Tether is rumored to create a new stable coin “$CNHT” based on the Chinese National Currency, the RMB using offshore accounts. Tether is the creator behind the infamous stablecoin $USDT, which is used on many cryptocurrency exchanges. This could potentially be Tether’s way of beating the People’s Bank of China to issue the first digital version of the RMB. This news was immediately met with mixed reactions. On one hand, it might help with the adoption of cryptocurrencies by allowing for an easier on-ramp to crypto for Chinese. However, this might also been seen as a move to challenge the People’s Bank of China, which is known to have disastrous consequences.
This news has been “leaked” by DGroup founder Dong Zhao, who is a known investor in Bitfinex and Tether.
Challenging the People’s Bank of China?
China maintains a “closed” capital account, meaning companies, banks, and individuals can’t move money in or out of the country except in accordance with strict rules.
International Trade Administration
State owned People’s Bank of China (PBoC) has always had a tight group on the RMB. RMB transfers out of China are tightly regulated and have to go through government approval before it is sent. If Tether creates a digital version of the RMB, users can freely send the currency in and out of the country on the blockchain – without government oversight. Netizens were quick to point this out, as shown by the following reactions on Chainnode:
Break things first?
Tether has always had a reputation of breaking things first, then figuring out the legal ramifications. Tether and Bitfinex are currently under investigation by the NY attorney General. It is not too difficult for Tether to secure secret offshore bank accounts to hold RMB, then issue the tokens on the blockchain. The technology is already there from USDT – the issue is if they can keep the bank accounts from been frozen by authorities. Funnily enough, members of the chinese crypto communities have called for a boycott of $CNHT
Chinese Currency Control Information:
https://www.export.gov/article?id=China-Foreign-Exchange-Controls
https://www.safe.gov.cn/en/
https://www.scmp.com/business/banking-finance/article/3008795/chinese-banks-quietly-lower-daily-limit-foreign-currency
