China is reportedly considering whether to permit the use of yuan-backed stablecoins.
That’s according to a report Wednesday (Aug. 20) by Reuters, which notes that this would mark a significant reversal in the country’s stance on digital currencies.
The State Council — China’s cabinet — will review and possibly approve a roadmap later this month for the wider usage of the currency around the world, including catching up to America’s increasing enthusiasm for stablecoins, sources familiar with the matter told Reuters.
The Chinese government had banned cryptocurrency trading and mining in 2021, citing worries about the stability of the financial system.
The report notes that China has long sought to make the yuan a global currency, similar to the dollar or euro, in line with its status as the second-largest economy in the world.
However, Reuters added, the country’s strict capital controls and its trillion-dollar annual trade surpluses have hindered that effort. Market participants have said those controls will also hold back the development of stablecoins, the report said.
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In other stablecoin news, the state of Wyoming this week became the first U.S. public entity to issue a stable token.
“Today, Wyoming reaffirms its commitment to financial innovation and consumer protection,” Governor Mark Gordon said in a news release. “The mainnet launch of the Frontier Stable Token will empower our citizens and businesses with a modern, efficient and secure means of transacting in the digital age.”
Joel Revill, chief executive of Two Ocean Trust and commissioner of the Wyoming Stable Token Commission, told PYMNTS CEO Karen Webster in an interview earlier that the commission is not tasked with trying to decide how the coin could be employed in commerce, as market forces will determine the use cases.
Regardless, Revill said, the stablecoin will operate on a “more transparent, lower cost, secure payment rail vs. the … archaic payment rails that Wyoming citizens, and everyone else, are subject to.”
Meanwhile, PYMNTS also wrote this week about some of the risks tied to stablecoins as they increasingly resemble mainstream payments.
The Financial Action Task Force (FATF)has warned that inconsistent compliance among wallet providers and exchanges could turn stablecoins into a channel for illicit finance. Its standards require know your customer (KYC) checks, sanctions screening and the “Travel Rule,” which mandates that originator and beneficiary information for transactions, similar to the banking system.
“Without those guardrails, scaling stablecoins as everyday spending money in emerging markets could introduce vulnerabilities regulators and payment firms are keen to avoid,” PYMNTS wrote.
