Content Organization: Peter_Techub News
At the Beijing Forum on July 10, Wang Yongli, former Vice President and Executive Director of the Bank of China, and Co-Chairman of China Shenzhou Information Service Group, delivered a speech titled "Insights on the Development and Regulation of Dollar Stablecoins." He analyzed the rise and development of dollar stablecoins and their impact on the global financial system, and in light of the current status of the digital yuan, he proposed that China should accelerate technological innovation, adjust policies, and strengthen regulation to seize the high ground in the global digital currency competition. Below is an organization of the core content of the speech.
I. The Rise and Challenges of Dollar Stablecoins
Wang Yongli reviewed the development history of cryptocurrencies and stablecoins. The release of the Bitcoin white paper in 2008 and the birth of the first Bitcoin block in 2009 marked the beginning of the cryptocurrency era. In 2013, Ethereum was launched, promoting ICOs (Initial Coin Offerings) through smart contracts and the ERC-20 protocol, greatly facilitating the prosperity of the crypto asset market. The price of Bitcoin soared from over $200 at the beginning of 2013 to $1,300, attracting global attention to blockchain and cryptocurrencies. However, the extreme volatility of cryptocurrency prices made them difficult to serve as a stable measure of value, leading to the emergence of stablecoins pegged to the dollar (such as USDT). The USDT white paper was published at the end of 2014, and it officially launched in 2015, relying on public blockchain technology to build a global, 24/7 uninterrupted payment and clearing system, contrasting sharply with the traditional bank-dominated SWIFT system.
The emergence of stablecoins has driven the rapid development of the crypto asset market, which in turn has prompted the continuous expansion of stablecoin scales. USDT and USDC (a dollar stablecoin regulated in the U.S. launched in 2018) dominate the market, with over 99% of stablecoins pegged to fiat currencies, where dollar stablecoins hold an absolute advantage. Wang Yongli pointed out that the success of dollar stablecoins is attributed to the dollar's status as the global reserve currency, but their decentralized nature has also led to regulatory gaps. For example, the transparency of USDT's reserves has sparked controversy, and the turmoil in the crypto market from 2022 to 2023 (such as the collapse of FTX) caused some stablecoins to decouple from the dollar, highlighting the importance of strengthening regulation.
The rapid development of dollar stablecoins poses a challenge to the internationalization of the digital yuan. Wang Yongli emphasized that if the digital yuan cannot compete with dollar stablecoins in terms of payment efficiency and clearing costs, its internationalization process will be limited. Especially after Donald Trump was elected President of the United States, his supportive stance on crypto assets and stablecoins further accelerated the development of dollar stablecoins, impacting the global financial system.
II. Global Trends and Changes in Stablecoin Regulation
Wang Yongli pointed out that bringing stablecoins under regulation has become a global trend. The U.S., European Union, and Hong Kong are accelerating relevant legislation and regulatory work, and China also needs to formulate corresponding policies as soon as possible. Regulated stablecoins will undergo essential changes, mainly reflected in the following aspects:
Strict Compliance Requirements: Stablecoin issuers will need to obtain licenses and meet regulatory requirements such as KYC (Know Your Customer), AML (Anti-Money Laundering), and CFT (Counter-Terrorist Financing). The highly anonymous decentralized characteristics will be significantly weakened, and the degree of centralized management will increase.
Sufficient Reserves and Transparency: Regulations will require stablecoins to have 100% sufficient reserves, with reserve assets held by third parties, subject to independent audits every month, and the results published. It will be prohibited to overissue stablecoins through credit or to use reserve assets as collateral.
Function Limitations: Stablecoins will be positioned as payment tools rather than investment or speculative targets, and they will not be allowed to pay interest or returns to holders, similar to tokens within a business circle (such as shopping vouchers or points), serving only as a supplementary role in specific areas.
Wang Yongli emphasized that regulated stablecoins will lose some of their decentralized advantages, and market competition will become more intense. Although USDT has gained substantial profits due to its first-mover advantage, its market share may gradually be divided as more stablecoins emerge. Additionally, the regulation of stablecoins needs to be coordinated with the regulation of crypto asset trading platforms and fiat currency exchange processes, and global coordination is crucial; otherwise, it may lead to financial risks.
III. Opportunities and Innovation Directions for the Digital Yuan
Wang Yongli believes that stablecoins are merely a transitional form in the process of currency digitization, and the digital yuan represents the future direction of development. China is in a leading position in the field of central bank digital currencies (CBDC), but compared to dollar stablecoins, the digital yuan still has gaps in international influence and technological systems. He proposed the following suggestions:
Learn from Stablecoin Technology: The digital yuan should adopt the public blockchain technology and global payment clearing model of stablecoins to improve payment efficiency and reduce clearing costs. Currently, the digital yuan is positioned as M0 (cash in circulation), replacing less than 3% of the total money supply, with limited functionality. In the future, it should be expanded to a comprehensive digitization of the yuan, replacing all substitutable forms of currency.
Adjust Policies and Pilot Programs: The crypto field is a key area for major power competition, and China needs to adjust its policies regarding crypto assets and stablecoins. It can conduct pilot programs through Hong Kong, issuing offshore RMB stablecoins, but must ensure strict regulation by China. The domestic and overseas versions of the digital yuan should be designed separately to meet internationalization needs.
Accelerate Legislation and Supporting Infrastructure: China needs to expedite legislation and regulation regarding stablecoins and crypto assets, building a safe and controllable digital currency ecosystem. At the same time, in conjunction with the digital identity authentication system promoted by the Ministry of Public Security (such as online numbers and online certificates), a synergistic advantage between the digital yuan and digital identity should be formed.
Seize Strategic Opportunities: Trump's opposition to the digital dollar provides China with a window of opportunity. If China can take the lead in launching a technologically advanced digital yuan, it will occupy a leading position in the global digital currency competition, significantly enhancing the internationalization level of the yuan.
IV. Theoretical Reflections and the Essence of Currency
Wang Yongli explored the relationship between stablecoins and the essence of currency from a theoretical perspective. He pointed out that currency serves as a measure of value, a medium of exchange, and a value token in circulation, with its core attributes not relying on specific physical or tangible carriers. The forms of currency have evolved from shells and metals to paper money and then to digital forms (such as encrypted characters in accounts and wallets), continuously evolving to improve efficiency, reduce costs, and strengthen risk control. Stablecoins, as tokens of fiat currency, only play a supplementary role in specific areas and cannot replace fiat currency.
He further analyzed that the international influence of dollar stablecoins exceeds that of many countries' CBDCs, due to their global payment system and the flexibility of market mechanisms. The digital yuan needs to break through the limitations of the existing system, adopting public chain technology similar to stablecoins to achieve low-cost payments that are peer-to-peer and borderless. At the same time, the issuance of stablecoins and digital currencies by multiple countries will trigger international competition, necessitating global regulatory coordination to prevent risks.
Conclusion
Wang Yongli concluded by emphasizing that the rapid development of the crypto field presents significant opportunities and challenges for the global financial system. The success of dollar stablecoins provides a reference direction for the digital yuan, but their decentralized characteristics will gradually weaken under regulation. China should seize the opportunity presented by the U.S. pausing the digital dollar, accelerate the technological innovation and internationalization process of the digital yuan, and combine it with the digital identity system to build a globally leading digital currency ecosystem. This not only relates to the internationalization of the yuan but is also a strategic necessity for China to seize the high ground in global digital economic competition.
By learning from the model of stablecoins, adjusting policies, and strengthening regulation, the digital yuan is expected to achieve breakthroughs on the global digital currency stage, injecting new momentum into the internationalization of the yuan.
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