Tether has launched a stablecoin, or a cryptocurrency whose price is related to that of a fiat currency or a basket of goods, pegged to offshore Chinese yuan. The stablecoin is called CNH₮ and is backed by offshore yuan or yuan traded outside of China. The backing ensures that investors in CNH₮ will be redeemed in case of problems or liquidation.
Tether already has three other stablecoins backed by fiat currencies – US dollars, Japanese Yen, and the Euro. Online publication The Block points out, the firm’s stablecoin backed by the Japanese Yen is yet to be launched.
While they are envisaged to become a medium of transaction for cross-border trades, stablecoins denominated in local currencies are mostly restricted to trading use cases on crypto exchanges currently.
Tether’s US dollar-backed stablecoin USDT is the world’s most popular stablecoin and reportedly accounts for as much as 95% of trading volume at exchanges. It is used as an intermediary by investors and traders to purchase and sell coins other than Bitcoin and Ethereum. It is also among the most controversial coins in the ecosystem. Critics charge the coin with inflating Bitcoin’s price and not having enough fiat backing.