Former central bank governor Zhou Xiaochuan: stablecoins pose risks of over-issuance and high leverage, and comprehensive tokenization of alternative account payments is insufficient

Zhou Xiaochuan, former governor of the People's Bank of China, published an article "Multi-dimensional review of stablecoins", which deeply analyzed the development status and latent risks of stablecoins.
Zhou Xiaochuan pointed out that the central bank has two main concerns about stablecoins: first, the risk of "spam", that is, the issuer overissues stablecoins in the absence of 100% real reserves; secondly, the high-leverage amplification effect, the operation of stablecoins after issuance may generate a currency-derived multiplier effect.
He believes that the current centrally managed account system still has good applicability, and the idea of replacing account payment systems through full tokenization is not well-founded. Existing regulatory frameworks such as the Genius Act in the United States, the relevant regulations in Hong Kong, and the regulations in Singapore have not yet dealt with these issues satisfactorily.
Zhou Xiaochuan said that although the market generally believes that stablecoins will reshape the payment system, an objective assessment shows that the current payment system, especially in the retail payment field, has very limited room for cost optimization. He warned against stablecoins being overused for asset speculation, which could lead to fraud and financial system instability.
The article also mentions that obtaining a license and paying a reserve fund is not the same as successfully issuing a stablecoin. Without sufficient application scenarios, it is difficult for stablecoins to form an effective circulation, and there may be a situation of "licensed but not coins". Whether stablecoins are used as a temporary payment tool during transactions or as a store of value for a specific period will directly affect their market retention.