Popularly known for their USDT stable coin, controversial cryptocurrency platform Tether may soon issue a Yuan-pegged stable coin named “CNHT”, according to a trader connected to the company.
Announced by Zhao Dong, an over-the-counter (OTC) trader from China and shareholder of Tether affiliate crypto exchange Bitfinex, the move would make this the fourth stable coin released by Tether. Tether also has coins pegged to the US dollar, Euro (EURT), and the Japanese yen (JPYT).
Earlier this year, talking to BlockPublisher Cheryl Aaron, Senior Counsel at Michael Best law firm had said;
“There will be a few key drivers of mainstream cryptocurrency adoption in 2019. The first is the rise of stable coins, which are a type of cryptocurrency designed to minimize volatility – one of the key reasons that certain investors and businesses have avoided cryptocurrencies to date.”
For anyone unfamiliar with stable coins, they are digital currencies that are backed by an asset with a more “stable” value, such as the Chinese renminbi or the US dollar. Since its conception, cryptocurrencies provide speedy, low-cost payments that have served to benefit most users across the board— but unfortunately, this came at the cost of extreme volatility. A post by FXCM entitled ‘What is a Stable Coin?’ emphasizes that unlike crypto they benefit from less volatility, given that they’re pegged against currencies whose foreign exchange fluctuations are steady and somewhat stable. On the other hand, typical cryptocurrencies such as Bitcoin or Ethereum experience high levels of inconsistency, rendering its conventional purpose as a medium of exchange comparatively moot. After all, a Bitcoin investor may be hard-pressed to part with their digital assets if they believe the prices will go up soon. In fact, our writer Habibah Shahid explains that stable coins are viewed as the solution to the instability of popular cryptocurrencies, as it represents fiat money with all the advantages of crypto.
This move speaks volumes of just how far the Chinese Yuan has gone. Historically speaking, the South China Morning Post reports that the Chinese Yuan was only a domestic currency until 2003. It wasn’t until the State council began to loosen the restrictions for its use and gave banks the go-signal in Hong Kong to offer Yuan deposits, remittances, exchange, and credit card services. The offshore trading market exploded, and today Hong Kong serves as one of the largest hubs for offshore Chinese Yuan deposits.
Zhao has also proudly announced that his digital asset management platform RenrenBit will be the first to invest in the project, with the project’s reserve to be held in Belgium. He also believes that the introduction of this new coin will reduce Tether’s dependency on the US dollar for business and boost the circulation of offshore renminbi even further.
However, critics think otherwise. It should be noted that this is not the first stable coin pegged to the Yuan— as crypto investment platform eToroX introduced “CYNX” in May. Although it’s too soon to have any statistics on its progress just yet, critics are already skeptical about seeing high demand for the new stable coin. Local Chinese crypto-traders may still choose to trade the popular USDT coin, as the demand for USD-pegged stable coins is higher than anywhere else in the world. Moreover, with USDT being the commonly used digital currency for international transactions, and the Yuan seeing plenty of fluctuations in the market, it only makes sense to stick to what they’re used to. Critics also believe that Chinese financial regulators will condemn such a cryptocurrency, as Jun Du, owner of Jinse, cites that it can “bring systematic risk to local Chinese cryptocurrency people and companies”.
Amidst this unprecedented announcement, Bitfinex and Tether are currently under investigation by the New York Attorney General (NYAG), who has expressed concerns regarding an alleged cover-up. Bitfinex has been accused of hiding a loss of $850 million in client and corporate funds, and helping themselves to $900 million of Tether’s reserves to make up for it. The two companies have denied these allegations, and have addressed that they will pursue these accusations in court.
As China poises to launch its own cryptocurrency to benefit small-to-medium businesses, which could explain why the to-be-released coin is being criticized, whether Tether’s CNHT is successful remains to be seen. Unfortunately, the stable coin issuer has yet to make a comment on the announcement, and with the regulatory roadblocks they have with the NYAG, they might have to leave crypto-traders in the dark for a little while longer.