The People’s Bank of China on Stablecoins
The People’s Bank of China (PBOC) has published a comprehensive review regarding stablecoins, emphasizing a crucial distinction: these digital assets function as private currencies from the viewpoint of users rather than being equivalent to sovereign currencies. The report suggests that while advancements in digital technology improve payment systems’ efficiency, they fall short in delivering true decentralization.
Economic Functions of Stablecoins
From the issuer’s standpoint, stablecoins can be likened to a “narrow bank” as they represent more than mere liabilities. In China, the presence of stablecoins is already evident through platforms like WeChat Pay and Alipay, where their roles mirror those of traditional currencies in many aspects. Upon examining the economic functions, it becomes clear that the currencies associated with third-party payment services resemble stablecoins in operation.
Challenges and Market Dynamics
Despite this, stablecoins are witnessing limited engagement within everyday retail transactions. Established payment platforms like Apple Pay, PayPal, WeChat, and Alipay have successfully built network effects and attained economies of scale, benefitting from their early entry into the market. Furthermore, the rise of USD stablecoins is chiefly driven by the dollar’s prominent position as a global currency, which may encourage a trend towards dollarization.
Hong Kong as an Experimental Environment
In the context of stablecoins pegged to the Chinese Yuan, Hong Kong is positioned as an experimental environment. Here, the regulatory landscape is being continually refined, supporting a balance between leveraging technological innovations and ensuring the stability of the financial system, the public interest in payment structures, and preserving national monetary sovereignty—thus maintaining a complex but essential relationship across multiple dimensions.
