Zhou Xiaochuan, the former Governor of the People’s Bank of China (for 16 years), has published an article exploring stablecoins. Like many central bankers, he is not keen on the concept, but raises one or two concerns rarely noted by others.
Part of Mr Zhou’s objections appear to stem from him being unconvinced about the benefits of tokenization. In his article (link below) he notes that many evaluations of stablecoins are one-sided, and instead suggests the concept be assessed from several viewpoints.
His strongest points are from a central banker perspective on controlling the supply of money. One issue is the multiplier effect of stablecoins. While stablecoin issuers are usually meant to hold one-for-one assets as reserves, people use stablecoins in a way that creates money, similar to how banks operate. This means the actual volume of stablecoins subject to run risk is higher than the issuance amount. An example is Hong Kong banks that print paper money. They have to deposit the equivalent in US dollars with the central bank.
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