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Fan Yifei, Deputy Governor of the People’s Bank of China mentioned the speculative nature of both Bitcoin and Stablecoins, at the State Council policy briefing this morning. He said bitcoin and stablecoins are a potential threat to the state’s financial security and social stability, as the decentralized digital currency has become a gateway to money laundering and illegal economic activities.
Fan Yifei addressed the drawbacks and safety hazards of the supposedly ‘safe’ stablecoins. Flagging stablecoins as representatives of private currencies that promote the consistency of uncertain and insecure finances.
“The so-called ‘stable coins’ of some commercial organizations, especially the global ‘stable coins’, may bring risks and challenges to the international monetary system, payment and settlement system, etc.”, said Yifei.
Promoting Central Bank’s Digital Currency
Fan Yifei encouraged people to make an absolute shift towards central bank digital currency. He shared that the People’s Bank of China saw a unanimous and successful response for central bank currency. The central bank currency is mainly issued to institutional entities such as commercial banks and is mostly used for large-value settlements.
“At present, all sectors of the society have basically formed some consensus on the influence of wholesale central bank digital currency. Most studies believe that the wholesale central bank digital currency will not have an impact on the existing financial system.”, said Yifei.
While the Digital Yuan issued by the central bank has performed well, the retail currency still has a long way to go to reach a positive consensus. Fan Yifei talked about the manifold debates around the economic efficiency of a retail digital currency and whether issuing it to the public for daily transactions will be an ideal choice.
“The debate on whether the retail central bank digital currency will cause financial disintermediation will weaken the monetary policy, and whether it will increase bank runs, etc., is more concentrated. We are also highly concerned about these issues. We are currently in the process of piloting. We always pay close attention to the impact of this digital renminbi on the monetary system, monetary policy, and financial stability.”, Yifei added.
Amid the historic Chinese crypto crackdown, the extended attack on stablecoins and promotion of the central bank’s digital currency can be seen as the activation of China’s last phase of the crackdown before it launches its own CBDC for the public.
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