Central bank Governor Yang Chin-long (楊金龍) yesterday took a cautious stance on stablecoins, saying they do not yet meet the standards needed to serve as pillars of the monetary system, despite their growing role in digital finance and tokenized assets.
Speaking at a conference organized by Financial Information Service Co (財金公司), Yang said stablecoins have payment potential, but fall short in key Bank for International Settlements criteria, such as monetary unity, elasticity and integrity, making them unsuitable to be core components of the financial system.
Different stablecoins often trade at discounts or premiums, depending on reserve quality and issuer credit risk, with secondary market prices diverging from their intended parity, he said regarding monetary unity.
Photo courtesy of the central bank
Combined with many issuers being registered in lightly regulated jurisdictions, some academics have called the environment a modern version of the US’ “wildcat banking” from 1837 to 1865, when a lack of federal regulation allowed many poorly capitalized, state-chartered banks to issue their own currencies.
Talking about supply elasticity, Yang said stablecoins cannot be easily adjusted, because new tokens are only issued after users deposit fiat currency.
Most stablecoins could be used across borders and held by anyone, making it harder to track its users and increasing the risk of fraud or illegal activity, he said.
Taiwan’s payment infrastructure is already highly developed, Yang said.
New Taiwan dollar-based stablecoins would operate as “pay-before” stored-value instruments, similar to electronic payments, Yang said, questioning whether consumers would adopt them for real-world transactions, as people are becoming increasingly cost-conscious and might not see its benefits.
The global stablecoin market is also dominated by USDT and USDC, he said, adding that while the tokens offer fast, low-cost cross-border payments, they carry risks.
For example, USDT is not fully regulated and allows anonymous transactions, he added.
It remains uncertain whether stablecoins can maintain their speed and cost advantages once regulation is applied, Yang said.
Stablecoins’ monthly transaction volume, about US$10 billion, is also still far below traditional networks such as Visa and PayPal, he added.
For Taiwan, the development of NT dollar stablecoins would depend on market demand, regulatory clarity and technological readiness, Yang said, adding that he expects their use to first emerge in virtual asset markets and real world asset tokenization.
Although stablecoins might play a role in a tokenized monetary system, settlements would still require a central bank digital currency to ensure trust and compatibility between different types of private money, he said.
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