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In a recent interview with CNBC, CEO of Circle Jeremy Allaire made his case why the new cryptocurrency to be issued by the People’s Bank of China (PBoC) could change global commerce permanently. In fact, it could propel the Chinese yuan to world prominence never seen before.
With the trade war between China and the U.S. heating up, there have been many discussion over the future of global commerce. Will China, for example, look to usurp the dollar from its position of global dominance? By the looks of it, it seems that it is trying to do with its new state-backed cryptocurrency.
Indeed, the People’s Bank of China recently confirmed that its yuan-backed stablecoin is ‘ready.’ What this means is that we could be entering a new era of currency wars, spurred by the advent of cryptocurrencies on the world stage.
According to CEO of Circle, Jeremy Allaire, the idea may work out in the end. As he told CNBC, the idea may serve as the “foundation for the internationalization of the yuan.”
“I look at this really meeting several goals. But, I think the bigger opportunity here is this is a way for the Chinese yuan to be distributed globally.”
However, the Chinese state has its work cut out for itself. Around 58% of all foreign exchange reserves are held in dollars, as is 40% of the world’s debt. The yuan likely will not ‘catch up’ the dollar’s power anytime soon, but the central bank’s stablecoin could be a piece of this larger puzzle. Through the yuan-backed stablecoin, China could create an altogether new financial system parallel to the current one which is dominated by SWIFT and Western banking institutions.
Stablecoins have often been touted as being one of the stepping stones towards mainstream adoption. Analysts from across the cryptocurrency industry have been in active discussions over this possibility, seeing a world were state-backed stablecoins could very well become the norm.
The legal status of such an idea is still in limbo. Some claim stablecoins could qualify as securities, but the SEC, for example, has yet to give out firm guidelines on the question.
Do you believe stablecoins could prove to have a major impact on geopolitics in the future? Let us know your thoughts below.
Image courtesy of CNN.