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China urged by companies, experts to consider yuan-based

stablecoins

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Mainland China has banned cryptocurrency trading since

2021

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Many companies worldwide looking into releasing

stablecoins

(Writes through with analysts comments and data on stablecoin

use)

By Summer Zhen

HONG KONG, July 11 (Reuters) - A Shanghai regulator said

it held a meeting this week for local government officials to

consider strategic responses to stablecoins and digital

currencies - a marked shift in tone for China where crypto

trading is banned.

The Thursday meeting was organised by the Shanghai

State-owned Assets Supervision and Administration Commission and

follows calls by experts and major companies in China to develop

a yuan-pegged stablecoin.

We need to have "greater sensitivity to emerging

technologies and enhanced research into digital currencies," He

Qing, the regulator's director, told the meeting according to a

post on the body's official WeChat account.

Photos of the meeting showed some 60-70 attendees.

Shanghai is China's main international financial hub and

often leads pilot programmes for regulatory change.

"Given China's strong fintech ecosystem, it has the

potential to be a key player in shaping the future of

blockchain-based payments," said Nick Ruck, director at LVRG

Research.

Blockchain-based stablecoins - which are typically pegged to

a fiat currency and offer faster and cheaper transactions - have

gained much momentum worldwide. One estimate by ARK Investment

Management puts the transaction value of stablecoins globally

last year at $15.6 trillion, surpassing that of Visa. It

noted that the value per transaction tends to be much higher.

In the U.S., where the legal framework is more developed,

more and more companies such as Amazon ( AMZN ) and Walmart ( WMT )

are looking at launching stablecoins.

In Asia, South Korea's new government has pledged to allow

companies to introduce won-based stablecoins and develop the

necessary infrastructure, though the central bank has cautioned

that it should be a gradual adoption.

E-commerce firm JD.com ( JD ) and fintech giant Ant

Group are urging China's central bank to authorise

yuan-based stablecoins to counter the growing sway of U.S.

dollar-linked cryptocurrencies, sources have said.

The companies plan to apply for stablecoin licenses in Hong

Kong, where stablecoin legislation is scheduled to take effect

on August 1.

HURDLES

At the Shanghai meeting, a policy expert from Guotai Haitong

Securities spoke about the history, types and characteristics of

cryptocurrencies and stablecoins, and analysed global regulatory

frameworks and strategic approaches, the regulator's post said.

The expert explained the opportunities and challenges facing

stablecoins and offered policy suggestions for digital currency

development, the post added.

Separately, Yang Tao, the deputy director of the think tank

National Institution for Finance and Development, said this week

that China should explore the issuance of yuan-based stablecoins

in the Shanghai Pilot Free Trade Zone and in Hong Kong

simultaneously.

Any change in China may not come easily, with the country's

capital controls likely to be a key hurdle to the development of

stablecoins, market participants have said.

The central bank's governor Pan Gongsheng also said last

month that the boom in digital currencies and stablecoins poses

huge challenges to financial regulation.

Mainland China banned cryptocurrency trading and mining in

2021 due to concerns about the stability of the financial

system.

While the debate around stablecoins in China has heated up

of late, the outlook for other cryptocurrencies is less clear.

Outside mainland China, non-stablecoin digital currencies

continue to increase in popularity with bitcoin climbing

to an all-time high above $118,000 on Friday.