A potential revolution in the global crypto landscape may be rapidly approaching!
On August 20, Reuters reported that the Chinese government is considering allowing the issuance of RMB-backed stablecoins (CNY-pegged Stablecoin), which may be approved by the State Council as early as this month.
If this news is true, it will undoubtedly be the most significant cryptocurrency news of the year! Because it is not only an important layout for China in the crypto field but will also significantly impact the existing duopoly of US dollar stablecoins (USDT + USDC).
The launch of the RMB stablecoin (provisionally called CNYC) will complement the existing digital RMB (e-CNY) internally and challenge the US dollar stablecoins externally, redefining the rules of the digital financial world. This article will conduct a series of analyses and evaluations around the RMB stablecoin CNYC.
1. CNYC and e-CNY, two sides of the same coin or a rivalry?
Before discussing CNYC, we must clarify its similarities and differences with the existing digital RMB e-CNY. The similarities are very obvious: both are directly linked to the value of the RMB, theoretically allowing for a complete 1:1 fixed exchange; the differences can be summarized in the following aspects:
Differences in issuance entities and nature
e-CNY is the legal digital currency issued by the People's Bank of China, serving as a digital alternative to physical cash (M0), with unlimited legal tender. Like common RMB cash, it is also issued by the central bank and circulated and operated by commercial banks.
CNYC is more likely to follow the current practices in the United States, issued by private institutions or groups (similar to how USDC is issued by Circle), with its value backed by strictly regulated and audited 1:1 reserves of RMB assets to ensure its value stability. However, CNYC will not have unlimited legal tender; its credit relies on the asset reserves and transparency of the issuing entity rather than national credit, which can be seen as a regulated private digital currency.
Differences in technical foundation
e-CNY is built on a centralized technical architecture, using private chain technology rather than decentralized public chains, with all transactions under the supervision of the central bank.
CNYC is more likely to be minted and issued on a public chain that currently has more consensus, allowing for direct integration into the global cryptocurrency ecosystem, achieving seamless connection with existing DeFi protocols, exchanges, etc.
Differences in application scenarios and strategic goals
The main application scenario for e-CNY is small retail payments within the country, intended to enhance payment efficiency and combat money laundering. Although cross-border payment functions were considered during its design, its original intention was never to circulate or trade on public chains.
CNYC, on the other hand, has globalization as its original intention. Its launch will provide a new low-cost and high-efficiency path for RMB internationalization. In cross-border settlements, cryptocurrency investments, and global asset allocation, CNYC will directly compete with US dollar stablecoins.
In short, the digital RMB serves as a 'legal currency' for domestic circulation, while the RMB stablecoin is a 'digital financial asset' aimed at the global market. The launch of both forms a dual-track strategy for RMB in the digital finance sector.
2. How will the RMB stablecoin stir the cryptocurrency market?
If CNYC is officially issued, it will have a profound impact on the global cryptocurrency market, especially on the dominant position of the US dollar stablecoins.
Challenging the dominance of US dollar stablecoins
US dollar stablecoins (USDT and USDC) are currently the absolute dominators of the cryptocurrency market, acting as hard currency in the crypto market, with almost all trading activities, lending, DeFi, etc., relying on them.
The launch of CNYC will provide the crypto market with a credible, regulated, and large-scale non-dollar-denominated stable asset for the first time.
For countries and regions with close trade relations with China or concerns about US dollar hegemony, CNYC presents an attractive alternative. For example, countries along the 'Belt and Road' and some in Latin America and the Middle East can use CNYC for more efficient cross-border trade settlements, freeing themselves from dependence on the traditional US dollar clearing system.
Changing the liquidity of the crypto market
As mentioned above, almost all current cryptocurrency trading pairs are based on US dollar stablecoins, and the launch of CNYC will inevitably give rise to many new trading pairs, such as BTC-CNYC, ETH-CNYC, etc., which will significantly increase market liquidity and trading depth.
At the same time, it will provide a brand new investment channel. For investors wishing to use RMB for investments in the crypto field, there will be no need to go through complex processes to convert RMB to USDT/USDC, significantly reducing transaction costs and compliance risks.
Deep integration of on-chain and off-chain
Traditional cryptocurrencies have relatively weak connections to the real economy, while the launch of CNYC can serve as a bridge between cryptocurrencies and the real economy. It is likely to be used in scenarios such as cross-border e-commerce, supply chain settlements, and resource (such as rare earth) purchases in the future. This not only strengthens the practical application of crypto technology but also creates new use cases for RMB settlements globally.
3. Investment secrets: which listed companies will benefit?
Disclaimer: The author has no holdings or interests with the companies mentioned below and is only appearing as a research subject, not constituting any investment advice, DYOR
If the news about CNYC is ultimately confirmed, related listed companies will face enormous development opportunities and valuation reconstruction.
Strong correlation: directly or indirectly participated in digital currency or blockchain infrastructure construction.
Sifang Jingchuang - 30046-SZ
Hengbao Co., Ltd. - 002104-SZ
Chutianlong - 003003-SZ
BC Technology Group - 0863-HK
Okex Cloud Chain - 1499-HK
Medium correlation: provides core fintech services, and its technical capabilities can be used to build the operation, clearing, and regulatory systems for stablecoins.
Yuxin Technology - 300674-SZ
Zhongjinke Finance - 002657-SZ
Weak correlation: low relevance to crypto, mainly benefiting from macro positive factors.
Lakala - 300773-SZ
New Guodu - 300130-SZ
In summary, the issuance of CNYC is undoubtedly a major milestone for China in the field of digital currency. It will not only become a new force in the global financial system but will also bring a new Eastern gene to the crypto world.
We have reason to believe that the launch of CNYC will inevitably stir up a wave in the crypto market, creating ripples.
