China Signals Support for Offshore Yuan Stablecoin Ambitions

Chinese authorities are cautiously opening the door to a yuan-backed stablecoin, marking a potential shift in Beijing’s digital currency posture. While mainland policy still prohibits private cryptocurrencies, discussions among regulators, state banks, and tech giants point to growing momentum behind offshore CNH-linked tokens—particularly in Hong Kong. The move reflects China’s broader aim to challenge U.S. dollar dominance in digital finance without compromising capital controls at home.

Tech Giants Push for CNH-Linked Tokens in Hong Kong

JD.com and Ant Group have reportedly urged the People’s Bank of China (PBOC) to greenlight offshore yuan-pegged stablecoins. Their efforts are focused on Hong Kong, where a new licensing regime for stablecoins takes effect August 1, 2025. With 70% of global offshore yuan (CNH) transactions already processed through the territory, the city is positioned as a key launchpad for tokenized yuan products.

Financial executives argue that such tokens could streamline trade settlement, lower cross-border payment friction, and create new vehicles for regional investment—all within a controlled offshore jurisdiction.

Official Messaging Acknowledges Dollar-Driven Risks

At the 2025 Lujiazui Forum, PBOC Governor Pan Gongsheng acknowledged the rising role of stablecoins in cross-border payments. Former regulators warned that lagging behind U.S. dollar-backed tokens like USDT and USDC could amount to a “strategic financial risk” for China.

While Beijing continues to prioritize the digital yuan (e-CNY) for domestic use, CNH-based stablecoins are increasingly seen as a complementary tool—one that could promote yuan internationalization without opening onshore capital markets.

Still, top analysts at Bank of China International have warned against “overly simplistic” views that a stablecoin alone can boost the global appeal of the yuan. They argue that broader reforms—on interest rate liberalization, capital flows, and trust in Chinese institutions—remain prerequisites.

Policy Meetings Point to Internal Shift

A recent high-level meeting in Shanghai marked the first regulatory session on stablecoins since China’s blanket crypto ban in 2021. Sources say it included senior financial officials and tech representatives, signaling a softening of China’s prior hardline stance—at least in offshore contexts.

Simultaneously, a newly restructured financial stability committee at the PBOC reiterated its commitment to yuan internationalization. That agenda now includes support for digital trade financing and expanded testing of tokenized financial products.

Yuan-Backed Assets Gain Traction

Last month, ChinaAMC (HK) launched the first tokenized fund denominated in yuan, tied to the Hong Kong Monetary Authority’s blockchain infrastructure. The fund offers investors exposure to short-term debt with faster settlement and enhanced transparency. While not a stablecoin per se, the move signals a growing appetite for digital RMB-denominated instruments under formal regulatory oversight.

Global stablecoin supply currently exceeds $250 billion, with more than 98% tied to the U.S. dollar. Analysts estimate that yuan-linked tokens could capture at least 10% of new issuance by 2028 if Beijing fully backs a CNH coin through offshore frameworks.

Hong Kong's Moment in the Spotlight

With its new licensing regime for fiat-referenced stablecoins taking effect this week, Hong Kong has become the de facto testing ground for China’s tokenized financial ambitions. Companies with strong mainland ties—especially in logistics, fintech, and trade finance—are expected to drive the first wave of adoption.

Early candidates for regulatory approval include stablecoin ventures backed by Chinese banks, regional e-commerce firms, and asset managers such as ChinaAMC and Harvest Global.

Tips for Traders

• Track digital asset firms operating in Hong Kong as they may gain first-mover advantage under China’s offshore stablecoin strategy.

• Monitor currency-hedged instruments tied to CNH as liquidity channels for yuan-denominated flows begin to expand.

• Watch for shifts in sentiment on U.S. dollar-backed tokens—yuan alternatives could introduce volatility in stablecoin pairs.

• Consider positioning around regulatory catalysts, especially licensing updates in Hong Kong’s digital finance sector.

• Stay alert to tokenized fixed-income products denominated in RMB—early issuance may signal policy endorsement.

• Evaluate geopolitical exposure across stablecoin platforms—those seen as aligned with China’s architecture may gain regional inflows.