Circle CEO Jeremy Allaire touted the advantages of stablecoins over central bank digital currencies (CBDCs) in an interview with the South China Morning Post.
Circle CEO Jeremy Allaire recently told the South China Morning Post that Beijing should consider allowing yuan-backed stablecoins if it wants to internationalize its currency.
“If the Chinese government ultimately wants to see the yuan used more freely in trade and commerce around the world, a stablecoin may be a better way to achieve that goal than a central bank digital currency,” he told the newspaper.
Although Allaire believes that stablecoins are a better option than CBDCs, he said the two are complementary. “If central banks are going to upgrade their systems and move from legacy technology to more modern distributed ledger technology, that’s great,” he told the South China Morning Post. “There are a lot of useful things about that, but I think it’s very different from the innovative work that the private sector is doing on the public internet.”
Chinese authorities would be hesitant to approve such a plan, as capital controls and a ban on the free convertibility of the yuan are pillars of their economic policy. In 2022, IMF First Deputy Managing Director Gita Gopinath said that if China wanted to challenge the dollar, it would need to open up its capital markets and allow full currency convertibility.
Other stakeholders point out that China would rather keep these rules than allow free convertibility and a real challenge to the dollar’s dominance.
“I think there will be incremental steps to use the yuan more to denominate China’s trade with commodity exporters,” Brad Setser, a former senior adviser to the U.S. Trade Representative during the Biden administration, told Foreign Policy. “And then I think China will find it very difficult to completely go further and really fundamentally change the structure of how it settles trade.”