What is stablecoin and how might China embrace it?

CGTN Europe

Hong Kong’s new law on regulated stablecoins will come into effect on August 1st, marking a major step in its transformation into a global virtual asset hub. Stablecoins serve as a bridge between traditional finance and tokenized assets, offering a more stable and regulated entry point into the digital economy. Rich Turrin, author of “Cashless – China’s Digital Currency Revolution,” spoke to CGTN Europe about the potential of an RMB-backed stablecoin and what it could mean for China’s evolving digital currency strategy.

Transcript

00:00Rich Turin is the author of Cashless, China's Digital Currency Revolution.

00:05Great to have you on the program again, Rich.

00:08Clear something up for us.

00:09What's the difference between this stablecoin and the central bank's digital currency plans?

00:16Oh, that is absolutely my favorite question.

00:19Thank you so much, Juliet.

00:20Pleasure to be back.

00:23A stablecoin is a privately issued form of money,

00:27meaning that it is backed by the full faith and credit of the company that issues it,

00:36as opposed to a central bank digital currency,

00:39which is backed by the full faith and credit of the central bank.

00:45So both of them are digital currencies.

00:48Both of them allow for near-immediate, very low-cost payments, which are fantastic.

00:54But one is based on the central bank backing and is the national currency of the country that issues it.

01:02And the other is private money.

01:04So you could have money from whatever large tech company issues the coin.

01:10We'll get on to some of those companies who are keen to get their hands on them in just a moment.

01:14But let's talk about the potential of this renminbi-backed stablecoin,

01:20maybe disrupting the dependence of digital tokens on the dollar.

01:25Yeah, this is a real possibility.

01:31But I think the thing that we all have to focus on,

01:33and I think the most important thing to focus on is will a renminbi-stablecoin be good for China's trade and good for China?

01:46And I think the answer is yes, it will.

01:50And then once this trade takes off and once the use of this coin starts,

01:56then we can worry about what it does to the dollar.

01:58But if it is long-term, a challenger to the dollar, we will only know that after some years of use.

02:09First, we have to build it.

02:11First, we have to have people test it and use it.

02:16And third, we have to have people love it so that they want to do business with Hong Kong using the stablecoin RMB.

02:27Okay, so you need to have this sort of longer-term outlook.

02:31So tell me, why are big brands like JD.com, Ant Group, why are they so keen?

02:37What revenue streams might a renminbi-stablecoin generate for them?

02:43Sure.

02:44These are the two best examples of stablecoin users

02:49because Ant Group and JD are both e-commerce providers.

02:54They have people buying things from them internationally.

03:00And some of the objects they might want to buy are not very expensive.

03:05So if I wanted to make a normal transfer payment from, say, United States to China to buy something,

03:15and I want to use SWIFT as my payment means,

03:19I'll have to pay $50 to my bank just to make the SWIFT transfer.

03:24Well, maybe I'm only buying something that costs $25.

03:27So it kills low cost or the high cost of dollar transfer or any currency transfer,

03:36because SWIFT is expensive in virtually any nation you're in.

03:41That really inhibits e-commerce.

03:46So having access to a stablecoin will give both JD.com and Alibaba access to a immediate,

04:01near-immediate, near-almost-costless payment system.

04:08So that will jack up their e-commerce revenue.

04:10Now wait for it.

04:12The next part is if they run the stablecoin,

04:16they make money on the reserves that are held by the stablecoin company.

04:23So it's a highly profitable venture for them in two ways,

04:28both through reserves and through the boost in their e-commerce business.

04:32Richard Turin, always great to talk to you.

04:34Thanks so much.

04:38I'll see you next time.

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