Speaking at the G20 finance officials meeting, Yue noted that the technology powering most crypto projects can be adapted to meet the requirements of the overall financial system, Reuters reported on July 17.
Yue also called for regulation of the sector to avoid associated risks such as the recent collapse of the Terra Ecosystem (LUNA). Stablecoins and crypto exchanges are gateways to DeFi projects, and Yue believes it is easier to regulate them than the products themselves.
“Despite the Terra-Luna incident, I believe that cryptocurrencies and DeFi will not disappear – although they may be held back – because the technology and business innovation behind these developments will likely be important to our future financial system.”
Yue’s stance undermines the HKMA’s long-standing friendly approach to cryptocurrencies. In January 2022, the institution released a statement stating that the authority is open to embracing the benefits of financial innovation while acknowledging the risks associated with it.
Recently, the institution has focused more on stablecoin regulations, especially after the collapse of the Terra ecosystem.
In the bank’s recent discussion paper on its central bank retail digital currency (CBDC), e-HKD, the HKMA warned that stablecoins could undermine the country’s dollar.
The HKMA noted that if a single stablecoin becomes more popular, the local currency will be significantly undermined.