Content organized by: Peter_Techub News
At the Beijing Forum held on July 10, Wang Yongli, former vice president and executive director of the Bank of China, and co-chairman of China Information Service Group, delivered a speech titled 'Insights on the Development and Regulation of Dollar Stablecoins.' He deeply analyzed the rise and development of dollar stablecoins and their impact on the global financial system, and combined with the current situation of the digital renminbi, proposed that China should accelerate technological innovation, adjust policies, and strengthen regulation to seize the high ground in global digital currency competition. The following is a summary of the core content of the speech.
I. The Rise and Challenges of Dollar Stablecoins
Wang Yongli reviewed the development history of cryptocurrencies and stablecoins. The publication of the Bitcoin white paper in 2008 and the birth of the first Bitcoin block in 2009 marked the beginning of the cryptocurrency era. In 2013, Ethereum launched, promoting ICO (Initial Coin Offering) through smart contracts and the ERC-20 protocol, greatly enhancing the prosperity of the crypto asset market. The price of Bitcoin surged from over $200 in early 2013 to $1300, attracting global attention to blockchain and cryptocurrencies. However, the price of cryptocurrencies is highly volatile and difficult to serve as a stable measure of value, which led to the emergence of stablecoins pegged to the dollar (such as USDT). USDT's white paper was published at the end of 2014, and it officially launched in 2015, relying on public blockchain technology to build a global, 24/7 uninterrupted payment and settlement system, contrasting sharply with the traditional bank-dominated SWIFT system.
The emergence of stablecoins has driven the rapid development of the crypto asset market, and the development of the crypto asset market has in turn promoted the continuous expansion of stablecoins. USDT and USDC (a dollar stablecoin regulated in the U.S.) launched in 2018 dominate the market, with over 99% of stablecoins pegged to fiat currencies, of which dollar stablecoins hold an absolute advantage. Wang Yongli pointed out that the success of dollar stablecoins benefits from the dollar's status as a global reserve currency, but its decentralized features have also led to regulatory gaps. For example, the reserve transparency issue of USDT has sparked controversy, and the turbulence in the crypto market from 2022 to 2023 (such as the collapse of FTX) caused some stablecoins to decouple from the dollar, highlighting the importance of strengthening regulation.
The rapid development of dollar stablecoins poses a challenge to the internationalization of the digital renminbi. Wang Yongli emphasized that if the digital renminbi cannot compete with dollar stablecoins in terms of payment efficiency and settlement costs, its internationalization process will be limited. Especially after Trump was elected as President of the United States, his supportive stance on crypto assets and stablecoins further accelerated the development of dollar stablecoins, impacting the global financial system.
II. Global Trends and Changes in Stablecoin Regulation
Wang Yongli pointed out that incorporating stablecoins into regulation has become a global trend. The United States, the European Union, and Hong Kong are accelerating relevant legislative and regulatory work, and China also needs to formulate corresponding policies as soon as possible. The stablecoins that are brought under regulation will undergo essential changes, primarily reflected in the following aspects:
Strict compliance requirements: The issuance of stablecoins must obtain a license and comply with regulatory requirements such as KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter Financing of Terrorism). The highly anonymous decentralized features will be significantly weakened, and the degree of centralized management will be strengthened.
Sufficient reserves and transparency: Regulations require stablecoins to have 100% sufficient reserves. Reserve assets must be entrusted to a third party, undergo independent audits monthly, and publish audit results. It is prohibited to overissue stablecoins through credit or to use reserve assets for collateral.
Functional limitations: Stablecoins are positioned as payment tools, not as investment or speculative targets, and must not pay interest or returns to holders. They serve only as supplementary tools in specific fields, similar to tokens within a business circle (such as shopping vouchers or points).
Wang Yongli emphasized that regulated stablecoins will lose some decentralization advantages, and market competition will become more intense. Although USDT has gained substantial profits due to its first-mover advantage, its market share may gradually be divided as more stablecoins emerge. Furthermore, the regulation of stablecoins needs to be coordinated with the regulation of cryptocurrency trading platforms and fiat currency exchange, and global coordination is crucial, otherwise, it may trigger financial risks.
III. Opportunities and Innovation Directions for Digital Renminbi
Wang Yongli believes that stablecoins are merely a transitional form in the process of currency digitization, and the digital renminbi represents the future development direction. China is in a leading position in the field of central bank digital currency (CBDC), but compared to dollar stablecoins, the digital renminbi still has gaps in internationalization influence and technical systems. He proposed the following suggestions:
Learn from stablecoin technology: The digital renminbi should adopt the public blockchain technology and global payment settlement model of stablecoins to improve payment efficiency and reduce settlement costs. Currently, the digital renminbi is positioned as M0 (cash in circulation), replacing less than 3% of the total money supply, with limited functionality. In the future, it should be expanded to a comprehensive digitalization of the renminbi, replacing all substitutable forms of currency.
Adjust policies and pilot programs: The cryptocurrency field is a key area of major power competition, and China needs to adjust its policies on crypto assets and stablecoins. It can conduct pilot programs through Hong Kong, issuing offshore renminbi stablecoins, but must ensure strict regulation by China. The domestic and overseas versions of the digital renminbi should be designed separately to meet international needs.
Accelerate legislation and supporting construction: China needs to speed up legislation and regulatory work on stablecoins and crypto assets to build a safe and controllable digital currency ecosystem. At the same time, it should integrate the digital identity authentication system promoted by the Ministry of Public Security (such as network numbers and online certificates) to form a synergistic advantage between the digital renminbi and digital identity.
Seize strategic opportunities: Trump's opposition to the digital dollar has provided China with a window of opportunity. If China can be the first to launch a technologically advanced digital renminbi, it will occupy a leading position in the global digital currency competition and significantly enhance the internationalization level of the renminbi.
IV. Theoretical Reflection and the Essence of Currency
Wang Yongli explored the relationship between stablecoins and the essence of currency from a theoretical perspective. He pointed out that currency is a measure of value, a medium of exchange, and a value certificate in circulation, and its core attributes do not rely on specific physical or tangible carriers. The forms of currency have evolved from shells, metals, and paper money to digitalization (such as cryptocurrency in accounts and wallets), continuously evolving to improve efficiency, reduce costs, and strengthen risk control. Stablecoins, as tokens of legal currency, only play an auxiliary role in specific fields and cannot replace legal currency.
He further analyzed that the international influence of dollar stablecoins exceeds that of many countries' CBDCs, due to their flexible global payment system and market mechanism. The digital renminbi needs to break through the limitations of the existing system, adopt public chain technology similar to stablecoins, and achieve low-cost payments that are point-to-point and borderless. At the same time, stablecoins and digital currencies issued by multiple countries will trigger international competition, requiring global regulatory coordination to prevent risks.
Conclusion
Wang Yongli finally emphasized that the rapid development of the crypto field is a significant opportunity and challenge facing the global financial system. The success of dollar stablecoins provides a reference direction for the digital renminbi, but its decentralized characteristics will gradually weaken under regulation. China should seize the opportunity presented by the U.S. postponing the digital dollar and accelerate the technological innovation and internationalization process of the digital renminbi, integrating the digital identity system to build a globally leading digital currency ecosystem. This not only concerns the internationalization of the renminbi but is also a strategic need for China to seize the high ground in global digital economy competition.
By learning from the model of stablecoins, adjusting policies, and strengthening regulation, the digital renminbi is expected to achieve breakthroughs on the global digital currency stage, injecting new momentum into the internationalization of the renminbi.
