#Commerce Dept. Goes On-Chain  Former Chinese President Opposes Cryptocurrency Idea: These Coins Are Not Needed!

As China considers easing off on cryptocurrencies, a former central bank governor has spoken out against the idea, saying there's no need for stablecoins.

While the possibility of China issuing a yuan-based stablecoin has been on the agenda, former central bank governor Zhou Xiaochuan has issued pointed warnings. Zhou stated that the use of stablecoins could fuel speculation and lead to fraud in the system. He argued that the benefits of these products are not as high as they are exaggerated, and the existing payment infrastructure already operates at low cost.

Zhou Xiaochuan served as the head of the People's Bank of China from 2002 to 2018. His statements coincided with the Chinese State Council preparing to evaluate the stablecoin roadmap. Zhou argued that QR code and NFC-based mobile payment systems have been operating successfully for years, so there is no real need for a transition to tokenization and decentralized systems. He also emphasized that central bank digital currencies (CBDCs) are also making significant contributions to the country's payment system.

The Dangers of Stablecoins

Zhou stated that without sufficient oversight, stablecoin issuers could issue tokens without reserves, creating a "multiplier effect" in the system. According to him, using tokens in various areas such as loans, mortgages, or revaluations could pose a risk several times greater than the reserves. A banking panic in such a scenario might not be manageable with existing regulations.

US and Asian Competition

China's stablecoin initiatives are seen as a response to the US's acceleration of dollar-backed stablecoin projects. Similarly, Japan and South Korea are making progress in this area. However, Zhou's statements indicate that Beijing remains cautious and unwilling to embrace the widespread adoption of stablecoins.