China’s central bank worried about stablecoins’ risk to financial systems

Published at: July 8, 2021

The Chinese central bank is “quite worried” about the global financial risks associated with digital currencies, particularly stablecoins, according to a senior official.

Fan Yifei, a deputy governor of the People’s Bank of China (PBoC), expressed concerns over the reportedly serious threat stablecoins, such as Tether (USDT), pose to global financial and settlement systems, CNBC reported on Thursday.

The official emphasized that the speed of development in private payments systems is “very alarming,” and the PBoC is working against monopolies and the “disorderly expansion of capital,” adding:

“Some commercial organizations’ so-called stablecoins, especially global stablecoins, may bring risks and challenges to the international monetary system, and payments and settlement system.”

Fan noted that the Chinese government has already taken some measures to limit the expansion of global stablecoins in the country. The deputy governor stressed that the PBoC will apply the same restrictive measures that it took on Alibaba’s Ant Group to other entities in the payment services market.

As previously reported, the Chinese state halted Ant’s $37-billion initial public offering last November, also launching an antitrust probe into Alibaba. Mu Changchun, head of digital currency research at the PBoC, later said that China’s central bank digital currency is designed to provide backup for major retail payment services like AliPay and WeChat Pay as its key objective. According to Fan, China’s invitation-only digital yuan system has amassed more than 10 million users so far.

Apart from cautioning against stablecoins, Fan also criticized major cryptocurrencies like Bitcoin (BTC), stating that such digital currencies have “become speculation tools” and pose potential threats to “financial security and social stability.”

China has taken a tough stance on the cryptocurrency industry, recently renewing its crackdown on crypto mining activity as well as cryptocurrency trading.

Meanwhile, some of the world’s biggest payments companies such as Visa have doubled down on their positive stance on stablecoins. “Stablecoins are on track to become an important part of the broader digital transformation of financial services, and Visa is excited to help shape and support that development,” the company wrote in its official crypto update on Wednesday.