Wang Yongli, the former Vice President of Bank of China, pointed out in his speech that USD stablecoins still face many challenges and are not universally accepted truths. The legislation stipulates that issuing a USD stablecoin requires sufficient reserves, which can only consist of US dollar cash deposits, short-term US Treasury bonds, or repurchase money market funds backed by a central bank. Among these, US Treasury bonds constitute the largest portion. However, a significant issue arises: if the market trading price of the Treasury bonds fluctuates, what happens if their value declines after the issuance date, even if the reserve was 100% initially? This represents the first challenge—the potential for the reserves to later become insufficient. The second challenge lies in the fact that while the types of reserve assets are specified, there is no clear, unified structure mandated for them. When different institutions issuing USD stablecoins maintain non-uniform reserve structures, the resulting stablecoins are effectively distinct from one another, creating arbitrage opportunities. This situation differs markedly from the Hong Kong dollar system, where, despite three note-issuing banks, the backing is highly unified and guaranteed by the Hong Kong Monetary Authority and the issuing banks. Looking ahead, with the potential emergence of dozens or even hundreds of USD stablecoins, the question remains: can they truly be effectively regulated? The third challenge is that even with unified rules prohibiting over-issuance, if decentralized finance (DeFi) protocols permit lending activities using stablecoins, inadequate management could lead to additional issuance or money creation—raising doubts about controllability. More importantly, allowing non-licensed institutions, rather than licensed financial entities like banks, insurance companies, or securities firms, to issue stablecoins means that various regulatory requirements cannot be fully implemented in the short term, posing significant risks. This could lead to a series of problems, indicating that current regulatory frameworks still require further refinement.
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