While cryptocurrencies have been greeted in parts of the world with open arms, centralised powers like China remain wary. Firms like Circle, a leading platform for generating digital tokens pegged to USD, tread in uncharted waters dealing with central bank digital currencies (CBDCs). Jeremy Allaire, CEO of Circle, proposed a unique solution in an interview with the South China Morning Post. He stated that a renminbi (RMB)-based stablecoin might be a better bet for the Chinese government than a CBDC, should they wish to increase the use of the RMB in global trade and commerce.
While astutely observing that the Chinese government is unlikely to warm to decentralized cryptocurrencies anytime soon, he held up Hong Kong’s progressive stance towards crypto as potentially indicative of subversive mainland support. This comes against the backdrop of China banning the use of cryptocurrencies in 2021, alongside pushing for trials and issuance of the nation’s digital yuan (e-CNY).
Although the funds issued through e-CNY are substantial and increasing, the digital yuan is poised not as a stablecoin but to replace the dollar, USDT, and all other stablecoins. The potential for friction here is clear – Circle’s USD Coin, for example, could be a casualty of China’s determination for her digital currency not to be viewed as a stablecoin.
However, the digitisation of yuan is spreading its influence beyond the borders. A recent instance was DBS, a Singapore-based crypto-friendly bank, developing an e-CNY merchant solution that enables swift payments in the CBDC to Chinese businesses.
Allaire also shed light on two different directions where digital currencies are evolving. On one hand, is the propagation of CBDCs by various governments which provide a vital transition from legacy technology to modern distributed ledger technology. Parallelly, the private sector is championing an innovative and self-sovereign system built on the public internet.
While the digitisation of currencies is a crucial step for governments worldwide, it is only one aspect of the broader digital transformation that currencies are undergoing. As Allaire notes, it is important to view interest in CBDCs by central banks as not an endorsement of decentralized cryptocurrencies and the technology behind them.
Opening a space to navigate centralized and decentralized technologies is crucial for building our financial future. The challenge is determining what integration looks like in a world where both coexist. This is the essence of the conversation around CBDCs versus stablecoins – not so much a question of ‘either-or’ but ‘how both.’
Source: Cointelegraph
