Tether is planning to launch a stablecoin pegged to offshore Chinese yuan. According to a Coindesk report, the new stablecoin was announced by Zhao Deng, Bitfinex shareholder and OTC trader, on China’s biggest messaging platform WeChat. He also told the publication that the stablecoin’s reserves would be held in Belgium. Deng stated that his peer-to-peer trading platform RenrenBit would support trading and deposits for the planned stablecoin, known as CNHT.
Tether already has three stablecoins – USDT, EURT, and JPYT – backed by the U.S. dollar, Euro, and Japanese Yen. Another trading firm, Israel-based eToro Inc., has launched a yuan-backed stablecoin called CNYX. But eToro’s stablecoin is backed by onshore reserves of yuan.
Tether shares senior management with controversial cryptocurrency exchange Bitfinex, which has been accused of propping Bitcoin prices by issuing more Tether. The exchange has also come under a cloud for refusing to divulge details relating to backup reserves for Tether. The New York Attorney General has filed a case against Bitfinex for misappropriating client funds.
Offshore yuan operates largely outside the Chinese government’s control and was created in 2004 to facilitate China’s growing stature in the world economy. It is more in sync with international capital markets and has gained popularity as a currency for international trade transactions. Hong Kong is a hub for offshore yuan; other important centers are Singapore, Taiwan, and London.
Traders often arbitrage between the exchange rate differences for offshore and onshore yuan, the former being more attractive for conversion to international currencies.