Circle, the issuer behind the popular USDC stablecoin pegged to the US dollar, has invested in a Chinese yuan-backed stablecoin project, CNHC.
The timing and strategic importance of the partnership is hard to overlook. In a matter of several years, stablecoins have grown from a fringe category to a stablecoin Over $130 billion market. These digital currencies are usually backed by traditional assets such as the US dollar and are designed to offer a less volatile way to trade than, for example, Bitcoin and Ethereum.
As the stablecoin industry flourishes, a hierarchy begins to form, mirroring the traditional US dollar-dominated financial world. currently, more than 99% Of the existing stablecoins backed by the US dollar, CNHC represents one of the few attempts to challenge the dominance of the US dollar in the blockchain world.
The department itself has been having problems since March. It was hit first by Silvergate closing And then Silicon Valley bank collapse. News has emerged that the stablecoin issuer has held backup deposits in both banks. Over the past week, USDC briefly Disconnected of its target value of $1.
It is not clear how much stake Circle has in CNHC, a cross-border payment service provider registered in the Cayman Islands. But the move to establish some presence in the east could be a good hedge bet for the Boston-based crypto startup.
CNHC’s latest total funding round $10 million led by KuCoin, currently Fourth largest crypto exchange In the world. IDG Capital and Circle were co-investors.
encryption in Hong Kong
While the US dollar-dominated world of stablecoins has matured and become closely regulated, the yuan-backed space is just beginning to take shape. The movement takes place in Hong Kong, which has historically been the largest offshore center for the yuan.
in 2009The city established a yuan settlement scheme, paving the way for the gradual internationalization of the currency. This step was marked by the creation of the foreign currency CNH, where the letter “H” stands for Hong Kong.
In the past few years, the city’s status as a financial center in Asia has been shaken by geopolitical events. But there are signs that it is trying to restore investor confidence.
Notably, it relaxes the rules around crypto-based finance. In late February, the city Suggest a set of rules It could allow retail investors to trade major cryptocurrencies such as Ethereum and Bitcoin, which is a stark contrast to the mainland China’s crackdown on all forms of cryptocurrency transactions.
The CNHC stablecoin was born to ride the new wave of cryptocurrency regulations in the region. The startup, which was founded in early 2021, is establishing its headquarters in Hong Kong.
“The development of regulated stablecoins is positive for Hong Kong as an international financial centre,” says Curt Shea, founding partner of Hong Kong-based venture capital firm Prodigital Future Fund. “Improved transparency and better protection for investors is the direction Hong Kong is headed, and I suppose more traditional banks may join as issuers.”
How it works
As a fully collateralized 1:1 stablecoin backed by the offshore Chinese yuan, CNHC requires approval from the Hong Kong Monetary Authority and is required to submit audit reports at the request of the local government, the company told TechCrunch.
The stablecoin issuer has also built a trust structure to sponsor collateralized fiat currency and a framework for KYC (Know Your Customer) and AML (Anti-Money Laundering).
CNHC can be exchanged for fiat yuan abroad on the stablecoin platform. For conversion to other currencies such as USD, EUR and GBP, CNHC works with partners in different countries.
CNHC is being issued on Ethereum and Conflux, a KuCoin-powered blockchain that features fast transactions and low fees. Conflux is also one of its kind Claims To be the only regulatory-compliant public blockchain in China. The Chinese blockchain was planning to move its headquarters to Hong Kong, its co-founder He said at an event in January.
Other crypto companies are also creating stablecoins pegged to the yuan. in DecemberTron blockchain billionaire Justin Sun welcomed Chinese yuan-pegged TCNH.
Founded in early 2021 by Jack Chou and Joy Cham, CNHC helps Chinese exporters collect payments from developing countries, where banking and other traditional financial institutions are lagging behind, using stablecoins. In 2022, the company has processed $40-50 million in monthly transactions via USDT and USDC pegged to the US dollar as well as the CNHC stablecoin.