jakiro
Author: Zhang Feng
Recently, discussions among domestic industry, policy circles and academia have heated up around the supervision and development path of stablecoins.Wang Yongli, the former deputy governor of the Bank of China, publicly stated that China should be wary of the risks of stablecoins, emphasizing that “it is not appropriate to vigorously develop stablecoins linked to legal currencies.”, whose views attracted attention in the industry.
Today, as the global digital currency competition is accelerating, if we only understand stablecoins from the single dimension of risk prevention and control, we may miss a key strategic window.Based on the spirit of the recent virtual currency work coordination meeting of 13 ministries and commissions and related policy logic, China’s thinking on the issue of stable currency may require a more comprehensive, more flexible, and more forward-looking vision.
1. Space for developing non-US dollar stablecoins: Focusing on ecology, China still has advantages
Wang Yongli believes that,The stablecoin market has been dominated by U.S. dollar stablecoins, and there is limited space for the development of non-U.S. dollar stablecoins..But this judgment ignores the “ecological attributes” of stablecoins.The value of stablecoins lies not only in the stability of its anchoring to a certain legal currency, but also in the payment scenarios, financial infrastructure and business ecology on which it relies.
China has the world’s most complete manufacturing supply chain, largest e-commerce network and leading mobile payment penetration rate.In the fields of cross-border trade settlement, supply chain finance, cross-border e-commerce payment and other fields, if a stable currency is formed with the RMB as its value support and China’s business ecosystem as its carrier, it is entirely possible to open up a new path that is different from the US dollar system.Especially along the Belt and Road and within the Regional Comprehensive Economic Partnership (RCEP) area, physical trade has a strong demand for efficient and low-cost digital payment tools, which is providing the soil for RMB stable coins.
Rather than saying that there is not much space, the key lies in whether China’s real economic network advantages can be transformed into digital currency ecological advantages.If we give up exploration just because the US dollar stablecoin currently leads the market share, it is tantamount to handing over the power to formulate possible future digital financial rules.
2. Exploring the path for US stable currency legislation: there are many problems, but competition has begun overseas
Wang Yongli believes that,There are still many problems and challenges in U.S. stable currency legislation.Indeed, the United States is currently at the forefront of stable currency legislation, and regulatory frameworks at the state and federal levels are gradually emerging; its legislative process has also exposed many problems, such as fragmented regulatory authority, high compliance costs, conflicts with the existing banking system, and the balance between consumer protection and systemic risks has not yet been clarified.
It is indeed a rational choice for China to observe first and let the United States explore its path first and observe its trial and error experience.But that doesn’t mean we should just wait and see.The competition of stablecoins is essentially a global market competition, especially in overseas markets and offshore scenarios. The acceptance of different stablecoins depends on their convenience, reputation and ecological cooperation.
Without liberalizing the domestic market for the time being, China can support Chinese-funded institutions in issuing and applying stablecoins anchored to the RMB or a basket of other currencies in overseas markets that comply with local legal frameworks, and compete with mainstream international stablecoins in a market-oriented manner.For example, in financial centers such as Hong Kong, Singapore, and the Middle East, we promote the application testing of compliant RMB stablecoins in trade financing, asset transactions and other scenarios to accumulate experience and user base.
3. Risk of legislative backlash: Mainland is on hold, Hong Kong goes first, a layout that can advance or retreat
Wang Yongli believes that,Stablecoin legislation may seriously backfire on stablecoins.The subtext may be,Once China legislates stablecoins, it may actually encourage its disorderly expansion and even impact the existing monetary system.Although this concern is reasonable, completely avoiding supervision and innovation is not the best policy.
China’s strategic choices have actually shown flexibility: the mainland is cautious about private stablecoins and has not yet opened up related businesses, while Hong Kong is actively promoting the formulation of a regulatory framework for stablecoin issuance, trying to issue “Hong Kong dollar stablecoins” and exploring digital asset transactions.This differentiated arrangement under “one country, two systems” has created a testing ground for both advancement and retreat.
As an international financial center, Hong Kong has a sound rule of law and free flow of funds. Conducting regulatory sandbox trials of stablecoins here can not only accumulate regulatory experience, but also control the transmission of risks to the mainland.If the test is successful, it can provide a reference for the mainland; if greater risks arise, it will not affect the financial stability of the mainland.Therefore, those who are worried about the “backlash” of the legislative meeting may underestimate China’s flexibility in institutional design and risk management capabilities.
4. Follow or not?Stablecoins do not belong to any country, and the ecosystem determines ownership.
Wang Yongli believes that “China cannot follow the US stablecoin path“The view implies a premise: stablecoins have strong American attributes.But in fact, as a technology-driven financial instrument, the properties of stablecoins are largely determined by the issuing entity, usage scenarios and governance structure.
Even if the US dollar stable currency is issued by a non-U.S. institution and forms an ecosystem in a specific region, its interests and influence will also be diverged.In other words, “Whoever issues stablecoins owns the ecosystem.”For example, if an Asian financial institution issues a U.S. dollar stable currency and is widely used in intra-Asian trade, then the stable currency will serve more of the regional economic cycle rather than necessarily strengthening the monetary hegemony of the United States.
For China, the key is not to “follow” or “not follow” a certain country’s path, but whether it can create independent and controllable stable currency products and ecosystems that comply with international rules based on its own needs and development stage.For example, the digital RMB (e-CNY), as a legal digital currency, is mainly targeted at domestic retail payments and cross-border pilots; while the RMB stable currency can focus on cross-border wholesale, offshore markets and specific business scenarios. The two can form a complementary rather than a substitute relationship.Of course, the specific development model can continue to be discussed.
5. Is there a price to pay for not doing it?Leave strategic space in global competition
In the era of global competition, the right to speak in finance is closely linked to the dominance of payment infrastructure.If China is completely absent from the rapidly growing stablecoin market, it could lead to several consequences:
The first is that the cross-border payment system further relies on the US dollar stable currency, deepening the “path dependence” of the RMB in the digital field; the second is that it misses the opportunity to export China’s technical standards and business rules through the digital currency ecosystem; the third is that it becomes passive in the formulation of future global digital currency rules.
Therefore, a more balanced strategy is:Leave appropriate development space for digital RMB, U.S. dollar stablecoins and RMB stablecoins..As a digital form of legal currency, digital renminbi should be steadily promoted, especially by accumulating experience in international cooperation projects such as the cross-border payment “Currency Bridge” (mBridge).As for the RMB stable currency, on the premise that the risks are controllable, it can be allowed to carry out pilot projects in the offshore market and specific trade scenarios, and form synergy with the digital RMB.
6. Halt or strategic risk management?
Mr. Wang Yongli’s warning on the risks of stablecoins is of great value, especially at the level of financial security and monetary sovereignty.However, in the rapidly changing digital financial competition, only emphasizing risks and ignoring strategic opportunities may cause China to lose the initiative in the next round of financial infrastructure reform.
The formation of the virtual currency work coordination mechanism of 13 ministries and commissions itself shows that China is trying to respond to the challenges and opportunities brought by digital currency in a more systematic and coordinated manner.In the next step, perhaps a more forward-looking stablecoin development strategy should be formed on this basis:
Clearly distinguish between domestic and overseas, onshore and offshore policies, strictly control private stablecoins domestically, and encourage compliance innovation overseas.
Support Hong Kong in building an international digital asset and stablecoin innovation center, and strengthen regulatory collaboration and experience sharing with it.
Encourage enterprises to pilot RMB stable currencies overseas based on real trade scenarios, and gradually build an ecosystem.
strengthen international cooperation, actively participate in the formulation of international stablecoin regulatory standards and promote the establishment of a diversified global digital currency system.
The deceased is like a man who never gives up day and night.One cannot jump into the same river.While guarding against risks, exploring the strategic value of stablecoins with greater wisdom and courage may be the key to China remaining competitive in the digital financial era.Wang Yongli’s explanation is an important reminder, but the Chinese story of stablecoins may require a broader narrative.
