Copyright scmp
China on Monday reaffirmed its hardline approach towards virtual currencies at home, warning of the risks of stablecoins, despite growing concerns that the United States might have consolidated its US dollar dominance through them. Instead, the world’s second largest economy vowed to broaden the use of its central bank digital currency known as e-CNY, according to Pan Gongsheng, governor of the People’s Bank of China. “[Stablecoins] are still in their early stages of development,” said Pan, noting that financial regulators worldwide still maintain a cautious stance towards the development of the virtual currency pegged to another asset. “As a financial activity, stablecoins currently fail to effectively meet basic requirements such as customer identification and anti-money-laundering, exacerbating gaps in global financial regulation,” he said at the opening ceremony of the Financial Street Forum in Beijing. This has fostered a strong atmosphere of market speculation, increasing the vulnerability of the global financial system and having an impact on the monetary sovereignty of some less developed economies, he added. Pan said the central bank will work with law enforcement agencies to continue to crack down on the onshore operation and speculation of virtual currencies. “The central bank’s policies and measures released since 2017 to combat the virtual currency-related risks remains in effect,” the governor said. His remarks came at a time when the market has been expecting more follow-up policies from China’s central bank, following the “Genius Act” signed off by US President Donald Trump in July and Hong Kong’s Stablecoin Ordinance effective in August. In the meantime, domestic research on stablecoins continues. The country’s largest government-backed research fund last month opened applications for the study of stablecoins and their cross-border monitoring systems with grants of 200,000 yuan (US$28,083) to 300,000 yuan (US$42,126). The Chinese central bank will optimise the positioning of China’s digital yuan, allowing more commercial banks to participate in the pilot scheme that was launched in more than two dozen cities since 2019 and has already accumulated a transaction value of more than 14 trillion yuan. Pan also announced on Monday that the central bank will resume the trading of government bonds in the secondary market, a move to adjust market liquidity and also build the yield curve in coordination with the fiscal department. The operation was suspended earlier this year due to significant supply-demand imbalances amid record low yields. He noted that the central bank has employed various monetary policy tools to maintain ample liquidity and a favourable financial environment for China’s economic recovery amid complex domestic and international conditions. “The People’s Bank of China will continue to uphold its supportive monetary policy stance, implement a moderately loose monetary policy,” he added. Also speaking at the forum, Zhu Hexin, director of the State Administration of Foreign Exchange, said that the administration will soon introduce nine new policy measures to promote trade innovation and development. Key initiatives include expanding pilot zones for cross-border trade liberalisation and optimising foreign exchange settlement. Wu Qing, chairman of the China Securities Regulatory Commission, said at the forum that the regulator will review the listing standards on the Shenzhen Stock Exchange’s ChiNext board to better align companies with the characteristics of emerging fields and future industries.
