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Chinese tech giants have suspended plans to issue stablecoins in Hong Kong, after Beijing expressed concerns over the rise in privately controlled currencies.
Companies including Alibaba-backed Ant Group and e-commerce group JD.com announced over the summer that they would participate in Hong Kong’s stablecoin pilot program or issue products backed by virtual assets, such as tokenized 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 the Cyberspace Administration of China (CAC), not to move forward, according to several people familiar with the matter.
PBoC officials advised against participating in the stablecoin’s initial rollout due to concerns about allowing technology groups and brokerages to issue any type of currency, five people said.
A person with knowledge of the central bank’s briefings with technology groups said the issuance of private stablecoins was also seen as a challenge for the PBoC’s digital currency project, e-CNY.
“The real regulatory concern is who has ultimate authority over money: the central bank or any private company in the market? said another person.
Stablecoins are digital tokens tied to fiat currencies such as the US dollar and are the cornerstone of cryptocurrency trading.
The reaction from Chinese authorities underscores how eager regulators around the world are to respond to the rise of stablecoins, especially after the Trump administration championed them as a pillar of traditional finance and a way to project dominance of the U.S. dollar.
The European Central Bank has said the widespread adoption of dollar stablecoins could hamper its ability to control monetary policy.
The Hong Kong Monetary Authority, the territory’s de facto central bank, began accepting applications from stablecoin issuers in August, establishing itself as a testing ground for the mainland.
In China, interest in the Hong Kong program grew over the summer, with some officials suggesting that renminbi-denominated stablecoins could potentially boost international use of the yuan.
Zhu Guangyao, former Chinese vice minister of finance, asserted in June that “the strategic objective behind the US promotion of stablecoins is to preserve the supremacy of the dollar” and that it is crucial for China to respond to this financial challenge with the development of a stablecoin pegged to the renminbi.
“We should take full advantage of the pilot programs in Hong Kong,” Zhu said at a forum in Beijing in June. “The renminbi stablecoin should 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 in late August by former PBoC Governor Zhou Xiaochuan.
At a closed-door financial forum in Beijing in July, Zhou called for a thorough assessment of stablecoins and the potential systemic risks they pose.
“We need to be vigilant about the risk of excessive use of stablecoins for asset speculation, as the wrong direction 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 called for a “careful assessment of the true demand for tokenization as a technological foundation.”
He added: “Although many believe that stablecoins will reshape the payments system, in reality there is little room to reduce costs in the current system, especially in retail payments. »
The People’s Bank of China declined to comment. HKMA said it does not comment on market rumors. CAC, Ant and JD.com did not respond to requests for comment.
