Stablecoins have entered a phase of rapid growth since the second half of 2023, with their current market size exceeding $230 billion and active accounts surpassing 250 million. Their integration with traditional payment systems and banking infrastructures highlights their transformative role in global financial innovation. However, persistent misconceptions about stablecoins hinder policy consensus regarding their development for offshore or onshore RMB applications. This article addresses six critical misunderstandings to foster a balanced perspective on stablecoins’ functional attributes and strategic value.
Misconception 1: Equating Stablecoins with Generic Cryptocurrencies
Reality: Stablecoins are a distinct subset of cryptoassets, differentiated by their stability mechanisms and semi-centralized governance.
- Functional Attributes: Unlike volatile assets like Bitcoin or meme coins, stablecoins (especially fiat-backed variants such as USDC and USDT) combine the stability of fiat currencies with blockchain’s efficiency and transparency.
- Governance: Stablecoins are often issued by centralized entities that maintain reserves and enforce compliance (e.g., freezing suspicious transactions), aligning with regulatory frameworks like the U.S. GENIUS Act.
Key Takeaway: Regulatory bodies (e.g., EU, Japan) classify stablecoins as payment tools, not speculative assets.
Misconception 2: Stablecoins Lack Value Stability
Reality: Incidents like USDC’s depegging during the 2023 Silicon Valley Bank crisis are exceptions, not the norm.
- Reserve Transparency: Leading issuers (e.g., Circle) now provide monthly audits and disclose reserve compositions (e.g., short-term Treasuries).
- Regulatory Safeguards: Jurisdictions like Singapore mandate liquidity requirements and asset segregation to mitigate risks.
👉 Explore how top stablecoins maintain stability
Misconception 3: Stablecoins Conflict with CBDCs
Reality: They serve complementary roles.
| Feature | CBDCs | Stablecoins |
|---|---|---|
| Scope | Domestic retail/wholesale | Cross-border/DeFi ecosystems |
| Governance | Centralized | Semi-decentralized |
| Example | Digital RMB | USDT in mBridge projects |
Synergy: Projects like Hong Kong’s Aurum demonstrate hybrid CBDC-stablecoin systems.
Misconception 4: Stablecoins Erode Monetary Sovereignty
Reality: Controlled adoption mitigates risks.
- Usage Limits: EU’s MiCA caps daily transactions to prevent dominance.
- Reserve Controls: Mandating local asset backing (e.g., U.S. Treasuries) preserves monetary policy efficacy.
Case Study: The Eurodollar market coexists with Fed policies despite global reach.
Misconception 5: Stablecoins Hinder Currency Internationalization
Reality: They amplify reach.
- RMB Potential: Stablecoins could bridge gaps where CIPS lacks penetration (e.g., SME cross-border trades).
- Dual Strategy: Complementing mBridge with RMB-pegged stablecoins diversifies pathways.
Data Point: Stablecoin transactions ($7T/year) already rival Visa+Mastercard combined.
Misconception 6: Stablecoins Fuel Illicit Finance
Reality: Advanced tracking and regulations curb abuse.
- Tech Solutions: Tools like TRM Labs trace illicit flows (e.g., $130M frozen in 2024).
- FATF Compliance: “Travel Rule” extensions enforce transparency for transfers >$1,000.
👉 Learn about blockchain anti-money laundering tech
FAQ Section
Q1: Are stablecoins safer than Bitcoin?
A1: Yes—fiat-backed stablecoins have lower volatility and higher regulatory oversight.
Q2: Can CBDCs replace stablecoins?
A2: Unlikely; their use cases differ (e.g., CBDCs for domestic vs. stablecoins for global settlements).
Q3: How do regulators prevent stablecoin misuse?
A3: Via reserve audits, transaction caps, and AML frameworks like MiCA.
Q4: Will RMB stablecoins boost China’s financial influence?
A4: Potentially, by enhancing RMB’s role in trade and DeFi ecosystems.
Conclusion: Stablecoins are pivotal to the future of finance. By debunking myths, policymakers can harness their potential for RMB internationalization while ensuring robust safeguards. Stakeholders should prioritize:
- Offshore pilots for RMB stablecoins.
- Collaborative regulation aligning with global standards.
- Public education to demystify stablecoin mechanics.