Global Stablecoin Development Trends and Policy Evolution

The "Renmin University Shenzhen Social Science Salon (62nd) and the Jinan University Financial Thought Salon (256th)" hosted by the Shenzhen Institute of Renmin University of China and the Institute of Advanced Social Sciences of Renmin University of China (Shenzhen) and co-organized by the International Monetary Institute (IMI) of Renmin University of China and the Shenzhen Institute of Advanced Finance of Renmin University of China was held on June 21. Experts and scholars from all walks of life conducted in-depth discussions on the theme of "Global Stablecoin Development Trends and Policy Evolution". The Institute of Financial Technology of Renmin University of China sorted out the core parts.

At a time when the digital economy is booming, stablecoins, as an important innovation in the field of digital currency, are profoundly rewriting the global financial landscape. Since its first launch in 2014, the market size of stablecoins has expanded rapidly, and the issuance mechanism and application scenarios have also been evolving. On May 21, the Legislative Council of the Hong Kong Special Administrative Region of China passed the Stablecoin Bill in the third reading, marking the formal inclusion of stablecoins, a virtual asset, into the legal regulatory system. Hong Kong has taken an important step in the field of digital assets. In addition to Hong Kong, the United States, the European Union, Africa and other countries and regions are also competing fiercely for the dominance of stablecoins. Against the background of the rapid development of global digital currencies, stablecoins and cryptocurrencies have become the core issues of financial innovation and policy discussions.

To further explore the above topics, the "Big Finance Thought Salon" (No. 256) initiated by the International Monetary Institute of Renmin University of China invited a number of political, industrial, academic and research experts to discuss the "Global Stablecoin Development Trends and Policy Evolution". Wang Yongli, Co-Chairman of Digital China Information Service Group Co., Ltd., and Zhu Taihui, Distinguished Senior Researcher of the National Finance and Development Laboratory, respectively shared their views on the theme. Xiao Geng, Chairman of the Hong Kong International Finance Association and Vice Dean of the School of Public Policy of the Chinese University of Hong Kong (Shenzhen), Tang Ke, Professor of the Institute of Economics of the School of Social Sciences of Tsinghua University and Dean of Zhishan College, Zeng Gang, Chief Expert and Director of the Shanghai Finance and Development Laboratory, and Tu Yonghong, Deputy Director of the International Monetary Institute of Renmin University of China and Dean of the Yangtze River Economic Belt Research Institute, participated in the discussion. The salon was hosted by Song Ke, Executive Vice President of the Shenzhen Research Institute of Renmin University of China and Executive Dean of the Institute of Advanced Social Sciences (Shenzhen).

Core Views

Wang Yongli made a keynote speech entitled "The Accelerated Development of US Dollar Stablecoins Brings Profound Warnings". He pointed out that the emergence of US dollar stablecoins (such as USDT) is to meet the needs of crypto asset transactions and serve as a bridge connecting the crypto world and the traditional legal currency system. With the development of crypto assets, stablecoins have expanded rapidly, but their long-term absence from regulation has caused concern. He emphasized that the stablecoins that are included in the regulation are essentially legal currency tokens rather than independent currencies. Their development highlights the inefficiency of the legal currency system. Countries need to learn from stablecoin technology to improve the cross-border payment capabilities of legal currency. He suggested that priority should be given to promoting the internationalization of the digital RMB, combining digital identity technology to form a competitive advantage, and actively participating in the overseas stablecoin market. The strengthening of stablecoin supervision is the standardized use of encryption technology by national sovereignty, rather than the recognition of the concept of decentralization. It is necessary to balance innovation and risk under the compliance framework.

Zhu Taihui believes that stablecoins have both the technical advantages behind encrypted assets and the value stability of legal currency, and at the same time, they have well solved the incentive mechanism problem of market participants (achieving Pareto improvements for all parties), and have become a key tool for linking legal currency with encrypted assets, cryptocurrency markets and traditional financial systems. The development trend of stablecoins is mainly manifested in the fact that the scale of stablecoins has entered a stage of large-scale growth, stablecoins have become a popular payment tool, and the integration of stablecoins and traditional financial systems is accelerating. Among them, the continuous decline in the scale of single stablecoin payments shows that stablecoin payments are rapidly expanding to cross-border trade and physical transaction scenarios, and the integration of banking institutions and stablecoins has opened up the source of funds for the development of stablecoins. The United States has created a new dollar cycle through the US dollar stablecoin to strengthen the international status of the US dollar. The introduction of offshore RMB stablecoins through the gradual model of "first offshore (Hong Kong)-then offshore (free trade zone and free trade port)" is a new tool to accelerate the internationalization of RMB.

Xiao Geng believes that Hong Kong urgently needs to develop stablecoins to significantly reduce cross-border transaction costs and support Hong Kong's needs to develop digital finance. In terms of supervision, the stablecoin must be issued by a licensed institution to balance market freedom while ensuring compliance. It is crucial for stablecoins to be anchored to the RMB, which can not only cope with the instability of the US dollar system, but also create a relatively independent ecology without directly affecting the mainland's monetary policy. In addition, the anchoring of stablecoins to the RMB can also create a broad and efficient investment platform for RMB assets. With the advantages of transparent and traceable information, the platform can efficiently connect global capital with real assets in the mainland, create conditions for orderly relaxation of foreign exchange controls, help achieve "hiding foreign exchange among the people", strongly support the RMB and RMB assets, and enhance the country's financial resilience and geopolitical status.

Tang Ke pointed out that at present, my country should promote the Hong Kong dollar stablecoin under the premise of ensuring supervision, and in the future, more physical asset tokens (RWA) purchased with stablecoins will be issued to support the construction of the Hong Kong dollar stablecoin ecosystem.

Zeng Gang said that from the nature of currency, stablecoins belong to the category of broad money. As digital assets are widely accepted, it is not ruled out that they may replace sovereign currencies.

Tu Yonghong believes that as an on-chain currency in the digital age, the rapid expansion of stablecoin transactions is the result of growing market demand. The current international trade model, payment system and production organization have undergone tremendous changes, and there is a huge demand to reduce transaction costs and break through foreign exchange controls. From a global perspective, the safe-haven properties of the US dollar and the stability of the RMB are the best. China's digital economy has a leading advantage in the world. If the central bank's digital currency and the stablecoin issued by private licensed institutions are parallel, it will be conducive to promoting the RMB to more countries and international markets. It is recommended that stablecoins be used more in the RMB offshore market, choose Hainan Free Trade Port, and explore the use of RMB stablecoins in specific application scenarios.