Circle CEO Sees Potential for Yuan-Backed Stablecoins Despite Crypto Ban in Mainland China

July 14, 2023

By Anjali Kochhar

Circle co-founder and CEO, Jeremy Allaire, remains optimistic about the development of Web3 in Hong Kong and the local monetary authority’s efforts to regulate stablecoins, even as mainland China continues to ban cryptocurrencies. In an interview with the South China Morning Post, Allaire acknowledged that China is unlikely to open its markets to cryptocurrencies but expressed confidence in the role stablecoins can play in supporting Beijing’s goal of yuan internationalisation.

While mainland Chinese officials have shown support for Hong Kong’s initiatives to attract the crypto industry, there is no indication that Beijing itself is warming up to cryptocurrencies. However, Allaire believes that stablecoins, which are crypto assets pegged to fiat currency, present a more immediate solution for the government’s goal of internationalising the yuan compared to the central bank digital currency (CBDC) eCNY.

According to Allaire, stablecoins could facilitate the wider use of the yuan in global trade and commerce. He cited an example of a stablecoin pegged to the offshore yuan (CNH) and suggested that stablecoins might offer a more effective path for achieving yuan internationalisation than the central bank digital currency. Notably, a team associated with CNH Coin, a stablecoin pegged to the offshore yuan, was detained in Shanghai in May, although no explanation for the detention has been provided by Chinese authorities.

Hong Kong has taken steps to regulate stablecoins and position itself as a global virtual asset hub. The Hong Kong Monetary Authority (HKMA) has pledged to introduce stablecoin regulations by 2024, recognising the potential impact of such products on financial markets. The Securities and Futures Commission is also working on complementary regulations for stablecoins, following the implementation of rules for licensing sellers of other cryptocurrencies last month.

Circle, the operator of the USDC stablecoin, is encouraged by the HKMA’s plans and considers Hong Kong its largest non-US market. Allaire expressed enthusiasm for the Hong Kong government’s prioritisation of stablecoins and its support as a motivating factor for Circle to expand its business in the region.

While central banks worldwide have expressed concerns about the impact of stablecoins on financial stability, the HKMA has proposed that the value of reserve assets should always match the outstanding stablecoins to mitigate potential risks. Additionally, the HKMA is exploring the possibility of a digital Hong Kong dollar and participating in a cross-border trial for the eCNY using blockchain technology.

Allaire believes that central bank digital currencies (CBDCs) and private stablecoins can coexist in a well-regulated environment. He views CBDCs as complementary to private sector innovations, emphasizing the importance of private sector contributions to innovation on the public internet.

Circle’s significant business presence is currently focused on Asia, with approximately 125 employees in the region. Allaire’s positive outlook on Hong Kong’s regulatory initiatives and the potential role of stablecoins reflects the company’s commitment to advancing digital asset adoption and supporting the internationalisation of the yuan.

In a world where digital assets are gaining acceptance in major financial markets, Circle aims to leverage stablecoins as a means to support Hong Kong’s relevance and facilitate the growth of its own business operations.

About the author

Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.

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