Head of crypto firm Circle accepts ban in mainland China, but sees role for yuan-backed stablecoins
- Circle co-founder and CEO Jeremy Allaire said Circle is encouraged by Hong Kong’s moves to regulate stablecoins, as Asia is its largest non-US market
- He acknowledged that China is not likely to open up to cryptocurrencies, but said stablecoins could help Beijing in its goal of yuan internationalisation
Jeremy Allaire, co-founder and CEO of the USDC stablecoin operator Circle, said he is under no illusions about mainland China opening its markets to cryptocurrencies, but he remains optimistic about Web3 development in Hong Kong and the local monetary authority’s move towards regulating stablecoins.
“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 in an interview with the South China Morning Post on Friday, the final day of his two-week trip to Asia, which included an appearance at the World Economic Forum in Tianjin in late June.
“I think there is Chinese government support for that,” he added. “That’s different than feeling like it says something about opening up the trading of crypto on the mainland. I don’t think there’s anything there.”
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“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 referred to a stablecoin pegged to the offshore yuan (CNH) as an example of how this might work. Members of the team behind the stablecoin CNH Coin, which makes another pegged to the Hong Kong dollar called HKD Coin, were detained in Shanghai in May, according to Chinese media. Authorities have yet to give an explanation for the detention.
Stablecoins are the next front in Hong Kong’s bid to regulate crypto markets and become a global virtual asset hub.
USDC, or USD Coin, is the second-largest US dollar-backed stablecoin in the world by market capitalisation, after Tether (USDT). Boston-based Circle calls itself the world’s largest “regulated dollar stablecoin issuer”, as USDC is considered a “stored-value instrument” in the US. Tether Ltd, which manages USDT, is owned by Hong Kong-based iFinex.
Allaire said Circle is encouraged by plans from the HKMA, which in January released a conclusion on its discussion paper for cryptoassets and stablecoins.
“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.”
Central banks around the world have expressed concern about the potential for stablecoins to impact financial stability. As a possible mitigation measure for this, the HKMA said in its conclusion paper that the “value of reserve assets … should meet the value of the outstanding stablecoins at all times”.
There have been some questions about the future role of stablecoins in a well-regulated environment once CBDCs are available. For Allaire, CBDCs are complementary and private coins still have a role to play in innovation.
“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.”
Much of Circle’s business activity today is in Asia, its largest non-US market and where it has about 125 employees, according to Allaire.
