Chinese tech giants continue to push for greenlight on yuan-pegged stablecoin

China’s tech firms JD.com and Ant Group have proposed to the country’s central bank to allow the launch of stablecoins in Hong Kong pegged to its offshore yuan. Both companies believe the initiative will promote global use of Chinese currency and counter the growing U.S. dollar-linked digital assets.

The Bank for International Settlements reported that over 99% of stablecoins are U.S. dollar-dominated. On-chain data shows that the global stablecoin market is roughly $247 billion, with the Standard Chartered Bank forecasting that it could surge to around $2 trillion by 2028.

China aims to compete in the stablecoin sector

JD.com and Ant Group are advocating for China to establish stablecoins in their offshore yuan to compete with the rising growth of U.S. dollar-linked virtual assets. China had banned cryptocurrencies in 2021, but the companies’ initiative could change Beijing’s view on pushing for the global use of the yuan.

Hong Kong is also planning to establish a regulatory framework for stablecoins to compete with the U.S. in global trade and digital finance. 

Hong Kong’s new Stablecoin Ordinance legislation, which will take effect from August 1, will give both Chinese tech giants the chance to issue stablecoins backed by the Hong Kong dollar.

JD.com and Ant have allegedly talked with the People’s Bank of China and argued that offshore yuan-pegged digital assets have the potential to promote the globalization of the yuan.

If China doesn’t develop stablecoins, it will essentially withdraw from the competition for next-generation global currency dominance and hand it to others.”

-Shen Jianguang, Chief Economist at JD.com.

JD.com founder Richard Liu told his staff that the firm wants to apply for stablecoin licences in all major markets to cut cross-border payment costs by 90% and reduce settlement times to under 10 seconds. Ant Group is also preparing to apply for stablecoin licenses in Hong Kong, Luxembourg, and Singapore.

China previously advocated for the internationalization of the yuan, but has been hindered by its reluctance to limit its strict fiscal policies. Data from SWIFT showed that the yuan’s share as a global payment currency dropped to 2.89% in May, while the U.S. dollar has a market share of 48.46%.

Xiao Feng, chairman of Hong Kong-based crypto exchange HashKey, argued that China has reached a point where it can no longer hold back from joining the stablecoin race. He noted that several Chinese exporters have turned to dollar stablecoins as more and more global merchants are sending payments in USDT.

The People’s Bank of China governor, Pan Gongsheng, highlighted in June that the growth in digital assets and stablecoins could jeopardize financial regulation. The bank’s advisor Huang Yinping also maintained that an offshore yuan stablecoin in Hong Kong is “a possibility.”

An economist at Morgan Stanley, Robin Xing, argued that China could use Hong Kong to trial offshore yuan-based stablecoins that could breach Beijing’s strict capital rules. He also argued that China needs to embrace the trend of sovereign currency tokenization to maintain competitiveness in the digital infrastructure race.

Chinese digital yuan partner to develop stablecoin tech in Hong Kong

On Wednesday, Shenzhen-listed North King Information Technology signed a strategic partnership with a Hong Kong company to establish stablecoins and other crypto business initiatives. The firm said it partnered with GoFintech Quantum Innovation to develop infrastructure to support stablecoins and other digital assets as well as tokenized real-world assets (RWAs).

The Chinese company wants to incorporate its information technology capabilities into the stablecoin sector by partnering with stakeholders such as crypto exchanges, regulators, and stablecoin issuers. North King also acknowledged that it wants to use Hong Kong as its starting point into the global fintech space.

The information technology company revealed that it wants to develop both hard and soft wallets for stablecoins, while GoFintech Quantum is already involved in making hardware wallets. In February, North King partnered with Quakey Tech to develop and sell hardware wallets resistant to quantum computing attacks.

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