China’s central bank warned that stablecoins, a type of digital currency, pose serious risks to global financial systems, while stressing that China’s digital yuan doesn’t have the same problems, reported Caixin.
Digital currencies issued by private institutions, including stablecoins, have become speculative tools that threaten financial security and social stability, and have become used as payment for illegal activities and money laundering, Fan Yifei, deputy governor of the People’s Bank of China, said at a press briefing Thursday.
Fan said Chinese government has already taken some actions to limit the expansion of global stablecoins in the country.
The value of stablecoins is pegged to a reserve asset like the US dollar or gold. They are attractive to investors because, in theory, their value is less volatile than Bitcoin and other cryptocurrencies.
As cryptocurrency trading has exploded, so has the use of stablecoins. The total market capitalization of the two largest stablecoins, Tether and USDC, has grown from less than $25 billion to over $100 billion at the end of May.