Beijing intensifies focus on stablecoin regulation to prevent capital outflows following new stablecoin legislation in Hong Kong and the GENIUS Act in the U.S., aiming to bolster digital financial competitiveness.
This regulatory approach could reshape global digital finance, impacting the balance of international monetary power and stablecoin market dynamics, with institutions closely monitoring potential shifts in liquidity and compliance.
Renminbi Stablecoin Advocacy Gains Momentum
Beijing is focusing on tight regulatory controls for stablecoins, particularly to manage capital outflows. This focus has intensified following Hong Kong’s stablecoin legislation and U.S. regulatory movements like the GENIUS Act. Key players include Wang Yongli, advocating for a renminbi stablecoin, and companies like JD.com and Alibaba planning stablecoins backed by Hong Kong dollars. The People’s Bank of China is involved in drafting strategic internationalization plans. Wang Yongli, former Vice President of the Bank of China, has emphasized, “China should consider launching an offshore renminbi stablecoin to recapture its former lead in crypto assets and digital payments. The progress toward international use of the renminbi could be limited if China fails to keep up with the dollar stablecoins in terms of payment efficiency and clearing costs.”
China Mandates 100% Reserve for Stablecoins
The regulatory approach aims to maintain China’s financial sovereignty while enhancing digital currency competitiveness. Institutions are required to back all stablecoins with 100% high-quality reserves to deter unbacked asset creation. The focus on embedding capital controls in stablecoin designs could affect global monetary dynamics. Historical data on China’s e-CNY pilot suggests potential outcomes as new stablecoin protocols are introduced.
Lessons from e-CNY: A Regulatory Blueprint
China’s previous digital currency pilot, the e-CNY, included strict controls like transaction limits, which may influence stablecoin regulations. Past attempts to internationalize the renminbi have faced challenges due to capital controls. Experts suggest Beijing’s approach links to its broader monetary strategy. The focus on regulatory control over stablecoins aims to counterbalance stablecoin developments in other jurisdictions like the GENIUS Act in the U.S.
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