China’s Zhou Xiaochuan Warns of Stablecoin Risks!

Recently, Zhou Xiaochuan, the former Chief of the People’s Bank of China, has threatened that deploying stablecoins on a large scale would endanger financial stability, create fraud possibilities, and hurt the efficient payment system of the country.

Scepticism Toward Stablecoins Amid Global Hype

The former Chief of the People’s Bank of China, Zhou Xiaochuan, claimed that he is not convinced of the quick expansion of stablecoins. At a closed session of the China Finance 40 Forum (CF40), he remarked that we have to look at these digital currencies in many ways, despite the U.S. and Hong Kong developing new regulations. Zhou Xiaochuan cautioned that an excess of excitement would result in poor policy and speculative hype would get bigger.

Efficient Domestic Infrastructure vs. New Entrants

Zhou Xiaochuan remarked that the current retail payment system in China, powered by QR codes, applications such as Alipay and WeChat Pay, and the digital yuan (CBEF), is already highly efficient and cheap. Due to this fact, he thinks that stablecoins can hardly be cheaper or faster, and he wondered why stablecoins should become such a popular thing.

Systemic Risks: Speculation, Fraud, and Capital Control Erosion

The stablecoins are supposed to be pegged to fiat currencies and be held securely with liquid assets. Zhou Xiaochuan cautioned that without powerful rules, particularly in such places as the U.S., Hong Kong, and Singapore, making too many stablecoins might become dangerous. He explained that excessive speculative use may lead to fraud, manipulation of the markets and make the entire financial system less stable. He added that the stablecoins would undermine the influence of money flows and monetary power held by China.

Cautious Path Forward as Authorities Weigh Stablecoin Plans

China seems to be searching for a stablecoin roadmap to enable the yuan to access foreign applications. But Zhou Xiaochuan’s remark is a warning that regulators must be highly cautious. He says that policymakers must balance real utility with systemic risk, and only then proceed, particularly when the digital yuan has already addressed domestic and cross-border requirements.

Bottom Line 

The warnings of Zhou Xiaochuan are a significant response to the demand for stablecoins all over the world. Drawing attention to threats such as speculation, fraud, and loss of financial control, he believes that China needs to maintain stability and time-proven mechanisms rather than pursue digital trends. His message is a reminder that despite the new technology, we should always be resilient and control the use of the emerging financial tools.