[Big read] Stablecoins are reshaping global finance — Can China keep up?

As stablecoins gain momentum globally, regulators in various regions are moving to keep pace. In China, the past month has seen a growing chorus of scholars and experts calling for policy reforms in response.

On 18 June, Pan Gongsheng, governor of the People’s Bank of China (PBOC), delivered a keynote speech at the Lujiazui Forum in Shanghai, marking the first public mention of “stablecoins” in China and sparking widespread discussion.

Addressing the rapid adoption of emerging technologies in cross-border payments, Pan highlighted how innovations like blockchain and distributed ledger technology underpin the growth of central bank digital currencies (CBDCs) and stablecoins.

He said these advancements enable the simultaneous processing of payments and settlements, fundamentally transforming the traditional payment landscape and significantly shortening cross-border payment chains. However, Pan also cautioned that these developments present substantial challenges to financial regulation.

Subsequently, on 10 July, the Shanghai State-owned Assets Supervision and Administration Commission (SASAC) held a special study session to discuss trends and strategies relating to cryptocurrencies and stablecoins. He Qing, SASAC party secretary and director, emphasised the need to accelerate research into digital currencies and to explore blockchain applications across cross-border trade, supply chain finance, asset digitalisation and other areas.

Stablecoins are a form of cryptocurrency issued by private institutions which are pegged to fiat currencies or specific assets. In contrast with the highly volatile Bitcoin and other cryptocurrencies, stablecoins have a much more stable value, and are primarily used as a payment tool for cross-border transactions and are applied in emerging economic fields such as virtual asset trading.

To prevent speculative trading and capital outflows, China has banned the domestic issuance and trading of cryptocurrencies since 2017. However, recent signals from top leadership suggested that stablecoins have attracted significant official attention. External observers are keenly interested in whether Beijing will alter its previous regulatory stance and begin supporting stablecoin issuance.

Zhu Feng, dean of the School of International Studies at Nanjing University, said in an interview with Lianhe Zaobao that China must adapt to the evolving international financial landscape, actively participate in the formation of the stablecoin ecosystem, and promote the formation and governance of international rules. He felt that a crucial touchstone of the openness of China’s financial system would be the speed at which China can integrate internationally.

Shen Hong, a research fellow at Peking University’s Institute of New Structural Economics, said when interviewed that as China deepens its role in international trade, maintaining a wait-and-see stance on stablecoins could result in a passive position in future cross-border settlements. In his view, stablecoins are not only a financial innovation, it is also a new arena for monetary dominance. For China, this presents a rare strategic opportunity to get out ahead by enhancing monetary dominance and challenging the US dollar’s central position.

Despite long being a grey area in terms of regulation, stablecoins are significantly growing in recognition in the financial sector as the US, EU, Singapore and Hong Kong have introduced or are about to introduce regulatory frameworks or legislation.

The Chinese government has not yet officially announced policies or plans related to stablecoins. However, Shen suggested that China might begin by observing and evaluating pilot projects to gather experience before formulating relevant regulations. The most practical approach could be to first issue stablecoins in the offshore RMB market as a payment tool for commodity settlement and cross-border trade.

Jin Weiping, an associate professor at the Insitute of Economics at Tsinghua University, felt that in developing stablecoins, China should not be too fixated on whether they are pegged to the RMB; the key lies in technical participation and practical application. “If you don’t participate, you will not have a chance in the future.”

She stressed that stablecoins are essentially a medium of exchange, and what truly matters is the type of assets China can offer. Only real-world assets with strong appeal can gain widespread user acceptance.

Under the one country, two systems framework, Hong Kong has long served as a testing ground for China’s exploration of the crypto industry, attracting tech giants to compete in the stablecoin field.

Deng Chao, CEO of digital asset investment management firm HashKey Capital, told Lianhe Zaobao that in recent years, the Hong Kong government and legislative bodies have actively promoted the development of the crypto industry, particularly in the setting up of the stablecoin sector, which provided valuable reference experience for future regulatory policies for the mainland.

As far back as 2017, Hong Kong began establishing a regulatory framework for cryptocurrencies and virtual assets. Hong Kong’s stablecoin ordinance, which came into effect on 1 August 2025, became an important part of this framework. The ordinance stipulated that stablecoin issuers must obtain a formal licence from the Hong Kong Monetary Authority (HKMA) to operate relevant businesses in Hong Kong.

Faced with the rapid development of stablecoins, Hong Kong’s regulatory agencies remain highly vigilant, aiming to strike a balance between promoting innovation and preventing risks. Before its stablecoin ordinance took effect, Eddie Yue, chief executive of the HKMA, pointed out in a post on the official website on 23 July that the regulated stablecoin business is still in its infancy, and regulations would be stricter in the beginning, before gradually becoming more flexible with practical experience.

Yue added: “Having said that, we also recognise the importance of ensuring that the regulatory requirements are necessary and reasonable to create room for issuing entities to stand on their feet and thrive.”

Many mainland Chinese tech companies are actively participating in Hong Kong’s stablecoin initiatives, with e-commerce giant JD.com and fintech company Ant Group showing strong interest in applying for stablecoin issuance licences in Hong Kong. JD.com’s subsidiary, JD Coinlink Technology, previously participated in the HKMA’s sandbox programme for stablecoin issuers.

According to Chinese media reports, JD.com founder Richard Liu mentioned at a sharing session in June this year that the company have plans to apply for stablecoin-related licences in major currency countries worldwide, aiming to significantly enhance the efficiency of corporate foreign exchange, reduce cross-border payment costs by 90% and compress transaction times to within ten seconds.

Despite being called “stablecoin”, stablecoins are not unreservedly stable and still harbours several risks.

The Bank for International Settlements previously issued a report warning about the rapid expansion of stablecoins, stating that they are unlikely to become a mainstay of the monetary system, and that without effective regulation it could even pose a substantial threat to financial stability and monetary sovereignty.

Pei Sai Fan, an adjunct professor at the Singapore University of Social Sciences (SUSS), said in an interview that stablecoins are typically issued by private entities, with inconsistent management standards. Their decentralised governance and anonymous transfer characteristics make fund flows hard to regulate and prone to misuse in illegal activities.

In contrast, CBDCs offer higher credibility and lower systemic risk. For example, China began its research on CBDCs in 2014 and started piloting the e-CNY in 2019, initially focusing on domestic retail payments before expanding into cross-border payments and commodity wholesale transactions.

At the Lujiazui Forum held in June, the Chinese central bank’s Pan announced eight new financial measures for Shanghai, including the establishment of an international operation centre for the digital RMB to promote its internationalisation and the development of financial market services.

Some academics are already calling for China to leverage its first-mover advantages in technology and institutional framework to overcome supervisory bottlenecks and promptly launch a RMB-backed stablecoin to complement the functions of the e-CNY. However, other experts caution against overhyping or blindly believing in stablecoins, and instead suggest maintaining strategic focus and adopting a multi-track approach — advancing the e-CNY, third-party payment tools, and pilot programmes in free trade zones in parallel.

Pei pointed out that when it comes to the internationalisation of the RMB, the e-CNY and stablecoins are not mutually exclusive; rather, they can be developed in tandem to complement each other.

Although the e-CNY also offers efficiency and convenience in cross-border payments, some experts found that China’s existing capital controls and foreign exchange regulations continue to restrict its international adoption.

Liu Jingzhu, a researcher at the Asia Academy of Digital Economics, told Lianhe Zaobao that under current rules, overseas companies receiving e-CNY can only use it for payments directly related to current account transactions with entities in China, including payments for goods and services traded with China or salaries for employees in China. It cannot be used for capital account expenditures, non-China-related transactions, nor can it be freely converted into foreign currencies.

She stated bluntly that these restrictions directly affect overseas users’ willingness to adopt the e-CNY: “No one wants to accept it, because you can’t use it even if you do.”

To address this, Liu recommended that China accelerate the establishment of a trade-based “whitelisted foreign exchange conversion” channel, allowing foreign parties to instantly convert received RMB into their local currency. This mechanism could be piloted with financial institutions and bulk commodity exporters in regions such as Singapore, the UAE, and Hong Kong. By setting predefined quotas and compliance-based whitelists, this approach ensures prudent cross-border capital management while enhancing the e-CNY’s usability and international acceptance.

While China is still thinking about how to regulate stablecoins, US President Donald Trump signed the country’s first federal-level stablecoin legislation — officially titled the Guiding and Establishing National Innovation for US Stablecoins (also known as the GENIUS Act) — into law on 18 July.

Notably, during his first presidential term, Trump harshly opposed cryptocurrencies, once publicly calling them a “scam”. However, during his re-election campaign, he did a 180; not only promising to make the US the “crypto capital of the world” but also moving swiftly to advance stablecoin legislation upon returning to the White House, actively embracing digital assets.

SUSS’s Pei noted that although the GENIUS Act ostensibly appears to fulfil campaign promises and win support from cryptocurrency advocates, it fundamentally reflects the US’s strategic intent to reshape the global financial order.

A key provision of the bill requires 100% reserve backing with liquid assets like US dollars or short-term US treasuries from stablecoin issuers. This not only reinforces the dollar’s dominance in the global monetary system but also creates new demand for the US treasury market.

A Citi Institute report published in April noted that as the US moves toward clear regulatory frameworks for stablecoins, stablecoin issuers are poised to become major buyers of US treasuries in the coming years, with their holdings projected to exceed US$1 trillion by 2030.

In fact, as traditional US treasuries holders like China and Japan reduced their holdings last year, stablecoin issuer Tether Holdings quickly stepped in to fill the gap. Tether CEO Paolo Ardoino revealed on social platform X that the company had acquired US$33.1 billion in US Treasuries — comparable to the holdings of traditional buyers such as the UK and Canada.

Tether launched the world’s first US dollar-pegged stablecoin, USDT, in 2014. It remains the largest and most widely circulated stablecoin globally. According to crypto data platform CoinGecko, as of 30 July, the total global stablecoin market had surpassed US$270 billion, with USDT accounting for nearly 60% of the market — firmly maintaining its leading position in the industry.

Meanwhile, the implementation of the GENIUS Act is expected to further accelerate the global adoption of US dollar-backed stablecoins, a development that drew concern from the European Central Bank (ECB).

Jürgen Schaaf, adviser of Market Infrastructure and Payments at the ECB, warned on 28 July in an official article: Should US dollar stablecoins become widely used in the euro area — whether for payments, savings or settlement — the ECB’s control over monetary conditions could be weakened. He is worried that if the use of US dollar-denominated stablecoins continues to increase through traditional channels and becomes widely used in cross-border transactions, euro-based instruments may face direct competition.

Schaaf stated that dollar dominance provides the US with both strategic and economic advantages, allowing it to finance its debt more cheaply while exerting global influence. For Europe, this would mean higher financing costs, reduced monetary policy autonomy and deeper geopolitical dependence on the US.

This article was first published in Lianhe Zaobao as “数字人民币或稳定币 中国兼容或二选一？”.

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