The US Dollar Stablecoin is not legal tender in the United States and lacks assurance from national credit.

Global Chief Economist Guan Tao emphasizes the need to be cautious with stablecoins, while affirming that China has forms of assets similar to stablecoins recognized by law.

MAIN CONTENT

  • The US Dollar Stablecoin is not recognized as official currency in the United States.

  • China possesses 'quasi-stablecoins' such as the Hong Kong Dollar and deposits from WeChat and Alipay wallets guaranteed by the Central Bank of China.

  • Strict regulations on stablecoins may weaken initial advantages and lead to market monopoly.

Is the US Dollar Stablecoin legal tender in the United States?

According to Mr. Guan Tao, global chief economist of BOC Securities, the US Dollar Stablecoin is not considered legal tender and lacks assurance from national credit. He emphasizes choosing a "wait-and-see" approach rather than rushing to invest in stablecoins.

Mr. Guan Tao stated: "The US Dollar Stablecoin is not recognized by the US government and thus lacks backing from sovereign credit sources. Therefore, the stability and legality of stablecoins remain a carefully considered issue."

Why do stablecoins lack backing from national credit?

Although stablecoins are pegged to fiat currencies like the US Dollar, they are not directly backed by a central bank or government. Unlike legal tender, stablecoins depend on the reserves of the issuing organization, which does not have sufficient credibility to ensure long-term value like traditional currencies.

What forms of assets similar to stablecoins does China have?

China currently possesses assets similar to stablecoins in practice, such as the Hong Kong Dollar issued by three local currency issuing banks, pegged at an exchange rate of 1 US Dollar = 7.8 Hong Kong Dollars.

Mr. Guan Tao mentioned that this component is quite different in interoperability compared to many stablecoins on the market as all Hong Kong Dollars are fully compatible and not distinguished by the issuing bank.

"China has formed official 'quasi-stablecoin' asset types such as the Hong Kong Dollar and reserve deposits from WeChat and Alipay wallets managed by the Central Bank on a 1:1 basis."

Guan Tao, Global Chief Economist of BOC Securities, CMF Seminar, July 2023.

How are cryptocurrency wallets in China’s ecosystem backed?

Customer funds from e-wallets like WeChat and Alipay are fully entrusted to the People's Bank of China, creating a guarantee mechanism similar to a 1:1 stablecoin issuance, ensuring safety and transparency in transactions.

What is the impact of bringing stablecoins into the legal framework?

Mr. Guan Tao warns that viewing stablecoins as real currency and tightening regulations will reduce initial advantages, leading to a monopoly trend in the alternative currency market.

The transition of stablecoins into official currency may drastically reduce the number of issuers, creating unfair competition and difficulties in maintaining profits.

"When stablecoins are understood as real currency and are subject to strict regulations, smaller issuers will struggle to survive, facilitating market monopoly in the currency space."

Guan Tao, Global Chief Economist BOC Securities, 2023.

What is the reason behind the monopoly trend when stablecoins are strictly regulated?

Any currency with an equivalent role will lead to the dominance of a few large corporations, making it difficult for most other stablecoin issuers to compete in liquidity and financial credibility. These factors reduce diversity and choice for users.

Frequently Asked Questions

Is stablecoin legal tender in the United States?

No, the US Dollar Stablecoin is not recognized by the US government as legal tender and lacks assurance from national credit.

What forms of stablecoins recognized by law does China have?

China owns assets similar to stablecoins such as the Hong Kong Dollar issued by local banks and deposits in WeChat and Alipay wallets guaranteed by the Central Bank.

How does strict regulation of stablecoins affect them?

Strict regulations may reduce the initial advantages of stablecoins and lead to the dominance of a few large issuers in the market.

Why is the lack of assurance from national credit important for stablecoins?

Lack of backing from a central bank or government makes stablecoins more volatile and risky than legal tender.

Are the deposits in Chinese wallets protected?

The deposits in WeChat and Alipay wallets are entrusted 1:1 to the People's Bank of China, ensuring safety and transparency.

Source: https://tintucbitcoin.com/stablecoin-trung-quoc-gan-nhu-on-dinh/

Thank you for reading this article!

Please Like, Comment, and Follow TinTucBitcoin to stay updated on the latest news in the cryptocurrency market and not miss any important information!