‘Stablecoins Trust Risks Should Not be Ignored’, Says Former Head of the Bank of China
As stablecoins have recently become all the rage in the blockchain space, Li Lihui, who heads the Blockchain Research Working Group at China’s National Internet Finance Association(NIFA), said on December 24 that although stablecoins could maintain a stable price, the “trust risks” brought by them should not be ignored, according to a report by Yicai.
Rather than fluctuating on the whims of traders’ speculation, stablecoins are characteristically pegged to a fixed amount of real-world assets, such as fiat currencies like USD or other blockchain-based assets like Ether.
Li, who is also a former head of the Bank of China, one of the four state-owned commercial banks in the country, shared his insights on the cryptocurrency industry at a digital financial assets forum held in Beijing.
“The market cap of certain stablecoin stands at over $1 billion, while smaller ones have a market value of hundreds of millions of dollars.” Li said, “ But some banking accounts linked to stablecoins are lack of transparency and regulation.They add trust risks.”
When it comes to cryptocurrency trends for the new year, Li stated that virtual currencies sometimes expands at an alarming rate, which may pose a threat to fiat currencies. But whether digital currencies could become a mainstream payment method relies on four principal elements: higher efficiency, lower cost, economic scale with commercial value, and social credibility and security.
He believed the volume of transactions between virtual currencies and fiat money depends on these factors: the international status of the fiat currency, the government’s regulatory stance, public sentiments and the market environment.
He further argued that developed countries possibly shift their regulatory attitudes towards cryptocurrencies in the near future. Japan is expected to focus on opening up its financial market despite its crypto friendly status. The United States might dedicate to establishing a regulated digital finance market, defining the boundaries of regulations.And Singapore possibly pushes forward innovative experiments in digital finance.