Pan Gongsheng, governor of the People’s Bank of China, first mentioned stablecoins at the Lujiazui Forum held recently. Multiple sources say that JD.com and Ant Group are promoting stablecoin projects in Hong Kong, China. Hong Kong has also specially introduced the “Stablecoin Ordinance”, which will come into effect on August 1st…

For a while, there was a lot of discussion about stablecoins. What exactly is a stablecoin? Why are China’s e-commerce giants and cross-border payment giants rushing to enter the stablecoin market? What impact do stablecoins have on ordinary people? For this reason, the Southern Metropolis Daily reporter interviewed industry experts.

Stablecoins are similar to Jiaozi of the Song Dynasty in China

What exactly is a stablecoin? To better understand the meaning of stablecoins, many domestic scholars, including Yao Yang, a Bo Ya Distinguished Professor at Peking University and director of the China Center for Economic Research, have compared stablecoins to the “Jiaozi” of the Northern Song Dynasty in China, which was also the world’s earliest paper currency.

According to China Gold Coin Group, during the Northern Song Dynasty, Sichuan was bordered by Tubo to the west and Dali to the south. In the eyes of the Northern Song Dynasty, this was extremely dangerous. Therefore, in the 13th year of the reign of Emperor Taizu Zhao Kuangyin, an order was issued to strictly prohibit copper coins from entering Sichuan, and the people of Sichuan could only use iron coins.

However, iron coins were small in value and not as valuable as copper coins. Therefore, merchants in Sichuan often had to carry a large amount of iron coins, which was very inconvenient. For instance, when purchasing a piece of silk at that time, the buyer had to carry 65 kilograms of iron coins.

To address this inconvenience in actual transactions, people in Sichuan boldly sought change and invented a receipt form of 楮 note, which was issued sporadly among the common people to replace the circulation of iron coins with smaller weights. This was the “jiaozi”, and its emergence shaken the foundation of metal coinage.

However, in the report “Envisioning RMB Stablecoins” written by Guo Kai, the executive director of the China Finance 40 Research Institute, it is introduced that jiaozi is not legal tender but a privately issued note. It maintains its value by being linked to deposits or physical reserves (such as iron coins), promising that the holder can exchange for an equivalent amount of iron coins or equivalent at the issuer. This bears a significant resemblance to the mechanism by which modern stablecoins maintain their value peg through collateral assets.