Some investors see stablecoins as a way to boost the yuan's global role, but Bank of America analysts said they are unlikely to be a major catalyst for the Chinese currency's internationalization.
Despite some investors viewing stablecoins as a way to boost RMB’s global role, analysts at Bank of America said in a note that they are unlikely to be a major catalyst for the internationalization of China’s currency.
The bank argued that “RMB internationalization is better achieved through bilateral agreements for cross-border settlements in local currencies and improving RMB’s liquidity and stability.”
The analysts explained that while some see stablecoins as a way to improve the currency’s global prominence by increasing demand and “creating a system bypassing the SWIFT payment network,” it takes a more cautious view.
The analysts said that “despite some growth potential, stablecoins face challenges in user adoption, issuers’ profitability, and compliance risks.”
The bank added that the “most promising use case is in cross-border payments,” where stablecoins can offer “near-instant settlements at a much lower cost.”