China's Ex-Central Bank Chief Critiques Stablecoins
Former governor of the People's Bank of China, Zhou Xiaochuan, has raised concerns about the potential dangers of stablecoins amid discussions for a yuan-based stablecoin. In a seminar held in July, Zhou emphasized the risk of stablecoins being abused for asset speculation, which could jeopardize the financial system's stability. He suggested that the necessity for stablecoins in the current financial infrastructure might be exaggerated, advocating for a more objective assessment of demand for these innovations. Zhou pointed out that China already has efficient mobile payment systems using QR codes and NFC technology linked to its banking infrastructure, achieved without the need for decentralization. Moreover, he highlighted that stablecoins could pose a multiplier effect risk, particularly when issuers create coins without adequate reserves, leading to potential financial turmoil. The former governor's caution comes as the Chinese government considers a stablecoin roadmap, contrasting sharply with its ongoing ban on cryptocurrency trading and mining. With the rapid development of stablecoin regulation in other countries, Chinese regulators remain cautious, advising local firms against promoting these digital currencies.
FAQ
❓ What are the potential risks of stablecoins?
Zhou Xiaochuan warns that stablecoins can be overused for speculation and might create systemic risks if improperly backed.
❓ Why does Zhou believe stablecoin adoption is overstated?
He argues that existing payment systems in China are already efficient and question the real need for stablecoins.
❓ What is the current stance of China on cryptocurrencies?
China maintains a ban on crypto trading and mining, contrasting with more permissive approaches in regions like Hong Kong.