Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Chinese tech giants have paused plans to issue stablecoins in Hong Kong, after Beijing raised concerns about the rise of currencies controlled by the private sector.
Companies including Alibaba-backed Ant Group and ecommerce group JD.com had said over the summer they would participate in Hong Kong’s pilot stablecoin programme or issue virtual asset-backed products, such as tokenised bonds.
But they have since put their stablecoin ambitions on hold after receiving instructions from Chinese regulators, including the People’s Bank of China (PBoC) and Cyberspace Administration of China (CAC), not to move ahead, according to multiple people familiar with the situation.
PBoC officials advised against participating in the initial stablecoin rollout over concerns about allowing tech groups and brokerages to issue any type of currency, five people said.
One person with knowledge of the central bank’s briefings to the tech groups said the issuance of privately run stablecoins was also seen as a challenge to the PBoC’s digital currency project, the e-CNY.
“The real regulatory concern is, who has the ultimate right of coinage — the central bank or any private companies on the market?” said a different person.
Stablecoins are digital tokens pegged to fiat currencies such as the US dollar and are a cornerstone of crypto trading.
The pushback from Chinese authorities underscores how regulators around the world are keen to respond to the rise of stablecoins, particularly after the Trump administration championed them as a pillar of mainstream finance and a vehicle to project the US dollar’s dominance.
The European Central Bank has said widespread adoption of dollar stablecoins could hinder its ability to control monetary policy.
The Hong Kong Monetary Authority, the territory’s de facto central bank, in August started accepting applications for stablecoin issuers, establishing itself as a testing ground for the mainland.
In China, interest in the Hong Kong programme swelled over the summer, with some officials suggesting that renminbi-denominated stablecoins would potentially boost the yuan’s international use.
Zhu Guangyao, former vice-minister of finance in China, argued in June that “the strategic purpose behind the US promotion of stablecoins is to preserve dollar supremacy” and it is crucial for China to respond to that financial challenge with the development of a stablecoin pegged to renminbi.
“We should fully leverage the pilot programmes in Hong Kong,” Zhu said at a forum in Beijing in June. “The renminbi stablecoin must be integrated into the overall design of the national financial strategy.”
But two people with knowledge of the tech groups’ plans said financial regulators were taking a more cautious approach following a speech by former PBoC governor Zhou Xiaochuan in late August.
At a closed door financial forum in Beijing in July, Zhou urged a thorough evaluation of stablecoins and potential systemic risks they posed.
“We need to be vigilant against the risk of stablecoins being excessively used for asset speculation, as misdirection could trigger fraud and instability in the financial system,” Zhou said at the China Finance 40 Forum, according to an article later published by the state-backed think-tank.
Zhou urged a “careful assessment of the true demand of tokenisation as a technological foundation”.
He added: “Although many believe stablecoins will reshape the payments system, in reality, there is little room to cut costs in the current system, particularly in retail payments.”
PBoC declined to comment. HKMA said it does not comment on market rumours. CAC, Ant and JD.com did not respond to requests for comment.
