China’s Central Bank ‘Worried’ Stablecoins Pose Risk to Financial System

8 July 2021

A deputy governor of China’s central bank has voiced concern that stablecoins, such as Tether, could pose a risk to the stability of the global financial system.

Fan Yifei, a deputy governor of the People’s Bank of China (PBOC), said digital currencies pegged 1:1: to a fiat currency had the bank “quite worried,” according to a CNBC report on Thursday,

“Some commercial organizations’ so-called stablecoins, especially global stablecoins, may bring risks and challenges to the international monetary system, payments and settlement system,” the report cited Fan as saying.

The banker said the PBOC is already taking measures against cryptos.

On Tuesday, the PBOC closed a Beijing-based company that provides software services for virtual currency transactions, reaffirming the central bank’s stance that no businesses under its purview should engage in such transactions.

Fan also said the risk of assets outside a pegged value, namely bitcoin, is problematic.

“These currencies have themselves become speculation tools,” said Fan, who added they posed a risk to “financial security and social stability.”

The PBOC is developing a central bank digital currency, or digital yuan, which is said to pose its own risks to the dominance of the U.S. dollar as a global reserve currency.

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