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China warns on stablecoins as digital yuan users pass 10 million

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Today at a State Council policy briefing, China has cautioned against the rise of virtual currencies, warning that cryptocurrencies and stablecoins might pose potential threats to the country’s financial security. 

Fan Yifei, Deputy Governor of the People’s Bank of China, told reporters that the central bank is keeping an eye on virtual currency speculation. He also confirmed that the central bank’s total approved digital yuan users had surpassed ten million, according to State media

China’s crackdown on cryptocurrencies and mining has been widely covered. Talking about stablecoins, Yifei expressed concerns about their use for money laundering and illicit activities. But he’s also worried about global stablecoins. When Facebook first unveiled Libra (now Diem), this seemed to spur an acceleration of China’s research into central bank digital currency (CBDC). Today Yifei reiterated concerns about the impact of global stablecoins on the international monetary system and payments.

“We are still quite worried about this issue, so we have taken some measures,” said Fan Yifei, without elaborating.

In the meantime, he said it was important to “vigorously promote central bank digital currencies.” International CBDC reports have highlighted various risks with a retail CBDC. These include the potential for financial disintermediation if users move deposits out of bank accounts and the increased risk of bank runs when consumers can easily switch to the digital yuan if they have concerns about a bank.

Fan Yifei said the central bank has taken on board these concerns and addresses them through business, technical, and policy designs. With ten million approved users, the next key target for the CBDC pilots is the Beijing Winter Olympics.

Meanwhile, in preparation for the event, the entire Beijing subway system now supports the digital yuan. Public transport is now a popular eCNY testing ground given the regularity of the payments. The digital currency is also being used on a Suzhou metro line and is the focus of the latest pilots in Chengdu and Xiong’an that promote green travel.