China’s Yuan-Pegged Stablecoin: PBoC Study on Future Economy

According to central bank experts, the Chinese government could counteract the US dollar’s dominance with a local stablecoin.

The Chinese government should explore stablecoins and consider launching a yuan-pegged cryptocurrency, according to researchers from the People’s Bank of China (PBoC).

The comments were made in an op-ed published on Tuesday in CN Finance, a bi-weekly magazine by the Chinese central bank. Co-authored by PBoC researcher Li Liangsong and a professor from Fudan University, “A Brief Analysis of Stablecoins” looks into the recent development of stablecoins, noting that the majority of them are US dollar-backed. The article features names such as the Winklevoss’ Gemini Dollar (GUSD) and the Paxos Standard (PAX), both launched in September.

"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 op-ed read.

The authors went on to note that stablecoins are the future norm although they are far from making a significant impact on the global economy.

"The evolution of this monetary system will likely be eventually achieved by a central bank-issued fiat digital currency," the researchers said.

Xu Xing, founder and CEO of Chinese cryptocurrency exchange OKCoin, reiterated this view in a series of Twitter posts on Wednesday.

"The dollar-pegged #stablecoin regulated by the US government will strengthen the penetration of the US dollar 100 fold. Embracing the tide of technology, the launch of a #CNY backed #stablecoin is an inevitable trend, and it will significantly improve the internationalization of the RMB. OKCoin USA will launch a fully compliant stablecoin," Xu wrote.

OKCoin was one of China’s three major crypto exchanges before Beijing cracked down on virtual currencies and banned initial coin offerings (ICOs) last September. Fleeing the hostile business environment, the company shifted its operations overseas. In July, it launched crypto trading services in the US.