China’s e-CNY stablecoin seeks to curb dollar reliance, but USDT and USDC’s $210B in Treasuries sustain U.S. dollar demand in BRICS.
According to a Financial Times report, China intends to permit the introduction of its initial stablecoin. Hong Kong policymakers recently enacted legislation permitting licensed businesses to issue tokens supported by any fiat currency.
According to Chen Lin, the Centre for Financial Innovation and Development director at the University of Hong Kong, China, a growing interest in stablecoins and cryptos has developed.
The emergence of the stablecoin era, which was supported by the US dollar, was perceived as a means of reinvigorating the USD’s appeal. The USD stablecoin sector could be challenged by a yuan-pegged stablecoin, which could further bolster China’s de-dollarization plans.
Is a cryptocurrency pegged to the Yuan a component of China’s de-dollarization initiatives?
In recent years, there has been a substantial increase in the prevalence of stablecoins. Currency-pegged cryptocurrencies are also perceived as a means of revitalizing the US currency. The demand for the US dollar will be bolstered by dollar-pegged crypto assets, as per David Sacks, the White House cryptocurrency administrator. The latest action taken by China may impact Sacks’ words.
China has made significant strides in promoting the Yuan as an international currency. In addition, China has implemented the Cross-Border Interbank Payment System (CIPS) as an alternative settlement system to SWIFT. CIPS employs the Yuan in place of the US dollar. Another potential approach to counteracting the US dollar is the nation’s most recent stablecoin initiative.
Is the Yuan poised to assume control?
It is well-known that the demand for assets denominated in the US dollar is declining. A recent report by BlackRock emphasized that central banks worldwide are transitioning from dollar-based assets to alternatives, including gold. Countries have abandoned the dollar due to the escalating distrust of US foreign policy and trade and the nation’s record-high debt. Larry Fink, the CEO of BlackRock, also emphasized that the dollar may not function as the global reserve currency indefinitely.
The US dollar continues to dominate global trade, despite its lackluster performance. The United States dollar is the most liquid currency in the world. Although the USD is losing its former allure, it will be exceedingly challenging to supplant it in the near future.
