In an intriguing recent dialogue, Jeremy Allaire, CEO of Circle, suggests to South China Morning Post that if Beijing aspires to see the Chinese Yuan embraced more prevalently in international trade and commerce, it needs to look at Yuan-backed stablecoins. This fervor for stablecoins may seem ahead of its time, given the common governmental fondness for central bank digital currencies (CBDCs), yet gold is still gold, digital or not.
Allaire’s conception of stablecoins isn’t necessarily at odds with CBDCs. Arguably, a balanced fusion of both may become the norm. He affirms that modernizing central banks with contemporary distributed ledger technology is beneficial, implying a symbiosis between these innovations and traditional banking systems.
However, for this vision to manifest, there are towering hedges to climb. China’s economic policy, with its stringent capital controls and prohibition on free yuan conversion, is a force to be reckoned with. In these times, it seems implausible for China to allow this flexibility. It’s no secret, earlier in 2022, Gita Gopinath – IMF First Deputy Managing Director insisted that for China’s challenge to the dollar’s dominance to be plausible, China must open its capital markets and permit complete currency convertibility.
Yet, the immense gravitational force of the dollar seems to prevail over these theoretical postulations. Brad Setser, a former senior advisor to the U.S. trade representative, reckons that China’s incremental approach in increasing the use of yuan-denominated trade with commodity-exporting countries will eventually reach a deadlock, encountering the vast complexities and realities of global trade settlement.
Nonetheless, amidst this vast web of economic and political intricacies, Circle and Tether have been inconspicuous beneficiaries. Chainalysis research reveals that stablecoins have been a boon for monetary remittances, particularly for Chinese firms sourcing overseas.
As unfolding narratives reveal, the future of digital currency is anything but a minuet in a larger symphony of financial revolution. It’s like a white-water rafting amidst roaring tides of technological advancement and international policy maneuvers, leaving us all watching with bated breath for the next unpredictable turn. Regardless, such chatter continues to ignite spirited discussions, driving curiosity and innovation in the digital financial world.
Source: Coindesk
