Wen Hongjun Stablecoin New Finance Series-16: Three "Standard" Blind Spots in the Central Bank's Stablecoin Report: Seeing Risks Correctly, Misjudging the Battlefield

The central bank of Taiwan recently released a new report on stablecoins, and I found three fundamental omissions in it.

(Previous context: Circle explores cooperation with Nomura Securities, aiming to allow Japanese companies to use stablecoins for cross-border remittances by 2027)

(Background supplement: Wen Hongjun’s New Financial Series on Stablecoins - 14) Will the stablecoin network become the core underlying layer of the new financial industry?

Table of Contents

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• Fundamental Issue One: The Central Bank’s “Player and Referee” Circular Argument
• Fundamental Issue Two: A Defensive Stance Measuring “Cross-Border Tools” with “Domestic Rulers”
• Fundamental Issue Three: A Bank-Centric View Describing Today’s Technology with a Three-Year-Old World
• “Does Taiwan Have No Dollarization Problem”??

Recently, on June 18, the central bank released this report titled “Issues Related to Stablecoins.” I read it carefully.

It compiles data on GENIUS, MiCA, regulatory progress in various countries, and research from the IMF/FSB with solid data and complete footnotes—it’s a comprehensive educational resource.

✅My personal interpretation is that this is a perspective wearing “central bank-centric” glasses, looking at something that is essentially a “cross-border dollar infrastructure.”

Just like my presbyopia, it may require multifocal lenses, or taking off my nearsighted glasses to see close objects more clearly (a pun on “forbidden objects,” 😅).

I am focusing these multifocal glasses on three stances: central bank-centric, defensive, and bank-centric.

Fundamental Issue One: The Central Bank’s “Player and Referee” Circular Argument

The core concept of the entire report is:

“The monetary system must be centered on central bank currency.”

The report cites the famous “three tests” from the BIS—uniformity, flexibility, and integrity—and concludes that stablecoins fail all three, making them “unable to serve as a pillar of the monetary system.”

This sounds scientific and authoritative, but it contains a logical trap:

These three standards are essentially derived from the premise that “central bank currency is the best anchor.” By definition, only central bank currency can achieve a perfect score. (But is central bank currency really like this in the real world?)

This is called a “circular argument”—first, I define what good money is, and then I prove that only my money is good.

And don’t forget the BIS’s role: it’s the “central bank of central banks.” Its research naturally places central banks at the center of the universe. This isn’t a conspiracy; it’s purely a matter of perspective.

The central bank cites the BIS to prove that “the central bank is important,” which is logically similar to what I posted on May 5th.

🔰It’s like the Butter Guild issuing a report using its own standard, “Natural butter must be yellow in color,” to prove that white margarine fails the test.

Technically, it’s not wrong, but kitchens around the world are already using margarine for cooking. You can insist that it’s “not butter,” but the market votes with its feet.
(The margarine metaphor refers to stablecoins; see Financial Pai Daxing’s previous post for details.)

More crucially: the three tests prove that “stablecoins cannot be the foundation,” but the report amplifies the conclusion to “stablecoins are not very important but need to be guarded against.”

Not being able to be a foundation is completely different from not being able to be rebar.

No one should claim that stablecoins should replace the central bank—but they can certainly be a key network cable in this building. (Now they’re even using Starlink, 🙄.)

The report spends a large portion of its content defending against a competitor that isn’t even trying to compete.

Fundamental Issue Two: A Defensive Stance Measuring “Cross-Border Tools” with “Domestic Rulers”

The biggest misalignment in the entire report lies in the “uniformity test.”

The report states: interbank payments rely on central bank reserves to achieve equivalent settlement, thus meeting the uniformity standard; stablecoins’ exchange rates deviate from par in secondary markets, so they fail.

But the comparison it uses is with “domestic” bank money.

The problem is that the real battlefield for stablecoins is “cross-border,” which is precisely where traditional bank money is weaker:

▶ 1 dollar in a Taiwanese bank account and 1 dollar in a New York bank account are not instantly equivalent.

To move the money, you need SWIFT + correspondent banks, incurring bid-ask spreads, cutoff times, T+1/T+2 settlement, and friction costs from Nostro/Vostro accounts.

In other words, traditional bank money in the cross-border dimension gets stripped of value by multiple intermediaries before arrival (fees and time costs). In contrast, USDC and USDT, through blockchain, offer better equivalence and immediacy in cross-border transfers, solving the pain points of the traditional correspondent banking system. In the cross-border dimension, USDC and USDT actually provide better equivalence and immediacy than the correspondent banking system.

Fundamental Issue Three: A Bank-Centric View Describing Today’s Technology with a Three-Year-Old World

The report (citing BIS papers) says: cross-chain transfers of stablecoins require “bridges,” which are slow, expensive, hacker targets, and lack trust for par-value exchanges, creating “fragmented silos.”

This description refers to the old lock-and-mint wrapped bridges from 2021–2022. But today’s world is different:

🔰Circle’s CCTP (native burn-and-mint) was specifically designed to solve the “par-value trust” issue—destroying on the source chain and minting “native” USDC on the destination chain, not wrapped tokens, at a 1:1 value. LayerZero and CCIP are also filling the interoperability layer.

🔰Figure 9 cited in the report shows “issuance market share” of stablecoins on various chains, not “whether they can be exchanged.” USDC issued by the same issuer on Ethereum and Base, through CCTP, is equivalently exchangeable—that’s not a silo; it’s multiple gateways.

Although the report cites BCG data to show that stablecoins account for only 6% of real-world payment volume, it also mentions the explosive growth of the RWA tokenization market (from $2.16 billion to $33.71 billion). This precisely proves that the stablecoin battlefield has shifted from “everyday consumer payments” to “on-chain asset settlement.” Using a retail mindset of paying for bubble tea and fried chicken to evaluate the asset tokenization revolution already happening in the AI agent era means banks need to think beyond that framework.

“Does Taiwan Have No Dollarization Problem”??

The report states that Taiwan has convenient payment systems, stable prices, good credit, and public trust in the New Taiwan Dollar, so “there is no dollarization problem.”

This statement is certainly true today, but it focuses on the wrong direction.

Retail-level trust in the TWD certainly exists; no one wants to use USD to buy bubble tea and fried chicken at the corner store.

✅But is the real battlefield really about fried chicken and bubble tea? Or is it about whether Taiwan’s “cross-border trade settlement,” the “supply chain cash flow” of TSMC’s production line moving to the US, or the “value settlement of Hon Hai’s computing servers” will run on tracks and tokens built within Taiwan, or be ceded to offshore VASPs and foreign issuers?

The report also cites the eurodollar expansion analogy from the 1960s–70s, but unfortunately, it only draws the defensive conclusion of “threat to emerging market monetary sovereignty.”

✅The same analogy, from a global perspective:

▶ The US is using stablecoins to create “Eurodollar 2.0,” extending the network effect of dollar hegemony for another round.

This is what Brent Johnson calls the “stealth weapon of empire,” and it’s also the Dollar Milkshake Theory: the digital upgrade of that straw.

🔰The US is not debating whether stablecoins should exist—it is directly weaponizing the dollar.🔥

And for an economy that sits at the center of the AI computing supply chain (TSMC, Hon Hai) and is a major net creditor of US Treasuries, the strategic question should be “how to collect, how to issue, and how to keep the flow within the country.” Repeatedly arguing that “our TWD has always been safe” seems less important.

✅Personally, Financial Pai Daxing believes that this report lacks not complete data, but rather “a map that places Taiwan within the global dollar infrastructure landscape.”

Defending monetary sovereignty is certainly necessary—reserve assets, redemption rights, prudential standards—all very correct.

✅But defense is not strategy; integration is!

Taiwan holds the world’s most critical AI semiconductor supply chain in its hands—a bargaining chip that others can only dream of.

If Taiwan truly wants to integrate, where should that track lead? Should it connect to the US GENIUS Act track, or continue pondering whether its own currency is safe?

(This article reflects some personal thoughts on the central bank’s public report on stablecoin perspectives, does not represent any company’s stance, and is not investment advice.)