China needs yuan-backed stablecoins ‘sooner rather than later’, state media urges Beijing

Beijing must be proactive in “adapting to the trend of stablecoins”, and waiting is not an option as the US has a head start, warns an article on Monday in state media that simultaneously calls for leadership to consider legislation regulating stablecoins while hyping up their potential role in making the yuan a more global currency.

Securities Times, a publication under party mouthpiece People’s Daily, said experts and industry insiders “generally believe that, as an emerging payment tool, the unique advantages and potential risks of stablecoins cannot be ignored, and that the development of [yuan-backed] stablecoins should be sooner rather than later”.

Unlike highly volatile cryptocurrencies such as bitcoin and ethereum, stablecoins anchor their values to a fiat currency or other reserve assets, and are meant to combine the efficiency of cryptocurrencies with the reliability of traditional money.

While allowing stablecoins to proliferate without regulations would harm the country’s financial system, forgoing such an efficient settlement tool could mean missing a golden opportunity for the yuan, the article warns.

“For China, which is promoting the global use of the yuan, proactively regulating stablecoins and therefore facilitating the internationalisation of the yuan might be a better solution,” the piece said.

And last week, the US Senate passed stablecoin legislation that allows permitted private entities to issue USD-pegged cryptocurrencies.

If Beijing follows suit, doing so would address two critical needs – innovation and financial security, according to Liu Xiaochun, a deputy director of the Shanghai Finance Institute (SFI) think tank, as cited by Securities Times.