Author: Aki Chen
This article is organized with the participation of GPT, intended for information sharing only, and does not constitute any investment advice. Readers are advised to strictly comply with the laws and regulations of their location and not to engage in illegal financial activities.
Recently, a series of developments indicate that offshore RMB stablecoins are accelerating their emergence: According to Reuters, mainland tech giants JD Group and Ant Group have repeatedly lobbied the People's Bank of China to be the first to issue stablecoins denominated in offshore RMB (CNH) in Hong Kong. Compared to its previous conservative stance on cryptocurrencies, the Governor of the People's Bank of China, Pan Gongsheng, has also expressed an open attitude from the central government regarding stablecoins, recognizing their potential to significantly shorten the cross-border payment chain through "payment upon settlement," while also emphasizing the substantial challenges they pose to financial regulation. Previously, Guotai Junan International received approval from the Hong Kong Securities and Futures Commission to upgrade its virtual asset trading platform, leading to a surge in its stock price, which is also seen as a signal of the "national team" entering the crypto industry. Under the policy "ice-breaking," various market participants are gearing up, and RMB stablecoins are moving from concept to practical implementation.
I. Event Review
According to Yicai, on May 21, the Hong Kong Legislative Council passed the "Stablecoin Bill" to establish a licensing system for fiat stablecoin issuers in Hong Kong; on May 30, the Hong Kong Special Administrative Region government published the "Stablecoin Bill" in the Gazette, meaning the bill officially became law. Subsequently, two internet giants responded actively. On June 12, Ant Group announced plans to apply for stablecoin licenses in Hong Kong and Singapore, and also intends to seek permission in Luxembourg, primarily to strengthen its blockchain business in the future and support its cross-border payment and fund management services. This involves two of its subsidiaries: Ant International, headquartered in Singapore, and Ant Digital Technologies, with its overseas headquarters in Hong Kong. On June 17, JD also stated that it would issue a stablecoin in Hong Kong, pegged 1:1 to the Hong Kong dollar and based on a public blockchain, which will penetrate and develop towards the consumer end after completing B-end payments. Notably, on the same day, the U.S. Senate also passed a stablecoin "Genius Act," seen as the first U.S. bill to establish a regulatory framework for "stablecoins," filling a regulatory gap in this area. The rapid advancement of Hong Kong's regulatory framework corresponds with corporate actions. The "Stablecoin Bill" in Hong Kong was officially passed by the Legislative Council at the end of May this year and will take effect on August 1. According to the bill, the Hong Kong Monetary Authority will open license applications. Stablecoin licenses are scarce, with expectations of only a single-digit issuance, but over 40 companies are already preparing to apply, with law firms reporting dozens more interested, leading to fierce competition. Applicants are almost exclusively top Chinese financial institutions and internet giants, including JD, Standard Chartered, Yuan Coin, Ant International, and Ant Digital Technologies, while some small and medium-sized enterprises face high barriers to entry, making their chances of application slim, and there have even been instances of companies riding the concept to hype stock prices. The Secretary for Financial Services and the Treasury, Xu Zhengyu, stated that the licensing system established by the new regulations will provide appropriate supervision for stablecoin-related activities, laying the foundation for the sustainable development of stablecoins in Hong Kong and the entire digital asset ecosystem. This initiative can be seen as a milestone in promoting Hong Kong's status as an international financial center.
II. Core Discussion and Expert Exposition
Misunderstandings and Definitions of Stablecoins
The prospects and positioning of offshore RMB stablecoins have sparked in-depth discussions among regulatory officials, financial scholars, and market participants. From a regulatory perspective, there is a consensus that stablecoins essentially remain a digital representation of fiat currency and should be incorporated into the existing financial regulatory framework. Former Vice Governor of the Bank of China, Wang Yongli, emphasized that regulated stablecoins are essentially tokens of fiat currency rather than independent currencies, highlighting the inefficiencies of the existing fiat currency system. Countries should leverage technology to enhance the cross-border payment capabilities of fiat currencies. He pointed out that the recent acceleration of stablecoin legislation in the U.S. and Hong Kong, which requires licensed operations, 100% reserves, and prohibits interest payments, effectively strengthens the centralized attributes of stablecoins and mitigates decentralization risks, bringing them closer to traditional financial regulatory categories. In this context, Qiao Yide, Vice President and Secretary of the Shanghai Development Research Foundation, clarified the recent surge in stablecoins:
The first common misunderstanding is to liken stablecoins to "blockchain versions of Alipay." This characterization is fundamentally inaccurate. Alipay is a third-party payment platform that does not possess currency attributes; the funds it transmits in transactions are still stored in users' bank accounts. In contrast, stablecoins inherently have value-bearing functions, even though their primary use is also for payments. In transactions, stablecoins directly represent users' assets rather than merely serving as a "channel" for funds.
The second misunderstanding is to compare the Hong Kong dollar to "USD stablecoins." On the surface, both have certain similarities in their anchoring mechanisms— the Hong Kong dollar is issued with a 100% dollar backing. However, there are fundamental differences in legal attributes and governance structures. The Hong Kong dollar is the legal currency of Hong Kong, regulated by the Monetary Authority through a linked exchange rate system, with issuance rights held by the three major note-issuing banks: HSBC, Bank of China, and Standard Chartered. The profits from note issuance go to the Hong Kong Exchange Fund, serving the public interest. In contrast, USD stablecoins, represented by USDT, are primarily issued by private companies, with the returns on reserve assets being privately owned by the issuers. For example, Tether's profits exceeded $10 billion in 2023, highlighting significant differences in governance and public interest.
The third misunderstanding is the belief that stablecoins are "decentralized." In reality, stablecoins are a highly hybrid structure, with significant centralized characteristics at their core. Their linkage to fiat currency means that the issuance mechanism relies on centralized entities to manage reserves and redemptions; simultaneously, the custody arrangements and auditing mechanisms of stablecoins are mostly controlled by centralized institutions. In contrast, their trading and circulation aspects reflect more decentralized characteristics on-chain. Therefore, stablecoins are neither fully centralized nor completely decentralized; a more accurate description is that they are "credit intermediaries" empowered by technology.
Overall, stablecoins are essentially a chain-based representation of fiat currency, a digital expression of credit. They utilize blockchain technology to connect the virtual and real worlds, undertaking functions such as payment and settlement, and possess strong transitional characteristics. From the perspective of financial development history, the popularity of stablecoins is, to some extent, a response to the inability of decentralized currencies like Bitcoin to fulfill daily currency functions— the ideal of decentralization encounters practical challenges, leading the market to "return" to the traditional currency system. This phenomenon precisely confirms that fiat currency still possesses strong vitality and stability within the current financial system.
Beijing's Exploration of Stablecoins and RMB Internationalization through Hong Kong
For China, offshore RMB stablecoins are seen as a new hope for promoting the internationalization of the RMB. Morgan Stanley's latest research report points out that as the U.S. advances stablecoin legislation, it may further consolidate the dollar's dominant position in the global financial system. Against this backdrop, Beijing's attention to stablecoins has significantly increased, and it is leveraging Hong Kong as a "regulatory sandbox" to explore their feasibility as future alternative payment tools while promoting the cross-border use of the RMB.
Former Governor of the People's Bank of China, Zhou Xiaochuan, recently mentioned stablecoin issues in public, noting that the widespread use of USD stablecoins could exacerbate the global trend of "dollarization," which warrants high vigilance. Morgan Stanley agrees with this view and further points out that the rise of stablecoins does not mean that the international monetary system will enter a new phase of "supranational currency." It emphasizes that the essence of stablecoins remains an extension of traditional fiat currency under the existing regulatory framework, with their core role being to enhance the efficiency of cross-border payments and transactions rather than to replace existing sovereign currencies. Li Yang, Chairman of the National Financial and Development Laboratory, also agrees with this viewpoint and adds that China should actively engage in the stablecoin field, promote the internationalization of the digital RMB (e-CNY), and utilize Hong Kong to develop RMB stablecoins to enhance the international status of the RMB. He emphasized that as long as sovereign states exist, the sovereign attributes of currency will not change. Currency sovereignty is an important component of national sovereignty, representing each country's highest authority to issue and manage its currency domestically. Regardless of how its technological path evolves, stablecoins cannot bypass the exchange rate regulation and capital flow restrictions between various countries in international payments.
When discussing the development path of RMB stablecoins, Morgan Stanley pointed out that they should be viewed as a potential component of the cross-border RMB settlement system, expected to synergize with existing financial infrastructure, including RMB swap agreements, CIPS (Cross-Border Interbank Payment System), and the global RMB clearing service network. Morgan Stanley's report noted that the internationalization of the RMB has seen a significant retreat over the past three years. Its share in the global reserve currency system has decreased from 2.8% at the beginning of 2022 to 2.2% by the end of 2024. The bank believes this trend reflects a weakening of international market confidence in China's economic prospects, leading to a corresponding decline in capital liquidity. The main reasons for the setbacks in RMB internationalization stem from ongoing concerns about the "triple challenges" facing China—high leverage debt, deflationary pressures, and demographic changes. These structural issues have diminished the attractiveness of RMB assets in the market and have, to some extent, limited the further expansion of the RMB in international transactions and reserves.
The Dual-Track Parallel Model of RMB Stablecoins
Li Yang specifically mentioned that the U.S. is actively promoting stablecoin legislation aimed at serving the national interests of the dollar: including modernizing the dollar payment system, consolidating the dollar's international dominance, and creating trillions of dollars in new demand for U.S. Treasury bonds, as the recently passed stablecoin bill requires full backing with dollars or U.S. Treasury bonds (T-bills). This means that stablecoin issuing institutions must either hold dollars in bank accounts or directly purchase T-bills. According to the current financial system arrangements, non-U.S. government entities (such as stablecoin companies) typically do not receive interest returns on T-bills. From this perspective, stablecoins provide a new mechanism for "interest-free resolution" for T-bills: if the stablecoin market continues to expand, issuers will continue to increase their holdings of T-bills as reserves, thereby further boosting the market demand for T-bills without requiring the government to pay additional interest costs, creating a kind of "silent resolution." Of course, the reality is often more complex and severe. On one hand, the total amount of T-bills is enormous, and even if stablecoins grow rapidly, it is still difficult to shake their overall stock in the short term; on the other hand, the issuance of stablecoins is still subject to multiple constraints, including compliance, demand, and macro policies.
The stablecoin mechanism cleverly transforms the expansion of the crypto market into an extension of dollar influence on-chain. Therefore, he calls for China to quickly devise a response strategy to achieve breakthroughs through "dual-track progress": on one hand, accelerate the construction of the central bank's digital RMB transaction settlement system, and on the other hand, actively explore the development of RMB stablecoins in the offshore system, allowing both to work synergistically. This "dual-track" approach has also been echoed by several experts. Qiao Yide, Vice President of the Shanghai Development Research Foundation, believes that in the face of the stablecoin wave, China needs to distinguish between short-term and long-term, domestic and offshore strategies: in the short term, it can first break through from the offshore market, using Hong Kong as an international financial center to pilot the issuance of RMB stablecoins; once conditions mature, it can reassess whether and how to promote them domestically. He emphasized that RMB stablecoins should focus on specific functions such as cross-border payments, for example, bypassing SWIFT for cross-border settlements and regional cooperation scenarios like the Mainland-Hong Kong "Payment Link," leveraging advantages in these areas to coordinate with the central bank's digital RMB and promote the internationalization of the RMB.
In terms of stablecoin model design, industry scholars and practitioners have also provided constructive ideas. Xiao Feng, Chairman of HashKey Group, suggested constructing a "dual-layer architecture" for central bank digital currency (CBDC) and RMB stablecoins. The specific approach is to allow licensed stablecoin issuers to open digital RMB reserve accounts at the central bank and use CBDC as wholesale funding to issue RMB stablecoins for retail and cross-border use in the form of on-chain tokens. This design combines the central bank's achievements in the development of digital RMB with the innovative power of market institutions, allowing the central bank digital currency to undertake wholesale functions while stablecoins are used for cross-border and retail payments, thereby significantly accelerating the cross-border circulation and internationalization process of the RMB. In Xiao Feng's view, stablecoins truly solve the "last mile" problem in inclusive finance, with their core value lying in enhancing the accessibility of financial services. Mainstream stablecoins represented by USDC (USD Coin) and USDT (Tether) are broadening the boundaries of the traditional financial system, providing efficient and low-threshold payment and settlement means for those who cannot easily access the banking system. He believes that stablecoins and tokenization technology will profoundly change the operational logic of global financial markets: "Ten years from now, stablecoins will drive tokenization to become the mainstream payment and settlement tool, ultimately replacing traditional financial infrastructure. The trend of 'good money driving out bad money' is irreversible because stablecoins are more efficient, lower in cost, and simpler in structure, supporting 24/7 trading."
Therefore, Xiao Feng stated: "As China's international financial center, Hong Kong must keep pace with or even lead the trend of stablecoin development. The launch of the 'Stablecoin Bill' in Hong Kong, which has completed the stablecoin legislative process ahead of the United States, marks an important step in the global construction of stablecoin systems. This bill not only has significant positive implications for Hong Kong's local fintech ecosystem but is also seen as an important boost for the internationalization of the RMB. In this process, Hong Kong can serve as a 'testing ground' for China's development of stablecoins, accumulating experience in institutional design, market operation, and risk prevention through a pilot approach, promptly identifying issues and improving mechanisms, laying a policy and practical foundation for broader promotion of stablecoins in the mainland in the future. Once the pilot of stablecoins in Hong Kong matures, consideration can be given to connecting offshore RMB stablecoins through free trade accounts (FT) in specific areas of the mainland, such as Hainan Free Trade Port and the Guangdong-Hong Kong-Macao Greater Bay Area."
III. Hong Kong's Regulatory Attitude: Regulatory Details and Licensing System
As the preferred testing ground for offshore RMB stablecoins, the design and implementation progress of its regulatory system have attracted significant attention. The "Stablecoin Bill" establishes a high-threshold access and ongoing regulatory system for stablecoin issuance and related activities through a combination of "licensing system + sandbox testing." After the bill was passed, the Hong Kong Monetary Authority (HKMA) launched the "Stablecoin Issuer Sandbox" program in March this year, inviting interested institutions to conduct pilot projects under regulatory guidance to communicate expectations and gather industry feedback in preparation for the formal implementation of the system. This sandbox mechanism demonstrates the pragmatic side of Hong Kong's regulation: testing in advance before legislation is completed, enhancing communication with the market, and ensuring smoother implementation of new regulations. According to the bill and supporting guidelines, anyone engaged in the issuance of stablecoins pegged to fiat currency or related activities in Hong Kong must obtain a license issued by the HKMA. The regulatory scope covers the issuance, management, and proactive promotion of stablecoins, and licensed institutions must strictly adhere to various requirements, including but not limited to:
Sufficient reserves and asset security: The circulating stablecoins must be fully backed by equivalent high-liquidity assets. Reserve assets must be consistent with the pegged currency (special cases require approval) and can include cash, bank deposits, and other low-risk assets, which must be stored separately from the issuer's own funds, ensuring the rights of holders through structures such as trusts. Issuers should establish a comprehensive reserve management and risk control mechanism, with independent audits verifying reserve adequacy monthly and publicly disclosing information about reserve size and composition.
Stability mechanisms and redemption: Issuers are responsible for maintaining the stability of the currency value and must establish effective mechanisms to ensure the lasting reliability of the stablecoin's pegged exchange rate. Holders have the right to redeem stablecoins at the pegged price, and under normal circumstances, redemptions should be completed within T+0 to T+1 days, without charging excessively high fees or setting unreasonable conditions. This provision safeguards users' liquidity expectations for stablecoins and prevents runs and liquidity risks.
Business scope restrictions: If stablecoin issuers wish to expand into new businesses, they must obtain prior approval from the HKMA and demonstrate that they have sufficient resources and that the new business will not pose significant risks to their stablecoin issuance responsibilities. This measure prevents issuers from jeopardizing the stable operation of stablecoins by engaging in high-risk businesses.
Local entities and governance: Applicants must be incorporated entities registered in Hong Kong and have a physical office in Hong Kong. The main management team (such as the CEO, executives, and directors) should reside in Hong Kong to facilitate direct oversight by regulatory authorities. Additionally, issuers must meet minimum capital requirements, proposed to be no less than HKD 25 million or 1% of the circulating stablecoin's face value (whichever is higher). The executive team must possess sufficient knowledge and experience in relevant fields, and any changes in control or management must receive prior regulatory approval.
Anti-money laundering and cross-border compliance: HKMA President Yu Weiwen emphasized that the anonymity and cross-border circulation characteristics of stablecoins pose risks and challenges related to money laundering and terrorist financing, requiring issuers to have sufficient capabilities in anti-money laundering (KYC/AML). If stablecoin operations involve other jurisdictions, applicants must develop comprehensive cross-border compliance plans to ensure that they and their partners hold the necessary licenses and comply with local regulations. In the future, Hong Kong will also strengthen cross-border regulatory cooperation through international platforms such as the G20 Financial Stability Board to promote the healthy and orderly development of stablecoin activities globally.
The Hong Kong regulatory authorities are keenly aware that stablecoins present both innovative opportunities and hidden risks. Legislative Council member Wu Jiezhuang has emphasized the need to "cool down" the market, stating that stablecoins are not speculative tools but rather payment means based on blockchain technology, which do not possess appreciation potential. As an international financial center that has formulated stablecoin regulatory systems relatively early, Hong Kong hopes to reserve development space for emerging business models while preventing financial risks. On one hand, it aims to seize the opportunity to make Hong Kong a "global model" for stablecoin compliance, facilitating the digital cross-border use of fiat currencies such as the RMB; on the other hand, it must closely monitor potential risks to ensure that "once problems arise, the regulatory and legal framework can take effect."
Currently, all parties in Hong Kong exhibit an unprecedented attitude of both enthusiasm and rationality towards stablecoins: the government publicly expresses support for the development of compliant stablecoins in Hong Kong through policy declarations and encourages public and private sectors to jointly explore the feasibility of using licensed stablecoins in government payments, cross-border trade, and other scenarios; the Legislative Council is intensively following up on the implementation details of the bill to ensure the smooth passage of the two accompanying announcements (including the definition of professional investors, etc.); the Hong Kong financial sector also views this as a new opportunity to consolidate Hong Kong's status as an international financial center.
IV. Challenges to Dollar Hegemony: What Are the Chances for RMB Stablecoins?
The brewing of offshore RMB stablecoins inevitably faces the grand proposition of "challenging dollar hegemony." The dollar has long monopolized the core position of the global financial and payment system, even in the crypto world: currently, nearly all of the top ten stablecoins are pegged to the dollar, with a total scale of about $258 billion, making the dollar effectively the default settlement layer in the digital asset field. The RMB accounts for less than 3% of traditional cross-border payments; can the emerging RMB stablecoins shake this pattern? The industry has conducted comparisons in terms of payment efficiency, institutional credibility, compliance, and cross-border collaboration.
Payment Efficiency
There are pain points in the cross-border payment field, with traditional wire transfers being lengthy, costly, and slow. Stablecoin technology is expected to greatly improve this situation. Xiao Feng commented that stablecoins enhance payment and settlement efficiency several times over and reduce costs significantly, with intermediaries greatly reduced. If a technology can reduce costs to one-fifth of the original and increase speed fivefold, it will undoubtedly possess immense vitality. However, it is worth noting that before the bill was introduced, stablecoin payments were not subject to KYC and anti-money laundering regulations. Although using stablecoins for cross-border payments is technically more efficient, this difference is partly due to regulatory disparities, and as regulations normalize, the compliance costs for stablecoins may also increase. This makes it difficult for RMB stablecoins to challenge the dollar's hegemony based on payment efficiency alone.
Institutional Credibility
This dimension involves two layers of meaning: the credibility of the pegged currency itself and the transparency and credibility of the stablecoin issuance arrangements. From the perspective of the pegged currency, the dollar, backed by the economic strength and financial system advantages of the United States, has long been regarded by global investors and official institutions as the most reliable store of value and pricing currency, with "dollar = credit" deeply rooted internationally. Although offshore RMB usage is expanding, it is constrained by China's capital account controls and the limited international acceptance of the RMB, resulting in a relatively weaker global credit image compared to the dollar. This means that a stablecoin pegged to the RMB must earn the same level of trust from international users as dollar stablecoins (such as USDT and USDC), requiring China to provide sufficient confidence in macroeconomic policy stability, RMB value stability, and convertibility. As the market worries, the doubts facing RMB stablecoins include: Is the convertibility of offshore RMB (CNH) sufficiently smooth? Are there unpredictable risks in RMB exchange rates and policies? These directly affect the willingness of overseas users to hold and use RMB stablecoins. Hong Kong's regulatory framework has been carefully designed to establish a trust mechanism for stablecoins: mandatory information disclosure, independent audits, and qualified asset custody will ensure high levels of reserve transparency and fund security for RMB stablecoins. In contrast, the currently dominant dollar stablecoins (such as USDT) have faced criticism in the early stages for lack of transparency in reserves and excessive proportions of commercial paper. If RMB stablecoins strictly adhere to Hong Kong regulations by maintaining 100% cash-equivalent reserves and regularly publishing audit results, their reserve reliability may even surpass that of some dollar stablecoins, thereby enhancing market confidence. Overall, while RMB stablecoins face a long road ahead to challenge dollar hegemony in terms of credibility, rigorous regulation and transparent mechanism design can at least narrow the gap with dollar stablecoins in terms of "trust deficit."
Compliance and Global Collaboration
Dollar hegemony is not only reflected in the currency itself but also in the United States' authority to formulate and enforce global financial rules. The expansion of dollar stablecoins also relies on the influence of the U.S. financial system— a large amount of dollar stablecoin reserves are directed towards U.S. Treasury bonds, providing additional demand support for T-bills. Against this backdrop, the launch of RMB stablecoins is, to some extent, a "new start" outside the existing international financial framework, and their compliance and legal status need to gain recognition from regulators in various countries to be widely used. In this regard, Hong Kong provides a feasible path: since Hong Kong's licenses have an international jumping-off point nature, if licensed RMB stablecoin issuers can establish a credible record in Hong Kong, they can then seek corresponding licenses in Singapore, Europe, and other places, gradually integrating into local compliance systems, which will greatly enhance the legality of cross-border circulation of RMB stablecoins. In the future, it is not ruled out that stablecoins licensed in Hong Kong may gain mutual recognition or exemption treatment in friendly jurisdictions, which will help RMB stablecoins "go global." In contrast, dollar stablecoins currently remain unregulated in many countries/regions (some are considered illegal, while others lack clear rules), which presents both risks and opportunities: markets outside the U.S. may be more open to RMB stablecoins regulated by Hong Kong, at least not more conservative than their treatment of unregulated U.S. stablecoins. Therefore, in terms of global collaboration and compliance, as long as RMB stablecoins can firmly hold onto Hong Kong as a base and seek support from regional financial centers (such as Singapore and Dubai), there is an opportunity to create a cross-border compliance network that coexists alongside dollar stablecoins, thereby gradually capturing some of the dollar's transaction share.
Network Effects and User Base
The competition of currencies ultimately boils down to the competition of network effects. One important reason for the dollar's dominance is that whether in traditional trade, investment pricing, or emerging digital transactions, everyone is using the dollar; the larger the network, the stronger the advantage. Dollar stablecoins align with this trend, dominating the global crypto market and forming a vast liquidity network. For example, USDT is widely circulated in global exchanges and over-the-counter markets, and merchants and individuals are accustomed to using it as a medium of value. RMB stablecoins started late and are inherently in a weak network position; to challenge the dollar, they must rapidly expand their own network. On one hand, China has the largest trade volume and supply chain system in the world, and many emerging markets have close trade ties with China. If RMB stablecoins can be promoted first in areas such as cross-border e-commerce and supply chain finance, they will quickly accumulate real transaction demand and user groups. Xiao Feng pointed out that many small and micro cross-border merchants in China will be among the biggest beneficiaries of RMB stablecoins—previously, they faced numerous difficulties in cross-border payment settlements, while stablecoins greatly facilitate this process. Currently, many residents in emerging markets have been holding USDT to hedge against local currency depreciation and capital controls, thereby expanding the dollar's influence in these regions. If a compliant RMB stablecoin enters the market in the future and obtains local regulatory approval, the RMB could also penetrate these markets in digital form, competing for territory with the dollar. Of course, establishing network effects is not an overnight task. For RMB stablecoins to win user favor, they must not only provide stable and reliable value and low-cost, high-efficiency payment experiences but also create convenient usage interfaces and widespread acceptance scenarios—including wallet support, merchant acceptance, and exchange channels. Dollar stablecoins have already received seamless support from global crypto wallets and trading platforms, while RMB stablecoins still need ecological development in this regard. However, once regulations clear compliance barriers, market forces will drive various wallets and exchanges to quickly integrate RMB stablecoins, as for commercial entities, adding a sovereign stablecoin means a potential user base from a large market.
In summary, RMB stablecoins are unlikely to shake the dollar's hegemony in the short term, but the launch of offshore RMB stablecoins has already placed a key piece on the chessboard of digital finance. In the long run, whether RMB stablecoins can challenge the dollar also depends on China's own pace of financial opening and the international community's confidence in the RMB. Regardless, the competition for currency dominance between China and the U.S. has already begun in this new battlefield of stablecoins.
V. Other Potential Challenges for RMB Stablecoins
Market Trust
For any currency to be widely adopted, trust is the cornerstone. While dollar hegemony is supported by political and military factors, more directly, it is based on global users' confidence in the dollar's payment and liquidity. To gain similar trust, RMB stablecoins need to establish credit endorsements on multiple levels. First is policy credibility. Market concerns about "political risk" include: Will there be sudden restrictions on RMB stablecoins due to geopolitical or regulatory shifts? For example, if U.S.-China relations become tense in the future, could the Chinese government restrict the exchange of offshore RMB stablecoins for dollars or require scrutiny of specific transactions? Such questions may cause some international users to have reservations. In this regard, Chinese regulators should maintain policy transparency and consistency, clearly communicating the regulatory boundaries and supportive stance of RMB stablecoins to eliminate unnecessary suspicions. Second is operational credibility. Stablecoin issuing institutions need to build a reputation; for instance, custodial banks should choose internationally reputable banks, and audits should involve globally recognized auditing firms to enhance the trust of international investors. The initial plan to issue licenses to a few capable licensed institutions in Hong Kong is based on this consideration: selecting the best to create a model benchmark.
Impact of the International Political Environment
As an innovation aimed at challenging dollar dominance, RMB stablecoins are inevitably influenced by international power struggles. It is foreseeable that the U.S. may be wary of them. Once RMB stablecoins begin to occupy a certain share in global capital flows, the U.S. may employ various means to suppress them, such as: requiring U.S. companies and financial institutions not to participate in the RMB stablecoin network, lobbying its allies to refuse RMB stablecoin payments, or even pressuring traditional networks like SWIFT not to cooperate with relevant offshore RMB clearing banks. This is not alarmist—historically, the U.S. has sanctioned banks in countries like Iran, removing them from SWIFT, and it is not out of the question that digital currencies could also be included in the sanctions toolbox in the future.
In conclusion, offshore RMB stablecoins carry the new dream of RMB internationalization but also face complex realities. From domestic financial security to international currency competition, from technological security to user cultivation, every step must be taken steadily and methodically. The emergence of RMB stablecoins does not mean an overnight challenge to dollar hegemony but rather resembles the beginning of a protracted battle—in the vast realm of the digital economy and emerging markets, the RMB will seek to gain more usage and recognition through this new vehicle of stablecoins. In the coming years, we may not see the dollar's position replaced, but we might witness the gradual rewriting of the landscape where the dollar stands alone: multiple fiat stablecoins, including the dollar, euro, and RMB, coexisting and competing, leading the global monetary system towards a more diversified and balanced direction.
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