- Several countries and regions are developing fiat-backed, central bank digital currencies (CBDCs).
- Some regulators aim to restrict or ban existing stablecoins in order to make room for official CBDCs.
- However, these restrictions have not yet been enforced.
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Numerous central bank digital currencies (CBDCs) are under development, meaning that various countries are planning to issue a digital asset tied to their own regional fiat currency.
This has largely been considered good news for the crypto industry; however, recent trends ask whether CBDC regulation could harm popular stablecoins that are already in circulation.
Regulations Could Restrict Stablecoins
This week, the People’s Bank of China (PBoC) published a draft law indicating that no third parties are allowed to create a yuan-backed cryptocurrency.
“No unit or individual may make or sell tokens, coupons and digital tokens to replace RMB in circulation in the market,” the document states.
Companies that violate this rule will be fined five times the income that they generate. If the law is passed, China’s CBDC will effectively be the only stablecoin for citizens.
China is not alone: in September, several European nations announced plans to heavily restrict third-party stablecoins until regulations are more clear. Though those restrictions are not necessarily permanent, the law is clearly designed to make room for regulated CBDCs.
Bruno Le Maire, Finance Minister of France, has explicitly stated that the European Central Bank should be “the only one to be allowed to issue a currency.”
In April, the Financial Stability Board (FSB), an international G20 organization, recommended numerous restrictions on stablecoins. Though it did not explicitly recommend that nations create their own CBDCs, the suggested policies leave room only for heavily-regulated stablecoin projects, putting CBDCs at a clear advantage.
Will These Regulations Succeed?
The extent to which these…