HONG KONG: A Shanghai regulator said it held a meeting this week for local government officials to consider strategic responses to stablecoins and digital currencies – a marked shift in tone for China where crypto trading is banned.
The Thursday meeting was organised by the Shanghai State-owned Assets Supervision and Administration Commission and follows calls by experts and major companies in China to develop a yuan-pegged stablecoin.
We need to have “greater sensitivity to emerging technologies and enhanced research into digital currencies,“ He Qing, the regulator’s director, told the meeting according to a post on the body’s official WeChat account.
Photos of the meeting showed some 60-70 attendees.
Shanghai is China’s main international financial hub and often leads pilot programmes for regulatory change.
“Given China’s strong fintech ecosystem, it has the potential to be a key player in shaping the future of blockchain-based payments,“ said Nick Ruck, director at LVRG Research.
Blockchain-based stablecoins – which are typically pegged to a fiat currency and offer faster and cheaper transactions – have gained much momentum worldwide. One estimate by ARK Investment Management puts the transaction value of stablecoins globally last year at $15.6 trillion, surpassing that of Visa. It noted that the value per transaction tends to be much higher.
In the U.S., where the legal framework is more developed, more and more companies such as Amazon and Walmart are looking at launching stablecoins.
In Asia, South Korea’s new government has pledged to allow companies to introduce won-based stablecoins and develop the necessary infrastructure, though the central bank has cautioned that it should be a gradual adoption.
E-commerce firm JD.com and fintech giant Ant Group are urging China’s central bank to authorise yuan-based stablecoins to counter the growing sway of U.S. dollar-linked cryptocurrencies, sources have said.
The companies plan to apply for stablecoin licenses in Hong Kong, where stablecoin legislation is scheduled to take effect on August 1.
HURDLES
At the Shanghai meeting, a policy expert from Guotai Haitong Securities spoke about the history, types and characteristics of cryptocurrencies and stablecoins, and analysed global regulatory frameworks and strategic approaches, the regulator’s post said.
The expert explained the opportunities and challenges facing stablecoins and offered policy suggestions for digital currency development, the post added.
Separately, Yang Tao, the deputy director of the think tank National Institution for Finance and Development, said this week that China should explore the issuance of yuan-based stablecoins in the Shanghai Pilot Free Trade Zone and in Hong Kong simultaneously.
Any change in China may not come easily, with the country’s capital controls likely to be a key hurdle to the development of stablecoins, market participants have said.
The central bank’s governor Pan Gongsheng also said last month that the boom in digital currencies and stablecoins poses huge challenges to financial regulation.
Mainland China banned cryptocurrency trading and mining in 2021 due to concerns about the stability of the financial system.
While the debate around stablecoins in China has heated up of late, the outlook for other cryptocurrencies is less clear. Outside mainland China, non-stablecoin digital currencies continue to increase in popularity with bitcoin climbing to an all-time high above $118,000 on Friday. – Reuters
