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The PBoC Concerned About The Stablecoins’ Impact On Financial Systems

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China Signs New Cryptography Law

Stablecoins have been extremely popular in the cryptocurrency industry for years now, ever since they proved to be an excellent way for crypto users to preserve the value of their investments during bear markets. In a few short years, numerous stablecoins have been launched, and some have even managed to rise quite high on the list of largest coins by market cap.

Their popularity grew so much that some private payment networks have seen quite a bit of potential in them. However, not everyone feels the same way, and China’s central bank seems to have strong concerns about their potential impact on the financial world.

PBoC taking steps against stablecoins

According to the People’s Bank of China, the bank is quite worried about the financial risks associated with cryptocurrencies, especially when it comes to stablecoin. This came from the bank’s deputy governor, Fan Yifei, who said that stablecoins like Tether pose a serious threat to global financial and settlement systems.

The deputy governor stressed that the private payment systems are developing at an alarming speed. Meanwhile, the People’s Bank of China is actively working against monopolies, as they see this as a disorderly expansion of capital.

According to Fan, it was necessary to take steps to limit this global expansion of stablecoins, and the Chinese government did not waste any time. It has already made its move, as the deputy governor noted. From what is known, the bank will use the same measures to restrict stablecoins’ expansion as it took against Alibaba’s Ant Group. It is already starting to target other entities in the payments market.

The measures taken against Ant Group that Fan has referenced included halting a $37 billion IPO. This took place in November 2020, and the bank also launched an antitrust probe into Alibaba. The central bank’s head of digital currency research, Mu Changchun, followed the move with a statement that China’s upcoming CBDC was created to offer backup for major payment services, such as WeChat Pay, as well as AliPay.

According to him, this will be China’s native currency’s primary objective. So far, the coin has over 10 million users, although the system is still invite-only.

As for Fan, his criticism did not stop at stablecoins. Major cryptocurrencies like Bitcoin were also mentioned and described as speculation tools. As such, the bank’s official sees them as potential threats to social stability and financial security.

China continues to stand against digital currencies

These statements coming from the PBoC official are nothing surprising or new. After all, China has had a very negative stance towards the crypto industry for years now. It recently caused a secondary crypto price drop after it cracked down on Bitcoin miners, forcing a large portion of them to halt production and seek their new home elsewhere, or give up on mining altogether.

It also strengthened its previous crypto ban in order to prevent any kind of business from using digital currencies. While the previous ban was already doing that to a point, there were still some cracks through which certain companies managed to slip through. The strengthening of the ban eliminated such cracks, making it nearly impossible to do anything with crypto in China, other than to hold it.

Owning cryptocurrencies is still not against the law as of yet, but mining, trading, earning from them, or using them as a payment method is prohibited.

The rest of the world is getting more involved with crypto

At the same time, most other countries are taking a completely different approach. Regulators around the world have made a move to try and regulate the industry, pushed by surging prices, institutional investors’ involvement, and wave after wave of rapid adoption. Companies like Visa have already been crypto friendly for a while now, collaborating with multiple firms that have been issuing their own cryptocurrency credit and debit cards, and now, these payment processors are taking a very positive stance regarding stablecoins.

Visa itself noted that stablecoins are heading towards becoming “an important part of the broader digital transformation of financial services,” which is why the company is more than excited to join up and support this development.

Ali is a freelance writer covering the cryptocurrency markets and the blockchain industry. He has 8 years of experience writing about cryptocurrencies, technology, and trading. His work can be found in various high-profile investment sites including CCN, Capital.com, Bitcoinist, and NewsBTC.

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