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BSN Head Sees e-CNY, Stablecoins as Two Extremes of Digital Currency in China

Though a central bank digital currency (CBDC), the digital yuan (e-CNY) is in the payment-related digital currency category with stablecoins like USDC and USDT in China but with a different path, the CEO of Red Date Technology and Executive Director of the Blockchain Service Network (BSN), Yifan He, has said. 

Speaking on why China is leading the race to push for a CBDC while at the same banned cryptocurrencies entirely, He says cryptocurrencies fall under the other category of digital currency that exists in China – the investment-related – which are also considered to be securities. As such, as is the case in many other countries, securities have to be heavily regulated because of their being used as an investment instrument and the need to ensure that they are able to trade fairly hence their ban in China. 

“For cryptocurrencies, it is technically impossible to regulate that,” He said in a panel discussion at the Atlantic Council-UC San Diego conference on digital currency in China and the Asia Pacific held last week on why cryptocurrencies including their mining, trading and exchanges are banned in China. “Another reason is that, in China, most investors are individuals. So individual investors need to be protected mostly.”  


e-CNY, stablecoins in China and future growth 

Meanwhile, despite falling in the same payment category which he says is advanced in China, He says only the yuan is recognised as legal tender in the country while stablecoins are not allowed. 

“Right now, those two technologies – stablecoins and Chinese e-CNY – we actually see (them) as two extremes: the Chinese e-CNY is centralized, KYC-based and two-tiered (you need to go through commercial banks for you to use it),” he said. “But stablecoins like USDC and USDT are totally on public chains, no KYC, and can be traded basically (and) transfer money anonymously. So it’s two extremes. Personally, I believe all the payment-related digital currencies would fall in between those two.”

He believes digital currencies will eventually change the entire payment infrastructure and the financial sector even though there will be “a pretty limited place for private to get involved” in China. He adds that as the e-CNY ecosystem gets bigger, he thinks there would be more openness and a lot of opportunities in the future. Some of the opportunities he identifies for financial institutions and technology companies will centre on how to build an infrastructure that links together CBDCs from various countries and hundreds of stablecoins that will exist as well as handle foreign exchange. 

“For example, why do we need SWIFT? Because commercial banks have different accounts. For these accounts to talk to each other, they need something like SWIFT or a messaging app. There will be a similar thing in the world for digital currencies,” he said as he suggests that CBDCs and stablecoins will co-exist but for different scenarios and use cases depending on the efficiency, transparency and easy access needs or the need to make larger transfer among financial institutions. 

With more CBDCs and stablecoins from different countries, the BSN head expects more infrastructures to be needed to link them together at some point, to handle settlements in different CBDCs and stablecoins, for all financial institutions to settle in different currencies in an efficient way. 

“There will be so many infrastructures needed to support this kind of digital currency economy. I think there is a huge opportunity,” he said. “That infrastructure, just imagine, is probably more complicated this way because stablecoins are anonymous, how to handle KYC and let them talk to different countries’ central bank digital currencies’ systems (legally). It’s very complicated.”


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