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(Kitco News) -
Jeremy Allaire, co-founder and CEO of stablecoin issuer Circle, said in an interview published Tuesday that even if mainland China doesn’t follow Hong Kong in freeing up its crypto sector, he still sees an important role for a yuan-backed stablecoin.
Allaire spoke to the South China Morning Post at the tail end of a two-week Asia trip which included an appearance at the World Economic Forum in Tianjin. He said that Hong Kong’s recent moves to legalize and regulate digital assets, and their concerted effort to court crypto firms, will set the region up for success on the global stage.
“The reality is that every other major financial market in the world is also embracing digital assets, and the biggest financial institutions in the world are embracing digital assets. So for Hong Kong to be relevant, it has to,” Allaire said. “I think there is Chinese government support for that.”
He said that he doesn’t believe Hong Kong’s example will be followed across the rest of China, however. “That’s different than feeling like it says something about opening up the trading of crypto on the mainland,” he said. “I don’t think there’s anything there.”
Allaire said that even if China is all-in on the eCNY, their central bank digital currency (CBDC), they should still consider supporting a yuan-backed stablecoin to internationalize their currency.
“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,” he said. Allaire suggested that a stablecoin pegged to the offshore yuan (CNH) might be a workable solution.
Circle’s USD Coin (USDC) is the second-largest U.S. dollar-backed stablecoin in the world by market capitalization with $27.4 billion in circulation, second only to Tether’s (USDT) $83.4 billion.
Allaire said Circle is encouraged by the proactive stance of the Hong Kong Monetary Authority (HKMA) related to stablecoins and other cryptocurrencies.
“We’re excited that this is a priority for the Hong Kong government and it seems like it’s a real priority for the HKMA,” Allaire said. “That’s tremendously positive and is really motivating for us to want to be able to grow our business here.”
He also believes that stablecoins will continue to play an important role in global markets even after the use of CBDCs becomes widespread.
“If central banks are going to upgrade their own systems to move away from legacy technology into more modern distributed ledger technology, that’s great,” he said. “There’s a whole bunch of things that are useful from that, but I view that as very different than the work that the private sector does to innovate on the public internet.”
Allaire has been very vocal in his support of Hong Kong’s new regulatory regime for digital assets in recent weeks. Speaking from the World Economic Forum in Tianjin, China on June 27, Allaire said that Hong Kong is now attracting some of the largest and most prominent firms in the industry, including his own.
“Hong Kong clearly is looking to establish itself as a very significant center for digital assets markets and for stablecoins and we are paying very close attention to that,” he said.
Allaire noted that Asia is now “a huge area of focus” for cryptocurrency companies as the large populations and eagerness to integrate the latest technologies make the region ideal for blockchain and Web3 growth.
“All around the world, in every major market, stablecoin laws are coming into place, and what I think that signifies is that this kind of digital currency, these fiat-linked digital currencies, are about to become a part of the mainstream global financial system,” he said.
As for what can help ensure the approval and integration of stablecoins into the global payment system, Allaire said, “The really key thing is a full-reserve model.”
“The assets can be a mixture of overnight cash at central banks, short-duration Treasury bills or equivalent government debt,” he said. “If you have that foundation as the asset base, and that’s regulated and looked after by banking supervisors, you’ll actually have the safest fiat digital instruments in the world. So we are pushing for that, and that is increasingly, I think, what we are going to see around the world.”
When asked about the U.S. Securities and Exchange Commission (SEC) specifically, Allaire said that at the global level, a uniform view is emerging that payment stablecoins are the domain of credentialed supervisors, banking and payment supervisors, and that also “seems to be the focus of the United States.”
“There could be stablecoins that behave in different ways, which might be subject to securities or commodities regulations, but clearly, these payment tokens that are operating as payment systems, it's clear they are not going to be subject to SEC regulations,” he concluded.
