With major economies gearing up for the rising ubiquity of stablecoins and their impact on the global economy, former Chinese central bank chief Zhou Xiaochuan has warned that US dollar-backed stablecoins could accelerate the “dollarisation” of the international monetary system.
Amid the explosive growth of cryptocurrency in the past few years, continued focus from high-level figures reflects the Chinese government’s interest in underlying technologies and their potential role in cross-border finance, despite cryptocurrency trading being banned on the mainland.
“Unless facing extreme, dire circumstances – such as [fighting] high inflation or heavy debt burdens – pursuing dollarisation could bring many adverse side effects.”
Unlike volatile cryptocurrencies such as bitcoin or ethereum, whose prices experience drastic fluctuations, stablecoins aim to combine the efficiency of digital assets with the reliability of traditional money. By pegging their value to fiat currencies such as the US dollar or Hong Kong dollar, or to other reserve assets, stablecoin prices are meant to live up to their name – as long as the currency behind them remains strong.
