As many countries launch CBDCs, demand for CBDCs continues to soar. According to the Atlantic Council, a CBDC tracker, 130 countries are exploring CBDCs, while 19 of the G20 countries are at an advanced stage. Although these countries are still in the process, 11 countries have fully launched it, and China is one of them.
China began CBDC testing in April 2020, with the government first focusing on the four cities of Chengdu, Shenzhen, Suzhou and Xiongan. Later, the digital yuan pilot program expanded to other cities and even spread to the top 5 largest regions.
Since then, China’s efforts have driven impressive adoption of its CBDC, e-yuan, or e-RMB. But recently, Circle’s CEO said China needs a yuan-backed stablecoin more than a central bank digital currency.
Yuan-backed stablecoins could accelerate China’s currency globalization more than CBDCs, Jeremy Allaire
Jeremy Allaire, CEO of Circle, the cryptocurrency company behind the USDC stablecoin pegged to the U.S. dollar, was interviewed by the South China Morning Post, where he suggested that China use a stablecoin instead of a CBDC.
“If the Chinese government ultimately wants to see the yuan used more freely in trade and commerce around the world, a stablecoin may be a better way to achieve that goal than a central bank digital currency,” Allaire said in an interview.
Allaire said that using a stablecoin pegged to China’s offshore yuan (CNH) would increase the currency’s use in global commerce and trade. Allaire also noted that mainland China may be skeptical about fully embracing the cryptocurrency industry, which would make his proposal difficult to implement.
Regarding the full adoption of digital assets in Hong Kong, Allaire said: “The reality is that other major financial markets around the world are embracing digital assets, and the world’s largest financial institutions are embracing digital assets. So if Hong Kong is to play a role, it must do the same.”
Allaire also talked about how stablecoins perform when many countries launch central bank digital currencies. The CEO said that private stablecoins drive innovation, while CBDCs are just complementary.
Allaire added, “It would be great if central banks were to upgrade their systems and move from legacy technology to more modern distributed ledger technology.”
Hong Kong plans to regulate stablecoins
The Circle CEO also pointed out the efforts of Hong Kong regulators to oversee the stablecoin industry. Additionally, the Hong Kong Monetary Authority (HKMA) has launched a plan to introduce stablecoin regulation by 2024.
Also during the China Conference: Hong Kong Forum, Secretary for Financial Services and the Treasury Christopher Hui reiterated his commitment to introducing the regulation.
According to the South China Morning Post, the Hong Kong Securities and Futures Commission has also begun to develop a supplementary regulatory framework for stablecoins.
Finally, there is hope for the development of Web3 in the Hong Kong Special Administrative Region. Notably, the Hong Kong government announced on June 30 the establishment of a working group to provide recommendations for entering the Web3 space.
