Tether has big plans for the cryptocurrency industry. So much even that they will undoubtedly be scrutinized even more than before. The company’s new plan involves a digital token backed by the Chinese RMB. It will be known as CNHT, and for some unknown reason, there will be a Belgian bank holding the stablecoin’s reserve.
Tether Wants Chinese Money
Given the public perception of cryptocurrency in China, one has to wonder what Tether is thinking. It is a country where Bitcoin isn’t looked upon fondly. Instead, the government has been fighting tooth and nail to ban all cryptocurrency activity. Only mining is still allowed, and event hat is under strict supervision. Issuing a digital stablecoin for this particular country seems to make little to no sense whatsoever.
Even so, Tether feels it is the right move. They will peg the CNHT stablecoin to the Chinese renminbi. For the time being, the service will be supported by at least one domestic company. RenrenBit will allow trading and depositing of CNHT once the stablecoin launches. So far, there has been no indication as to when that will be exactly. As is usually the case with Tether, transparency is not the company’s strong suit.
Who will use it?
The big question is who this stablecoin is for. It seems unlikely China will suddenly allow for trading cryptocurrencies through this new digital currency. Additionally, the Chinese yuan is anything but stable. Not too long ago, it was devalued by the Chinese government for the fourth time in quick succession. It is impossible to create a stablecoin pegged to this currency in that regard, yet Tether will give it a shot anyway.
Additionally, it does not appear as if Tether has anyone willing to buy CNHT at this time. Without investor funds coming in, this stablecoin cannot be minted on a blockchain. The stablecoin’s balance sheet must match the number of funds in reserve. How all of this will be handled, is rather unclear. With seemingly no real demand or purpose tot his currency, it is a very unique, albeit potentially short-lived business venture.
The Belgian Bank Angle
To make things even more interesting, there is a very unusual banking partner involved. Rumor has it a Belgian bank will handle the stablecoin’s reserve. Which bank would take such a risk, remains unknown. Belgium has no official guidelines for cryptocurrencies or digital currencies at this time. It is also not a region where any noteworthy activity has taken place in recent years.
Keeping the reserve offshore does make some sense. It is also a good move for Tether, assuming these rumors are true. The company is heavily reliant on the United States at this time. Diversifying some of the risks is never a bad idea. Furthermore, involving this Belgian bank would aid in distributing the offshore circulation of the renminbi. There are a lot of unknown aspects of Tether’s new venture. More information is expected to become available in the weeks ahead.
Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency or digital currency.