Offshore Renminbi Stablecoin: Opportunities and Challenges Coexist

Recently, offshore RMB stablecoins are accelerating their emergence. According to reports, tech giants JD Group and Ant Group have lobbied the People's Bank of China multiple times to issue stablecoins denominated in offshore RMB (CNH) in Hong Kong first. The Governor of the People's Bank of China, Pan Gongsheng, has also expressed an open attitude towards stablecoins, acknowledging that they can significantly shorten cross-border payment chains, while also emphasizing the challenges they pose to financial regulation. Previously, Guotai Junan International was approved to upgrade its virtual asset trading license, seen as a signal of the "national team" entering the crypto industry. With policies gradually opening up, RMB stablecoins are moving from concept to practical implementation.

Event Review

On May 21, the Hong Kong Legislative Council passed the "Stablecoin Regulation Bill," establishing a licensing system for fiat stablecoin issuers. On May 30, the "Stablecoin Regulation" officially became law. Subsequently, internet giants actively responded. On June 12, Ant Group announced that it would apply for stablecoin licenses in Hong Kong and Singapore, and also plans to seek permission in Luxembourg to strengthen its blockchain business. On June 17, JD.com stated that it would issue a stablecoin pegged 1:1 to the Hong Kong dollar.

The Hong Kong "Stablecoin Ordinance" will come into effect on August 1, and the Financial Management Authority will begin accepting license applications. It is expected that only a single-digit number of licenses will be issued, but more than 40 companies are already preparing to apply, making the competition fierce. Most applicants are leading financial institutions and internet giants from China.

Core Discussion

Definition and Misunderstandings of Stablecoins

A stablecoin is essentially a mapping of fiat currency onto the blockchain, a digital expression of credit. It uses blockchain technology to connect the virtual and real worlds, performing functions such as payment and settlement. The popularity of stablecoins is, to some extent, a response to the inability of decentralized currencies like Bitcoin to fulfill the functions of everyday money.

Common misconceptions include:

1. Comparing stablecoins to "blockchain version of Alipay" ignores their currency attributes.
2. Comparing the Hong Kong dollar to "USD stablecoin" ignores the differences in legal attributes and governance structures.
3. Believing that stablecoins are "decentralized", in reality, they are highly hybrid structures.

Beijing borrows from Hong Kong to explore the internationalization of stablecoin and the Renminbi.

For China, offshore Renminbi stablecoins are seen as a new hope to promote the internationalization of the Renminbi. Beijing is using Hong Kong as a "regulatory sandbox" to explore its feasibility as a future alternative payment tool while promoting the cross-border use of the Renminbi.

Experts suggest achieving breakthroughs through a "dual-track approach": on one hand, accelerating the construction of the central bank's digital RMB transaction settlement system, and on the other hand, actively exploring the development of RMB stablecoin in the offshore system.

In terms of stablecoin model design, there is a proposal to construct a "dual-layer architecture" for central bank digital currency ( CBDC ) and the Renminbi stablecoin. The specific approach is to allow licensed stablecoin issuers to open digital Renminbi reserve accounts at the central bank and use central bank digital currency as wholesale layer funds to issue Renminbi stablecoins for retail and cross-border purposes in the form of on-chain tokens.

Hong Kong regulatory attitude: regulatory details and licensing system

Hong Kong's "Stablecoin Regulation" establishes a high-threshold access and ongoing supervision system for stablecoin issuance and related activities through a combination of "licensing system + sandbox testing." The main requirements include:

1. Adequate reserves and asset security
2. Stability Mechanism and Redemption
3. Business Scope Limitation
4. Local Entities and Governance
5. Anti-Money Laundering and Cross-Border Compliance

The Hong Kong regulatory authorities recognize that stablecoins are both an innovative opportunity and a potential risk. They hope to reserve development space for emerging business models while preventing financial risks, aiming to make Hong Kong a "global model" for the compliance of stablecoins.

Challenging the Dollar Hegemony: What are the Chances of the Renminbi Stablecoin?

The offshore RMB stablecoin faces the challenge of dollar hegemony. From the perspectives of payment efficiency, institutional credibility, compliance, and cross-border collaboration:

1. Payment efficiency: Stablecoin technology can significantly improve the efficiency of cross-border payments, but as regulatory standards are established, compliance costs may also increase.

2. Institutional Credibility: The US dollar has long been regarded as the most reliable store of value and pricing currency. The renminbi stablecoin needs to provide sufficient confidence support in terms of macro policy stability, currency stability, and convertibility.

3. Compliance and Global Cooperation: The Renminbi stablecoin needs to obtain regulatory approval from various countries. A Hong Kong license may provide an international springboard, helping to build a cross-border compliance network.

4. Network Effects and User Base: The US dollar stablecoin has formed a large liquidity network. The Chinese yuan stablecoin needs to quickly expand its own network, starting from areas such as cross-border e-commerce and supply chain finance.

Other Potential Challenges

1. Market Trust: It is necessary to shape credit endorsements on multiple levels, including policy credibility and operational credibility.

2. Impact of the international political environment: Possible suppression and sanctions from countries such as the United States.

Overall, the offshore RMB stablecoin carries the new dream of RMB internationalization, but it also faces complex challenges in reality. Its emergence does not mean that it aims to shake the dollar's hegemony overnight, but rather resembles the beginning of a protracted battle. In the future, we may see the coexistence and competition of various fiat stablecoins such as the dollar, euro, and RMB, as the global monetary system evolves towards a more diversified and balanced direction.