Circle CEO: Yuan Stablecoin Could Offer Advantages to China over its CBDC

According to Circle CEO Jeremy Allaire, while China has adopted a restrictive stance toward decentralized cryptocurrencies, the use of stablecoins could potentially play a pivotal role in driving the acceptance of China’s digital yuan. In an interview with the South China Morning Post, Allaire, whose company is responsible for the United States dollar-backed stablecoin USD Coin, suggested that a stablecoin based on the yuan might be the most effective means for China to promote the global usage of its national currency.

Allaire proposed that if the Chinese government desires wider adoption of the yuan in global trade and commerce, stablecoins may serve as a more viable path than a central bank digital currency (CBDC). China has been stringent in its regulation of cryptocurrencies, while simultaneously pioneering the experimentation, testing, and issuance of its digital yuan CBDC. As of January 2023, the Chinese government reported a circulation of approximately 13 billion digital yuan.

Interestingly, the digital yuan website asserts that the currency will supplant the dollar, Tether, and all other stablecoins, while clarifying that the CBDC itself is not a stablecoin. The website provides users with the ability to exchange cryptocurrencies for digital yuan through MetaMask or its own conversion portal.

Allaire acknowledged that China is unlikely to embrace decentralized cryptocurrencies but indicated that the progressive approach of Hong Kong toward the crypto sector could indicate implicit support from mainland China.

The Circle CEO also emphasized the positive trend of governments and central banks globally exploring CBDC development using modern distributed ledger technology, moving away from legacy systems. However, he cautioned against misconstruing this as an acceptance of decentralized and self-sovereign systems, stating that it represents a distinct divergence from the private sector’s innovative work on the public internet.

Despite the restrictive regulations, the digital yuan has begun to extend its reach beyond Chinese borders. As previously reported, DBS, a cryptocurrency-friendly bank based in Singapore, has created a digital yuan merchant solution that enables Chinese businesses to receive payments in the CBDC. The service enables clients in mainland China to receive digital yuan payments, with settlements made directly to yuan-denominated bank accounts.

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