China CB: Stable Coins accepted in China will need to observe FX rules

China is preparing to be the first country to roll out a digitized domestic currency, a development that is being closely watched by the world’s financial services industries, though few details are currently available.

Akin to Facebook’s proposed Libra digital currency and other cryptocurrencies such as bitcoin, the Digital Currency Electronic Payment (DCEP) project will be powered partially by blockchain technology.

The People’s Bank of China will adopt a two-tier approach with its project, Mu Changchun, the head of the central bank’s digital currency research institute, told a forum in Hong Kong. It will first issue the currency to commercial banks and other institutions, who will then resend it to the general public.

“During the research period, and also the issuance period there will be a horse race approach,” Mu said.

“The front runner will take the whole market - who is more efficient, who can provide a better service to the public - they can survive in the future.”

He also said that any other “stable coins”, digital currencies whose value is pegged to that of other assets or currencies, would have to abide by all of China’s foreign exchange rules if they were to be accepted in China.

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