) Usually higher fees, potentially from a few percent and up Stability High, low volatility risks Dependent on reserve control and market Popular applications Domestic payments, large e-wallets Cross-border payments, international e-commerce Technological advantages Stable legal framework, existing payment networks Creative capabilities, integration with open blockchain

Frequently asked questions about the impact of stablecoins in China

Can stablecoins completely replace domestic payment methods? No, stablecoins are still difficult to replace due to the low costs and high stability of the existing "quasi-stablecoin" mechanism. Why are Internet companies focusing on developing stablecoins? They leverage a large user base, blockchain technology, and trade networks to promote cross-border transactions. What advantages do domestic platforms have over foreign stablecoins? The direct peg to the Renminbi and optimal transaction costs are the biggest advantages. What role do stablecoins play in cross-border payments? They help reduce costs, increase transaction speed, and expand the international e-commerce ecosystem. Are stablecoins at risk of high price volatility? Stablecoins pegged to fiat assets have reserve mechanisms designed to minimize price volatility risks.

Source: https://tintucbitcoin.com/stablecoin-loi-the-trien-khai-tren-internet/

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