To better achieve strategic coordination, proactive regulation, and collaborative advancement, consideration should be given to adopting a linked development model for domestic offshore and overseas offshore RMB stablecoins.

Author: Yang Tao, Deputy Director of the National Financial and Development Laboratory

Source: National Financial and Development Laboratory

RMB Stablecoin Development Model Can Combine "Internal and External"

Recently, during a speech at the 2025 Lujiazui Forum, Central Bank Governor Pan Gongsheng pointed out that new technologies such as blockchain and distributed ledgers are driving the vigorous development of central bank digital currencies and stablecoins, while also posing significant challenges to financial regulation. In fact, with Hong Kong's "Stablecoin Regulation" set to take effect on August 1, discussions about stablecoins have recently gained unprecedented attention.

Generally, offshore RMB business refers to financial operations conducted in overseas markets that settle in RMB. Driven by policy, this has developed into a pattern centered on Hong Kong, with multiple points of development in places like Singapore and London. Domestic offshore RMB business reflects a dual characteristic of "onshore" and "offshore," operating primarily through account management, allowing for capital to flow freely under specific conditions. Correspondingly, many viewpoints suggest that offshore RMB stablecoins should be piloted in the Hong Kong market, and once conditions are ripe, exploration should occur in domestic offshore markets represented by free trade pilot zones.

We believe that stablecoins built in the Web 3.0 world have transcended the traditional categories of offshore and onshore. To better achieve strategic coordination, proactive regulation, and collaborative advancement, a linked development model for domestic offshore and overseas offshore RMB stablecoins should be considered. The reasons are as follows: First, in the face of the rapid development of dollar-collateralized stablecoins and the swift evolution of stablecoin regulation in various countries and regions, China urgently needs to proactively research and regulate stablecoins from the perspectives of financial security and monetary sovereignty, systematically considering the reform pilot of RMB stablecoins rather than passively responding through overseas offshore RMB stablecoins. Second, the scale of the Hong Kong RMB offshore market is limited, and under the requirement for stablecoins to maintain a 1:1 reserve with fiat currency assets, it may struggle to independently support RMB stablecoins to achieve economies of scale. Third, the regulation of stablecoin issuance and trading involves numerous cutting-edge challenges such as identity verification and anti-money laundering. Countries and regions are actively promoting regulatory innovation and seeking solutions. In this regard, relevant central departments should play a leading role in the regulation of RMB stablecoins while seeking coordination and cooperation with Hong Kong regulatory authorities.

Since the establishment of the Shanghai Free Trade Pilot Zone on September 29, 2013, a system has been basically established that aligns with international trade and economic rules. At the same time, central financial management departments are fully supporting the construction of Shanghai as an international financial center to reach a higher level, and the central bank has announced eight measures, including the comprehensive reform pilot for offshore trade finance services in the Shanghai Lingang New Area. Therefore, it is worth considering promoting relevant RMB stablecoin innovation and exploration in sync between the Shanghai Free Trade Pilot Zone and Hong Kong.

Regarding domestic offshore RMB stablecoins (CNY Coin, CNYC), one model could involve a clearing organization, large commercial banks, leading payment institutions, and well-known investment institutions jointly initiating the establishment of an RMB stablecoin issuance institution in the Shanghai Free Trade Zone. This would explore the on-chain issuance and operational mechanisms of RMB stablecoins and form a wholesale market for RMB stablecoins aimed at certain authorized institutions (such as digital RMB operating institutions, which have accumulated relatively rich innovative experience), allowing authorized institutions to exchange RMB stablecoins for qualified enterprises or individuals, thus building a retail market for RMB stablecoins.

The second model could rely on certain digital RMB operating institutions' branches in the Shanghai Free Trade Zone to directly mint and operate RMB stablecoins on-chain, ensuring compliance responsibilities are fully met when redeeming to specific qualified economic entities. Of course, if banks are the issuers of stablecoins, on one hand, the tokenized deposits explored by overseas banks or related organizations, while having similar characteristics to stablecoins, still differ from true stablecoin mechanisms. On the other hand, some overseas banks, in response to disintermediation challenges, have begun to research or attempt to establish technology subsidiaries or jointly set up related legal entities to explore issuing fiat stablecoins to enhance their ecological appeal to customers and resist the impact of the crypto industry. Therefore, the exploration of RMB stablecoins under this model still needs to clarify specific paths and focuses.

It is essential to note that regardless of the model, several requirements must be met simultaneously. First, RMB stablecoins need to set sufficient asset reserves, which, in addition to highly liquid assets like RMB cash and short-term government bonds, could include a certain proportion of digital RMB reserves to achieve coordinated advancement with the central bank's CBDC reform pilot. Second, the issuers of RMB stablecoins are required to establish comprehensive compliance operational mechanisms for risk identification, asset segregation and custody, and internal control, fulfilling relevant compliance obligations towards direct customers while striving to cooperate with all parties to expand the application scenarios of RMB stablecoins, effectively aligning with the key reforms of the free trade zone. Third, fully leveraging the "electronic fence" characteristics of the FT accounts in the Shanghai Free Trade Zone, through innovative design of technical standards and smart contracts, the entities holding and using RMB stablecoins during the pilot period should be limited as much as possible to specific qualified institutions, enterprises, or individuals.

At the same time, regarding overseas offshore RMB stablecoins (CNH Coin, CNHC), under model one, a joint RMB stablecoin issuance institution could be initiated by domestic and foreign institutions in Hong Kong, or under model two, allow certain authorized domestic banks or payment institutions to rely on their registered legal entities in Hong Kong to mint and issue overseas offshore RMB stablecoins, which must comply with relevant legal regulations in Hong Kong. This would create a dual RMB stablecoin system for both domestic and foreign markets, while drawing on existing cross-border payment and capital flow arrangements between the mainland and Hong Kong to explore the exchange and interconnection mechanisms between CNYC and CNHC. In the short term, CNYC would primarily be used to supplement and enhance the payment and settlement efficiency of cross-border trade and business activities, while CNHC aims to further strengthen Hong Kong's position in the internationalization of RMB and can be used compliantly for on-chain financial activities and transactions such as commodities settlement, especially actively exploring support for RMB-based Real-World Assets (RWA), thereby jointly working to enhance the global influence of RMB and RMB assets.

It should also be noted that domestic and foreign regulatory authorities and RMB stablecoin issuing institutions should work together to continuously promote intelligent technology innovation, effectively identify secondary market activities of RMB stablecoins within the blockchain ecosystem, especially monitoring cases where non-qualified domestic entities hold RMB stablecoins to prevent illegal capital flows and prevent their use for illegal activities.

Of course, as the Bank for International Settlements (BIS) points out, stablecoins still have defects in three key standards: singleness, elasticity, and integrity. The reform exploration of RMB stablecoins still needs to strictly control risks, proceed gradually, and maintain moderate scale, while also expediting the formulation of relevant laws and regulations to strengthen discourse power in the global legal competition surrounding stablecoins. Looking to the future, it may also draw on the "Finternet" proposed by BIS, based on the construction of a Unified Ledger, to simultaneously promote the coordinated development and complementary win-win of digital RMB, bank tokenized deposits, and stablecoins.

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