China should increase its research efforts on the topic of stablecoins and consider backing domestic institutions to issue a yuan-pegged cryptocurrency, a researcher from the People’s Bank of China (PBoC) argues.
CN Finance, a bi-weekly magazine and a mouthpiece of the Chinese central bank, published an op-ed on Tuesday entitled “A brief analysis of stablecoins” that was co-authored by a PBoC researcher named Li Liangsong and a professor from China’s Fudan University.
The article explored the latest development of stablecoins in the world that have been mostly anchored to the U.S. dollars, including some that are backed by regulators such as the Gemini Dollar (GUSD) and Paxos Standard.
The authors went on to argue that the development of these U.S. dollar-pegged cryptocurrencies will strengthen the dominant role of U.S dollars in the global monetary system but may bring a negative effect on other major fiat currencies.
“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,” the authors added.
Seemingly echoing that point, crypto exchange OKCoin’s founder Star Xu said on Wednesday in a Weibo post that he believes the “Trend of issuing a Chinese yuan stablecoin is inevitable. And OKCoin USA will participate in rolling out a regulated stablecoin.”
That said, the authors of the CN Finance article also pointed out there’s still a long way to go before stablecoins can make a real impact on worldwide economies.
“If stablecoins can scale eventually, the role of central banks could be in a dilemma. Fiat currencies issued by central banks will become collaterals to back stablecoin but will not end up in the market circulation. That will limit the role of central banks in payment settlements and monetary policies,” the authors said, concluding:
“The evolution of this monetary system will likely be eventually achieved by a central bank-issued fiat digital currency.”
Chinese yuan image via Shutterstock