Summary
- Sources report that China is considering ways to permit the use of yuan-backed stablecoins.
- It was revealed that there is a possibility that Chinese authorities could change their long-standing policy banning digital assets.
- Alongside the bullish outlook for the global stablecoin market, China's moves are expected to send important signals to investors.
Expectation for Approval of Stablecoin Use After SCO Meeting at the End of This Month
Likely Shift in Policy Banning Cryptocurrency Trading and Mining
China is reportedly considering allowing the use of yuan-backed stablecoins to expand global yuan adoption. This marks a significant change in China's stance on digital assets.
According to Reuters on the 20th (local time), the State Council of China is expected to discuss ways to expand the use of the yuan and stablecoins for cross-border trade and payments with certain countries at the Shanghai Cooperation Organization (SCO) summit in Tianjin at the end of this month, sources say.
If China approves the use of stablecoins, it would signal a major shift in the country's approach to digital assets. China had banned cryptocurrency trading and mining in 2021 over concerns regarding financial system stability.
The source noted that Chinese authorities see financial innovation, especially stablecoins, as a promising tool for the internationalization of the yuan. The details of this plan are expected to be released in the coming weeks, and Chinese regulatory authorities, including the People's Bank of China (PBOC), are expected to be tasked with implementation, the source added.
China wants the yuan to gain international currency status, but strict capital controls and annual trade surpluses amounting to trillions of dollars present obstacles to internationalization. Market participants say these limitations are likely to also be a major hurdle for stablecoin development.
According to the Bank for International Settlements, stablecoins backed by the United States Dollar (USD) currently account for more than 99% of the global stablecoin supply.
South Korea has also pledged to allow companies to introduce won-based stablecoins and develop the necessary infrastructure, with similar initiatives underway in Japan.
A stablecoin is a type of cryptocurrency designed to maintain a stable value, typically pegged to fiat currencies such as the United States Dollar (USD), and is often used by crypto investors to transfer funds between tokens.
According to payment platform SWIFT, as of June, the yuan's share in global settlement currency usage is only 2.88%. The United States Dollar (USD) holds a 47.19% market share.
Last month, Shanghai regulators announced they held a meeting of local government officials to consider strategic responses to stablecoins and digital currency.
In a recent interview, Huang Yiping, an advisor to the People's Bank of China (PBOC), suggested that an offshore yuan stablecoin could be launched in Hong Kong.
Hong Kong's long-awaited stablecoin legislation took effect on August 1. Shanghai, China's financial hub, is also setting up an international operations center for digital yuan.
According to sources, Hong Kong and Shanghai are expected to be the first cities in China to implement stablecoin-related plans quickly.
According to cryptocurrency data provider CoinGecko, the global stablecoin market is currently valued at only about $247 billion. However, Standard Chartered Bank expects it will grow to as much as $2 trillion by 2028.
Contributed by Jeong-ah Kim, kja@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
