As Beijing expresses concerns over the rise of privately controlled currencies, China’s tech giants – Alibaba-backed Ant Group and e-commerce firm JD.com – are suspending plans to issue stablecoins in Hong Kong.
Summary
- Ant Group and JD.com suspend stablecoin projects in Hong Kong after warnings from Beijing.
- The PBoC has raised sovereignty concerns over private currency-issuing companies.
- The caution follows Zhou Xiaochuan’s warning about speculation and instability.
According to the Financial Times, the companies announced over the summer that they would participate in Hong Kong’s stablecoin pilot program. But now Chinese regulators, including the People’s Bank of China and the Cyberspace Administration of China, have advised against participating in the stablecoin’s initial rollout.
PBoC officials have expressed concerns about allowing technology groups and brokerages to issue any currency.
The central bank has reportedly expressed concern over whether private companies should have “ultimate right over the currency.”
This caution contrasts with the earlier enthusiasm of some Chinese officials, who viewed renminbi-denominated stablecoins as a strategic response to the dominance of the U.S. dollar.
In June, former Vice Minister of Finance Zhu Guangyao said the United States was promoting stablecoins to maintain the global dominance of the dollar.
He also suggested that China use Hong Kong’s pilot programs and stressed that a renminbi-based stablecoin should be integrated into the country’s national financial strategy.
Interest in the Hong Kong program grew over the summer. Officials also suggested that renminbi stablecoins could boost international use of the yuan.
Risk Assessment Outweighs Benefits of Payment Innovation
Former People’s Bank of China Governor Zhou Xiaochuan has warned of the need to be vigilant against excessive use of stablecoins for asset speculation, stressing that poor guidance could lead to fraud and instability in the financial system.
He called for a careful assessment of the real demand for tokenization as a technological foundation.
The former governor questioned the potential of stablecoins for payments, stating that “there is little room to reduce costs in the current system, particularly in retail payments.”
The Hong Kong Monetary Authority began accepting applications from stablecoin issuers in August. This made the territory a testing ground for experimentation on the continent.
The reaction from Chinese authorities highlights the broader global regulatory tensions surrounding stablecoins.
