In a recent speech at the 2025 Lujiazui Forum, People's Bank of China Governor Pan Gongsheng highlighted that emerging technologies like blockchain and distributed ledgers are driving the rapid development of central bank digital currencies and stablecoins, while also posing significant challenges to financial regulation. With Hong Kong's "Stablecoin Ordinance" set to take effect on August 1st, discussions around stablecoins have reached unprecedented levels of interest.
Understanding the Current Landscape of RMB Stablecoins
Offshore RMB business traditionally refers to financial activities denominated and settled in RMB outside mainland China. Driven by policy initiatives, it has developed a pattern centered in Hong Kong, with additional hubs in Singapore, London, and other global financial centers. Domestic offshore RMB business exhibits characteristics of both "onshore" and "offshore" operations, with account management as its core operational mechanism, enabling certain conditions of capital flow freedom.
Many experts suggest piloting offshore RMB stablecoins in the Hong Kong market first, then expanding to domestic offshore markets represented by pilot free trade zones once conditions mature. However, we believe that stablecoins built for the Web3.0 world transcend traditional onshore-offshore categorizations.
Why Consider an Integrated Development Approach?
Several factors support the adoption of a coordinated development model for both domestic offshore and international offshore RMB stablecoins:
First, with the rapid development of USD-collateralized stablecoins and evolving regulatory frameworks across jurisdictions, China needs to proactively address stablecoin research and regulatory response from financial security and monetary sovereignty perspectives. Relying solely on offshore RMB stablecoins represents a passive approach.
Second, the scale of Hong Kong's offshore RMB market is limited. Under requirements for 1:1 reserve backing with fiat assets, it may struggle to independently support RMB stablecoins achieving economies of scale.
Third, regulating stablecoin issuance and trading involves numerous cutting-edge challenges including identity authentication and anti-money laundering. Regulatory bodies worldwide are actively developing innovative approaches. Central authorities should play a leading role in RMB stablecoin regulation while seeking coordination with Hong Kong regulators.
Potential Implementation Models
The Shanghai Pilot Free Trade Zone, established in September 2013, has essentially built an institutional system aligned with international economic and trade rules. Meanwhile, central financial management departments are fully supporting Shanghai's international financial center construction toward higher capabilities. The People's Bank of China has announced eight measures, including conducting pilot reforms of offshore trade financial services in the Shanghai Lingang New Area.
Model One: Institutional Collaboration
Clearing organizations, large commercial banks, leading payment institutions, and renowned investment institutions could jointly establish an RMB stablecoin issuance institution in the Shanghai Pilot Free Trade Zone. This would explore the establishment of an on-chain issuance and operation mechanism for RMB stablecoins, creating a wholesale market for authorized institutions (such as digital RMB operating institutions that have accumulated relatively rich innovation experience). Authorized institutions would then exchange RMB stablecoins for qualified enterprises or individuals, establishing a retail market.
Model Two: Direct Operation by Authorized Institutions
Alternatively, branches of digital RMB operating institutions in the Shanghai Pilot Free Trade Zone could directly mint and operate RMB stablecoins on the chain. When exchanging with specific qualified economic entities, they would fully implement compliance responsibilities. If banks act as stablecoin issuers, several considerations emerge: while tokenized deposits explored by overseas banks or related organizations share similar characteristics with stablecoins, they differ in mechanism. Some overseas banks are also establishing technology subsidiaries or joint legal entities to issue fiat stablecoins to enhance customer ecosystem attractiveness and counter the crypto industry's impact. Thus, this model requires clarifying specific paths and focus areas.
Critical Requirements for Implementation
Regardless of the model chosen, several requirements must be simultaneously met:
First, RMB stablecoins must maintain sufficient asset reserves. Beyond high-liquidity assets like RMB cash and short-term government bonds, a certain proportion of digital RMB reserves could be established, achieving synergy with central bank CBDC pilot reforms.
Second, RMB stablecoin issuers must establish comprehensive risk identification, asset segregation and custody, internal control, and other compliant operation mechanisms. They must fulfill compliance obligations toward direct clients and collaborate with various parties to expand application scenarios for RMB stablecoins, effectively supporting free trade zone reform priorities.
Third, fully leveraging the "electronic fence" characteristics of Shanghai FTZ accounts, through innovative technical standards and smart contract design, entities holding and using RMB stablecoins during the pilot period should be limited to specific qualified institutions, enterprises, or natural persons.
Developing the Offshore RMB Stablecoin (CNH Coin)
Under Model One, domestic and international institutions could be promoted to jointly establish an RMB stablecoin issuance institution in Hong Kong. Under Model Two, certain authorized domestic banks or payment institutions could be permitted to use their legal entities registered in Hong Kong to mint and issue offshore RMB stablecoins, complying with relevant legal regulations in Hong Kong.
This would form a dual RMB stablecoin system both domestically and internationally. Drawing on existing cross-border payment and fund flow arrangements between mainland China and Hong Kong, exchange and interoperability mechanisms between CNYC (onshore) and CNHC (offshore) could be explored. In the short term, CNYC would primarily supplement and enhance the efficiency of cross-border trade and business payment settlements. CNHC would aim to further strengthen Hong Kong's position in RMB internationalization and could be compliantly used in on-chain financial activities and commodity trading settlements, especially actively exploring support for RMB asset-based RWA (Real-World Assets). Together, they would enhance the global influence of the RMB and RMB assets.
Regulatory Cooperation and Technological Innovation
Domestic and international regulatory authorities and RMB stablecoin issuers should collaborate closely to continuously promote intelligent technological innovation. This includes effectively identifying secondary market activities of RMB stablecoins within the blockchain ecosystem, particularly monitoring situations where non-qualified domestic entities hold RMB stablecoins, to prevent illegal fund flows and illicit activities.
As the Bank for International Settlements (BIS) has pointed out, stablecoins still have defects in three key standards: singleness, elasticity, and integrity. The reform and exploration of RMB stablecoins must strictly control risks, proceed step by step, and maintain appropriate scale. Simultaneously, relevant laws and regulations should be promoted as soon as possible to strengthen discourse power in the global legal competition surrounding stablecoins.
Looking forward, we can also learn from the "Finternet" concept proposed by BIS, built on a Unified Ledger, to synchronously promote the coordinated development and complementary共赢 of digital RMB, bank tokenized deposits, and stablecoins.
Frequently Asked Questions
What is a stablecoin?
A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to a specified asset, like a fiat currency or gold. This stability is typically achieved through collateralization or algorithmic mechanisms.
How would an RMB stablecoin differ from the digital Yuan?
The digital Yuan (e-CNY) is a central bank digital currency (CBDC) issued directly by the People's Bank of China. An RMB stablecoin would likely be issued by commercial entities and fully backed by reserves of RMB or other high-quality assets, operating on blockchain networks and potentially targeting different use cases, especially in cross-border scenarios.
What are the main benefits of developing RMB stablecoins?
Key benefits include potentially enhancing the efficiency of cross-border trade settlements, strengthening RMB internationalization, fostering innovation in the digital asset ecosystem, and providing a regulated alternative to privately issued foreign stablecoins within China's sphere of influence.
What are the biggest risks associated with stablecoins?
Primary risks include maintaining the peg (ensuring 1:1 redeemability), the quality and liquidity of reserve assets, potential for runs, use in illicit finance, and broader financial stability concerns if they achieve significant scale without proper regulation. 👉 Explore more strategies for understanding digital asset risks
Who would be allowed to use RMB stablecoins initially?
Initially, usage would likely be restricted to specific qualified institutions, enterprises, or natural persons within controlled environments like pilot free trade zones, utilizing mechanisms similar to "electronic fences" to manage access and monitor transactions.
How does Hong Kong's Stablecoin Ordinance impact this development?
Hong Kong's ordinance provides a regulatory framework for stablecoin issuers operating within its jurisdiction. This creates a potential pathway for authorized institutions to issue offshore RMB stablecoins (CNHC) in Hong Kong, complementing any future onshore initiatives and creating a dual-system approach. 👉 Get advanced methods for tracking regulatory changes