- Government urged to consider and support Yuan-backed Stablecoins.
- U.S. has approved at least two dollar-pegged Stablecoins.
- Central banks will be in dilemma should Stablecoins finally scale.
A research official from the People’s Bank of China (PBOC) has urged the Chinese government to enhance research efforts on Stablecoins besides backing domestic institutions that issue Yuan-pegged cryptocurrencies.
Banking on Stablecoins
The comments were published on Tuesday, October 9, 2018 copy of the Chinese Central Bank’s own bi-weekly magazine, the CN Finance. The report, titled “A brief analysis of Stablecoins,” is Co-authored by Li Liangsong, a PBoC researcher and a professor from the Fudan University.
The article considered the recent development of Stablecoins globally and especially those that are anchored on the U.S. Dollar besides those that are backed by regulators like the Gemini Dollar (GUSD) and the Paxos Standard.
The Gemini dollar is a Stablecoin designed to offer liquidity for users who plan to send or receive U.S. dollars via the Ethereum blockchain and is strictly pegged to the dollar with the Gemini Trust Company holding U.S. Dollar deposits equivalent to the amount of Gemini tokens in circulation. The Gemini dollar is approved by the New York Department of Financial Services (NYDFS).
Also approved by the NYFDS is the Paxos Standard whose launch was announced last September 10, 2018, and fully backed by the U. S. Dollar. The Paxos, according to the company’s announcement, was already a qualified custodian which means the United States Securities and Exchange Commission (SEC fully regulated and approved it) to hold clients funds.
The Paxos Standard Token is also designed to provide liquidity for investors involved in cryptocurrency trading by offering a “digital alternative to fiat cash” that can avail instant transaction settlements.
The authors of the report contend that the development of the U.S. Dollar-pegged cryptocurrencies will strengthen the dominant role of the U.S. Dollar in the global monetary system but could somehow affect other leading fiat currencies. The report stated:
“If the U.S. dollar-pegged Stablecoins can eventually be widely recognized by the market and can prove their use in the real economy, we should double down on our research efforts [on the issue] and learn from relevant experience to support domestic institutions to issue yuan-pegged crypto Stablecoins.”
Stablecoin Fever Grips the Cryptosphere
The founder of OKCoin Crypto Exchange seemed to echo the same point in a Weibo post saying he believes the “Trend of issuing a Chinese yuan Stablecoin is inevitable. And OKCoin USA will participate in rolling out a regulated Stablecoin.”
The report authors believe the role of central banks will be in a dilemma in the event that the Stablecoins finally scaled since fiat currencies offered by central banks will end up becoming collateral for Stablecoins, limiting the role of central banks.