Global Stablecoins and China’s CBDC: New Moneys with New Impacts on the Financial System?

Abstract

Digital currencies are reshaping the financial, monetary, and regulatory landscape. There are at least two routes for the development of digital currencies. One is global stablecoins (e.g., Diem that is previously named Libra), issued by private players, while the other is central bank digital currency (CBDC) issued by central banks, with China’s CBDC as an example and possibly the first CBDC that will be issued by a major economy. Albeit in their rudimentary stages, global stablecoins and China’s CBDC are likely to disrupt the current financial system and challenge existing financial regulation. This article examines two crucial but under-explored questions: what are the approaches of global stablecoins and China’s CBDC, and their impact on financial regulation? Based on comparative analysis, this Article argues that global stablecoins and China’s CBDC would have impacts on macroeconomic (in)stability, the regulation of global stablecoin, and the international monetary order.

Keywords: digital currency, Libra, Diem, central bank digital currency, technology, renminbi, financial regulation, regulatory response