Author: Ye Kai, Huaxia Digital Capital
Introduction
Today, some rumors surfaced: "JD Ant was rejected by the central bank to exit the stablecoin license," and many influencers quickly deleted their posts, which shows a lack of intelligence. Although the Hong Kong stablecoin regulations combined with the new guidelines seem to impose many restrictions that appear to be detrimental, what is the underlying logic? It is more about restricting US dollar stablecoins to leave room for offshore RMB stablecoins; limiting retail stablecoins to first develop the institutional market for stablecoins.
The rejection of JD Ant by the central bank is not about exiting the stablecoin license; it is highly likely due to the rejection of offshore RMB stablecoins. Joycoin's goal is the Hong Kong dollar stablecoin, while offshore RMB stablecoins will likely first come from Chinese institutions involved in banking operations (in Hong Kong, Chinese institutions refer to central state-owned enterprise financial institutions based in Hong Kong), rather than JD Ant.
From this topic, let's discuss the possibilities of Hong Kong stablecoins, offshore RMB stablecoins, and digital RMB. Here, to avoid adding pressure to regulators, I would like to clarify: the plot is purely fictional, please do not take it personally.
Main Text
Two days before the official implementation of Hong Kong's "Stablecoin Regulations," Phoenix News Digital Economy Channel interviewed Huaxia Digital Capital for an interpretation of the stablecoin regulations, during which a question was asked: Please describe the relationship between digital RMB and stablecoins in a vivid way. I used a big tree as a metaphor: digital RMB and offshore RMB stablecoins are like a new financial tree, rooted in the "black soil" of the Shanghai Lingang Free Trade Zone, with the trunk composed of the digital RMB data pulse backed by the central bank, and the branches and leaves stretching in the sea breeze of Hong Kong, bearing "CNHC" offshore fruits. The growth of this plant is planned, not mechanized, but organically symbiotic. Digital RMB and offshore RMB stablecoins are not mutually exclusive; rather, they promote the circulation of RMB globally through a "dual-track" model.
Roots, Trunk, and Leaves: Understanding the "Dual-Track" Model
1. Shanghai Roots: Deeply Embedded in the Real Economy
As the largest onshore RMB center, the Shanghai Lingang Free Trade Zone is seen as the root system of this plant, supporting the core ecology of RMB. Cross-border e-commerce, automobile exports, green energy equipment, and other "large B2B settlement" transactions within the electronic fence use digital RMB as an entry point, which is then converted into CNHC stablecoins within the Hong Kong sandbox through the central bank interface, allowing enterprises to make payments on-chain. This model ensures that funds remain within the trade closed loop, unaffected by external capital flows. Through this method, enterprises can complete payments in minutes, far exceeding the 2-3 days settlement time required by traditional SWIFT.
The goal of the roots is to inject sufficient liquidity into RMB stablecoins through these bulk transactions, with optimistic projections estimating that by 2030, the scale of cross-border payments could reach 10 trillion yuan, and on-chain RWA financing could reach 500 billion yuan, gradually expanding the international influence of RMB.
2. Digital RMB: The Resilient Trunk at the Center
Digital RMB acts like a sturdy pipeline, carrying the RMB payment network. It connects the roots in Shanghai with the branches in Hong Kong, playing a crucial connecting role. In Shanghai, digital RMB mainly handles domestic RMB fund borrowing and foreign exchange settlement; once funds cross borders, they are batch converted into CNHC through the central bank interface before entering overseas markets.
This centrally controlled design ensures effective regulation while providing flexible channels for fund flow. Through this "cold and warm exchange valve," the central bank can effectively supervise the flow of funds both domestically and internationally while providing sufficient freedom to support cross-border payments.
3. Hong Kong CNHC: Green Leaves Facing the World
As the largest offshore RMB center, Hong Kong serves as the branches and green leaves of this plant, facing the global market. CNHC, in addition to being an on-chain consensus "note" for RMB-denominated assets, is also designed as a small payment tool suitable for cross-border payments, capable of rapid circulation globally. The Hong Kong Monetary Authority has very strict requirements to ensure that each CNHC can be pegged 1:1 to RMB cash or highly liquid notes, allowing for multi-chain issuance.
Hong Kong's CNHC can not only serve international trade and capital flows but also play an important role in RMB-denominated asset areas such as green electricity computing assets, energy mineral resources, and the tokenization of Hong Kong stocks. Market research indicates that if CNHC can achieve 4x leverage, it would be sufficient to support an annual trade settlement volume of 40 trillion yuan. This positions RMB to gradually compete with US dollar stablecoins in East Asia, Central Asia, the Middle East corridor, and global trade.
How to Nourish the CNHC Leaves with Nutrients from the Roots
The entire process of fund flow resembles a precise ecological system, ensuring the liquidity and operability of offshore RMB stablecoins in the international market. The following is a hypothetical process of RMB fund circulation (purely fictional, please do not take it personally):
(1) FT Accounts and Electronic Fence Chain: In the Shanghai Free Trade Zone, RMB is first converted into exportable digital RMB through FT accounts, under regulatory oversight.
(2) Central Bank Cross-Border Four-Way Valve: The central bank verifies identity and trade authenticity through the "cold and warm exchange valve" to ensure compliance.
(3) Shanghai-Hong Kong Dual-Domain Bridge: Funds from Shanghai's digital RMB enter the reserve pool of Hong Kong custodial banks in bulk, converting into Hong Kong's CNHC.
(4) Multi-Chain Synchronized Minting: CNHC is issued synchronously on multiple blockchain platforms by licensed Hong Kong stablecoin issuers based on reserve balances, covering Ethereum, Solana, BNB Chain, etc.
(5) Reverse Redemption: Through Hong Kong's clearing and settlement banks (Bank of China Hong Kong) or market makers, users can exchange CNHC for digital RMB through the four-way valve and return to the domestic market for use.
This entire process resembles a "three-defense tunnel" in the financial market, preventing capital outflow while ensuring trade compliance. For eligible enterprises and individuals, this process is almost a "fast pass."
Dual-Track Regulatory Technology System
To ensure the safety and compliance of RMB cross-border fund flows under the "dual-track model," regulatory agencies in Shanghai and Hong Kong can build a tight and efficient regulatory technology system:
On the Shanghai side, centered around "FT accounts" and "electronic fence" technology, a dedicated free trade account (FT account) is established to achieve closed-loop fund flow and precise monitoring within the account, in conjunction with the central bank and commercial banks' collaborative fund entry and exit management, ensuring that every cross-border fund flow is based on real trade backgrounds. At the same time, electronic fence technology is used to achieve precise control and tracking of fund usage, ensuring that funds are only used for compliant cross-border trade payments. The central bank sets up cross-border fund "identity verification and authenticity review" interfaces at the Shanghai cross-border four-way valve, conducting authenticity and compliance reviews for each batch conversion of digital RMB into CNHC before it occurs, utilizing on-chain and off-chain data fusion technology, and employing AI and big data analysis for dynamic real-time risk monitoring to prevent money laundering and capital flight risks.
On the Hong Kong side, based on the "Stablecoin Regulations," the Hong Kong Monetary Authority requires stablecoin issuers to establish strict "reserve asset custody and transparency mechanisms," designating local custodial banks (such as Bank of China Hong Kong) to isolate and audit CNHC reserve assets regularly, using blockchain's "real-time transparency proof of assets" (Proof of Reserve) technology to achieve real-time reconciliation and synchronization of on-chain reserve balances and off-chain custodial funds. Furthermore, the multi-chain issuance process of CNHC relies on the immutability of distributed ledgers and on-chain tracking technology, utilizing on-chain smart contracts to achieve real-time registration, tracking, and permanent traceability of each cross-chain asset's transaction history, ensuring that the fund flow process is completely transparent and regulatory.
Through this comprehensive set of regulatory technology measures, Shanghai and Hong Kong can establish a robust cross-border fund regulatory system. Every fund flow on-chain can be precisely monitored and traced back to its original source, preventing illegal capital outflow while ensuring the efficient operation and safety of cross-border payments. This dual-domain linked regulatory technology innovation provides a solid regulatory foundation and technical support for the future internationalization of RMB and the global circulation of offshore RMB stablecoins.
Significance, Risks, and Challenges of the Dual-Track System
The "Digital RMB + RMB Stablecoin" dual-track model is not simply a division into two parts; it is a balanced design that considers efficiency and safety, central bank regulation and market vitality. From the perspective of payment efficiency, relying solely on the central bank-led digital RMB system, while stable and compliant, has limited cross-chain capabilities due to its operation on a permissioned chain, making it difficult to cover the global 24/7 real-time cross-border transaction needs. Conversely, if one completely relies on the market-oriented offshore RMB stablecoin CNHC, it may face systemic risks such as reserve asset volatility and risk control failure; if it becomes unpegged, it could trigger a crisis of confidence.
The dual-track system is precisely designed to address this "dilemma": digital RMB acts as the main road, responsible for ensuring sovereignty, identity compliance, and the original source of fund flow; CNHC serves as the auxiliary road and branch, extending quickly, flexibly, and at low cost to every corner of the world where there is a demand for RMB.
As emphasized by the Bank for International Settlements (BIS): "The central bank is the main root, and private institutions are the branches." The key to the dual-track system lies in the central bank maintaining fundamental control while releasing market forces to extend boundaries.
Of course, this structure is not without challenges. For instance, if interest rates in Hong Kong fluctuate significantly and reserve asset returns do not keep pace, CNHC may face concentrated sell-offs, leading to unpegging risks; in other regions where policies are still unclear, the chain extension may be interrupted, affecting the trade closed loop; additionally, if the central bank-led cross-border system experiences technical failures, the bridge between the two tracks may also fail. Therefore, the future of the dual-track system is filled with imaginative possibilities but requires multiple safeguards in terms of systems, technology, and global coordination.
In summary, the "dual-track model of digital RMB and offshore RMB stablecoins" reflects a delicate balance between financial technology and policy regulation. Shanghai, as the root system of the onshore RMB ecosystem, and Hong Kong, as the offshore RMB financial hub facing the world, are forming a powerful synergy, gradually pushing offshore RMB stablecoin (CNHC) onto the global stage. Although this process is accompanied by technological, policy, and market risks, under the collaborative effects of clear regulation, effective risk control, and technological innovation, the RMB dual-track model is expected to become a highly competitive innovative paradigm in the process of RMB internationalization. Looking ahead, with more global policy coordination and technological improvements, more global assets will be denominated in offshore RMB stablecoins, and RMB is expected to occupy a more proactive and critical position in the global digital economy wave.
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