Zhou Xiaochuan: The central bank is concerned about the over-issuance of stablecoins and the emergence of high leverage

According to Odaily Planet Daily, former Governor of the People's Bank of China Zhou Xiaochuan wrote an article titled "A Multi-Dimensional Review of Stablecoins," in which he pointed out that central banks currently have at least two concerns about stablecoins. The first is "excessive money issuance," where issuers issue stablecoins without 100% true reserves, a phenomenon known as over-issuance. The second is high leverage, where the post-issuance operation of stablecoins creates a multiplier effect on monetary derivatives. To date, centralized account systems have demonstrated good applicability. The argument for replacing account-based payment systems with full tokenization is weak. Under the current improved institutional framework, whether it is the US Genius Act, relevant regulations in Hong Kong, or regulatory provisions in Singapore, these issues have yet to be addressed with confidence.

While many believe stablecoins will reshape the payment system, objectively speaking, the current payment system, especially in the retail payment sector, has little room for cost reduction. Judging from current micro-behavior, we must be wary of the risk of stablecoins being overused for asset speculation. A deviation in this direction could lead to fraud and financial instability. Just because a stablecoin issuer has obtained the relevant licenses and paid reserves does not necessarily mean they have issued the stablecoin. Without sufficient demand, stablecoins may not enter effective circulation, meaning they may receive an issuance license but remain unissued. Whether a stablecoin is used as a temporary payment medium for transactions or as a store of value for a limited period of time will affect its remaining market share after issuance.