The Taiwan Banker

The advancement of human civilization includes several goals: more convenient, faster-paced living, lower costs, and less regulation. There are always enterprising individuals who will go invent and design devices and methods to achieve these goals. Once a product is launched, it is adopted by pioneers, gradually spreading to the larger population, and it becomes more user-friendly. Regulation, restrictions, and even bans are common in the early stages of development, since the government cannot control the product, and speculation and fraud inevitably harm the public. Once it has achieved a certain degree of success, however, regulation is inevitable. Sixteen years ago, Satoshi Nakamoto designed the blockchain to achieve decentralization beyond the reach of government control, embarking upon a virtual currency journey. While relatively recent, this history from the algorithmically-generated Bitcoin to stablecoins linked to national fiat currencies has seen gradual adoption by major regulations. The technology of stablecoins is already mature and is not the main focus of discussion. Instead, we are interested in understanding the reactions they will catalyze across society when they are accepted as a payment or a transaction medium. To design suitable regulatory frameworks, Taiwan can learn from the experiences of pioneering countries, including the US, Japan, the EU, and neighboring Hong Kong, as well as their corresponding market reactions. Stablecoins face several challenges in gaining government and mainstream acceptance. First is critical question of monetary sovereignty. Will they be pegged to the currently dominant US dollar or the New Taiwan dollar? Second, can regulators effectively oversee them? In the event of a bank run, can deposits be easily redeemed for fiat currency? Furthermore, traditional banks remain cautious, as stablecoins could potentially impact the decades-old SWIFT protocol and alter their profit models. Finally, and most importantly, the success of any scheme depends not only on the technical protocols, but the establishment of market ecosystems. The remarks of European Central Bank President Christine Lagarde represent the concerns about monetary sovereignty and oversight: while stablecoins appear innovative, they introduce structural vulnerabilities already familiar to the traditional financial system, particularly in liquidity allocation and cross-border integration of regulation. “I think it risks undermining our capacity to conduct monetary policy,” she emphasized. “I think it risks weakening the sovereignty of those countries.” Lagarde’s views are debatable, but they do highlight the considerations of the Taiwanese government. Stablecoins are now being widely discussed, yet without clear agreement on the direction these discussions should go. Thus, traders are optimistic, the government is cautious, traditional banks are concerned, and the public is largely unaware of the implications. Future application scenarios remain uncertain. Taiwan is approaching a crucial juncture in stablecoin development, but it still has a long way to go along this road. What they will look like, and what business models they will create, remain to be answered over the next decade. Nakamoto's dream of decentralization ultimately ended up as a centralized stablecoin, yet the spark of innovation will continue to play a role in advancing human civilization.