KuCoin leads CNHC’s $10 million funding round, but is offshore RMB really suitable for stablecoins?

Original title: KuCoin Has Closed a $10M Funding Round Into CNHC, but Is the Offshore Yuan Right for a Stablecoin?

Recently, KuCoin Ventures, the venture capital arm of cryptocurrency exchange KuCoin, led a $10 million financing round for the stablecoin issuer behind CNHC, a stablecoin pegged to the offshore RMB. KuCoin focuses on the Chinese market and is registered in Seychelles.

CNHC is pegged 1:1 to the offshore renminbi, or CNH, whose reserves are held at a depository in Hong Kong.

“This investment in CNHC is part of KuCoin Ventures’ broader strategy to invest in Web3 infrastructure in the Asia-Pacific region,” Justin Chou, KuCoin’s chief investment officer and head of KuCoin Ventures, said in a statement. “Hong Kong has a well-established traditional financial ecosystem. With the introduction of new regulations and policies for a new generation of digital assets, Hong Kong has the opportunity to become the new world crypto hub.”

CNHC was issued on both Ethereum and Conflux . On-chain data shows that Ethereum has 23 token holders and 102 transfers, while Conflux has 606 holders and 1,487 transactions.

Conflux co-founder Long Fan said that Conflux has captured the majority of the market share in China because Conflux "complies with regulatory requirements" in China.

“The significance of CNHC lies in its ability to bridge the traditional financial system with the emerging Web3 landscape, especially amid heightened regulatory scrutiny in the U.S.,” he told CoinDesk in a report. “CNHC offers a practical alternative for businesses and users seeking compliance options outside of the U.S.-centric regulatory framework.”

Finding alternatives to the dollar

The vast majority of stablecoins are backed by the U.S. dollar. While there are stablecoins based on other fiat currencies (such as the euro, the pound), none of them come close to the number of tokens pegged to the dollar.

On the one hand, this strengthens the hegemony of the US dollar. CoinDesk columnists believe that the next dollar-denominated financial sector is largely a good thing because it expands US rule-making.

But at the same time, not everyone wants to play by U.S. rules, especially when they have no connection to the U.S. U.S. regulators are also reluctant to allow cryptocurrencies full access to the U.S. banking system before strict federal regulation is established.

The market itself does not like this type of US-centric centralized risk. USDC has decoupled from its peg several times during the crypto banking crisis, and although it recently re-pegged, smart investors are skeptical.

Although the market is skeptical about algorithmic stablecoins after the collapse of Terra last year, BitMEX co-founder Arthur Hayes believes that the answer to all this is still to launch an algorithmic stablecoin based on Bitcoin derivatives and name this token "kakaDollar".

CNH certainly has a successful use case in China’s offshore bond market, the market it was built for. But the cryptocurrency market is another matter entirely.

There are people in the market who are skeptical about this.

Alex Liu, CEO of Taipei-based Maicoin, told CoinDesk in a recent interview that the yuan is tightly controlled both onshore and offshore, so it won’t solve the problem.

“I think the only real challenge to the dollar is the renminbi. But not through cryptocurrencies, not through China’s CBDC,” he said, referring to the central bank’s digital currency. The real focus, he said, is on oil trading denominated in yuan. “Most of the trade between Russia and China is de-dollarized,” he said.