If eventually the Chinese government wants to see the RMB used more freely in trade and commerce around the world, it may be that stablecoins are the path to do that more than the central bank digital currency, said Circle CEO Jeremy Allaire in a recent interview with the South China Morning Post. Allaire believes that stablecoins are a superior option to CBDCs, but that the two are complimentary.
However, authorities in China are hesitant to allow such a plan due to capital controls and a ban on the free convertibility of the yuan. IMF First Deputy Managing Director Gita Gopinath said that China would need to open its capital markets and allow for full currency convertibility in order to challenge the dollar. Brad Setser, a former senior advisor to the U.S. Trade Representative during the Biden administration, noted that China would rather keep these rules in place rather than allow for free convertibility and an actual challenge to dollar dominance.
Research from Chainalysis shows that stablecoins are an effective tool for remittances, especially for Chinese companies that need to source from overseas. However, earlier this year, the team behind CNHC, a stablecoin tied to the offshore version of the yuan primarily used for the bond market, were arrested in Shanghai.