Stablecoins, a new type of digital currency that is pegged to a fixed value of fiat currency, are on the rise. These digital coins are pegged to the value of a given fiat currency, such as the United States dollar, the Euro, or the Chinese yuan, and are meant to solve issues like volatility and price manipulation.
Today, the People’s Bank of China has issued a statement on cryptocurrency, saying that it is concerned about the impact of stablecoins on the global financial system. The statement, issued by the central bank’s financial research department, said that stablecoins such as Tether (USDT) and TrueUSD (TUSD) are being used to manipulate the price of cryptocurrencies, which are not being used to conduct transactions. The PBoC has asked the CFTC, SEC, and CFTC to closely monitor stablecoins in the hope that they will curtail the use of cryptocurrency in the financial market.
Stablecoins have been popular in the cryptocurrency industry for several years now, as they have proven to be a great way for cryptocurrency users to preserve the value of their investments during bear markets. In a few years, many stackablecoins have entered the market, and some have even managed to climb quite high in the list of the largest coins in terms of market capitalization.
They are so popular that some private payment networks see great potential in them. Not everyone agrees, however, and China’s central bank seems very concerned about the potential impact on the financial world.
PBoC takes action against stable coins
According to a statement from the People’s Bank of China, the bank is very concerned about the financial risks associated with cryptocurrencies, especially when it comes to stablecoin. That’s according to the bank’s vice governor, Fan Yifei, who said stablecoins like Tether pose a serious threat to global financial and settlement systems.
The Deputy Governor noted that private payment systems are growing at an alarming rate. Meanwhile, the People’s Bank of China actively attacks monopolies as a disorderly expansion of capital.
According to Fang, steps needed to be taken to curb this global spread of Stabelcoins, and the Chinese government wasted no time in doing so. She has already made her move, as the assistant governor noted. As far as we understand, the bank will take the same measures to limit the expansion of stablecoins as it did against Alibaba’s Ant Group. It is already starting to target other organizations in the payments market.
One of the measures Phan cited against Ant Group was to stop a $37 billion IPO. This happened in November 2020, and the bank also launched an antitrust investigation against Alibaba. Mu Changchun, head of the central bank’s digital currency research department, said in response to the decision that the upcoming CBDC is set up to support major payment services such as WeChat Pay and AliPay.
This will be the main goal of China’s national currency, he said. The room currently has more than 10 million users, although the system is still invitation-only.
As for Fan, his criticism was not limited to the barn components. Large cryptocurrencies like bitcoin have also been mentioned and described as tools for speculation. Therefore, the bank director considers them a potential threat to social stability and financial security.
China continues to reject digital currencies
There is nothing surprising or new about these statements by the PBoC official. After all, China has had an extremely negative attitude towards the crypto industry for years. Recently, it caused a secondary decline in cryptocurrency prices after imposing strict restrictions on bitcoin miners, forcing a significant portion of them to cease production and find a new site elsewhere or stop mining altogether.
It has also tightened its previous ban on cryptocurrencies to prevent them from being used in any type of business. Although the previous ban had already addressed this problem to some extent, there were still loopholes that some companies could slip through. Increased prohibition has eliminated these cracks, making it virtually impossible to do anything with cryptocurrencies in China except store them.
The possession of cryptocurrencies is not yet prohibited by law, but it is illegal to mine them, trade them, make money with them or use them as a means of payment.
The rest of the world is increasingly interested in cryptocurrencies
At the same time, most other countries are taking a very different approach. Regulators around the world have sought to regulate the sector, spurred on by rapidly rising prices, the participation of institutional investors and successive waves of rapid adoption. Companies like Visa have been pro-crypto-currency for some time, working with several companies that issue their own credit and debit cards in cryptocurrencies, and now these payment processors are taking a very positive stance on Stablcoins.
Visa itself has noted that stablecoins are becoming an important part of the broader digital transformation of financial services, so the company is happy to join in and support this evolution.
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