Chinese Academics Warn Stablecoins Pose a Threat to China’s Monetary Sovereignty
Chinese academics are raising renewed concerns over the potential risks posed by stablecoins—cryptocurrencies pegged to fiat currencies—arguing that their growing influence may undermine China’s monetary sovereignty and financial stability.
According to a recent paper published by researchers at a leading Chinese economic think tank affiliated with the People’s Bank of China (PBoC), stablecoins like Tether (USDT) and USD Coin (USDC), which are predominantly backed by the U.S. dollar, could erode the effectiveness of the yuan and create systemic risks if allowed to circulate freely in the Chinese financial ecosystem.
A Challenge to the Renminbi
The academics emphasize that stablecoins, due to their borderless and decentralized nature, could act as an alternative medium of exchange and store of value, particularly in cross-border transactions. “If widely adopted, stablecoins could weaken the status of the renminbi in domestic and international settlements, and limit the central bank’s ability to control monetary policy,” the paper noted.
This echoes previous warnings from Chinese financial authorities, who have maintained a cautious stance toward cryptocurrencies while aggressively pursuing the development of the digital yuan (e-CNY), China’s central bank digital currency (CBDC).
The Rise of Dollar-Backed Digital Assets
One key concern is the global dominance of dollar-backed stablecoins, which account for the majority of stablecoin market capitalization. Chinese scholars argue that this may serve to further entrench U.S. dollar hegemony in global finance, potentially allowing foreign influence over domestic economic conditions.
“The widespread use of U.S.-dollar-based stablecoins could facilitate capital outflows, enable illicit financial activity, and increase foreign dependency,” one researcher warned.
Regulatory Tightening and Digital Yuan Promotion
In response, China has tightened regulations on cryptocurrencies, banning trading and mining activities since 2021. At the same time, it has accelerated the rollout of the digital yuan, aiming to establish a sovereign digital currency that can counterbalance the influence of foreign digital assets.
The paper recommends continued vigilance and regulatory coordination, both domestically and internationally, to manage the risks posed by stablecoins. It also underscores the importance of expanding the use and acceptance of the digital yuan in global trade and finance.
Conclusion
As the digital currency landscape evolves, the warnings from Chinese academics highlight the geopolitical dimensions of blockchain-based finance. With stablecoins rapidly integrating into global payment systems, nations like China are navigating a complex intersection of innovation, competition, and sovereignty.