Tether to offer offshore Chinese Yuan stablecoin – Is there a market need?


As a stablecoin, Tether has clout in the market, as it should since it is by far the largest version of this “special use” type of token. The “USDT” reportedly has reserves to the tune of $3.5 to $4 billion, many multiples higher than its closest competitor. Skeptics have accused its management team of cavalierly substituting a line of credit from the Bitfinex crypto exchange for $700 million in cash, but the story today is that Tether will soon be issuing a Chinese currency stablecoin that can be exchanged with USDT.

Stablecoin issuance seems to be more than a passing fad in the crypto industry. The Binance exchange has already issued of few of them on its own, and although there is a rare possibility for appreciation of these tokens in the market, their expressed purpose is to provide a place within the crypto-ecosphere to store un-invested capital and to provide the exchange with additional transaction fee revenue. There may be a few global taxing jurisdictions that do not tax gains until they are converted to fiat currency, the overriding reason why an investor may not deal directly in his domestic currency, especially if his plan is to reinvest at the right moment in another crypto position.

The timing of this announcement, which was made by Dong Zhao, a shareholder of Tether’s sister company Bitfinex, coincided nicely with recent declarations by the Chinese central bank that they had been working on a type of national digital currency that was “ready” for testing and would combine the best of blockchain with other undisclosed enhancements to solve scaling issues. While this project would involve the domestic Renminbi version of the national currency, it is not clear how the Tether stablecoin could benefit in any way by the goings on within China on the crypto front.

In an interview with Coingape, Dovey Wan, a crypto-analyst that focuses on activities with China is doubtful:

I don’t see enough demand for CNHT and alike, as local Chinese will still trade $USDT with CNY, if it’s CNH it will be the same as USD. This is because CNH and CNY are fundamentally two different currencies with regards to the Chinese economy. While CNY is the on-shore currency regulated by the People’s Bank of China, CNH is the offshore Chinese currency that trades in the foreign currency markets. Hence, the demand for the off-shore stablecoin in China is expected to be low.

Tether has not disclosed their strategy or objectives with their new “CNHT”, but Dovey Wan warns that the way crypto firms operate may not fit in well with their way of thinking. Of course, Tether may not be looking toward the Chinese mainland for its path to success. There have been many storylines in the press this year about domestic Chinese investors finding innovative ways through Virtual Private Networks (VPNs) and OTC brokers to move capital from onshore accounts to offshore investments in Bitcoin and other crypto altcoins. Perhaps, this group is Tether’s target market, so to speak.

The movement of funds in and out of Tether’s offerings might amaze the uninformed. Daily volumes through the Tether platform tend to exceed those for Bitcoin, a good indication that investors are taking advantage of the short-term storage capability of Tether. Tether management might be onto something.

More about Tether can be found below:

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