Exploration of Renminbi Stablecoin Development: New Ideas for Domestic and International Linkage

Recently, the topic of stablecoins has sparked widespread attention again. With Hong Kong about to implement new regulations on stablecoins, there has been a heated discussion in the industry about the development prospects of the RMB stablecoin.

Traditional views suggest that offshore RMB stablecoins should first be piloted in Hong Kong and then explored in domestic free trade zones once conditions are ripe. However, considering the new characteristics of the Web 3.0 era, we recommend adopting a development model for RMB stablecoins that links domestic and overseas markets.

This suggestion is based on the following considerations: First, in the face of the rapid development of US dollar stablecoins and global regulatory trends, China needs to proactively conduct research and regulation on stablecoins from the perspective of financial security and currency sovereignty. Second, the scale of the Hong Kong offshore renminbi market is limited and may struggle to independently support the renminbi stablecoin to achieve economies of scale. Furthermore, stablecoin regulation involves multiple cutting-edge areas such as identity verification and anti-money laundering, requiring central authorities to take the lead and closely cooperate with Hong Kong regulatory agencies.

Specifically, consideration can be given to simultaneously promoting the innovation of the RMB stablecoin in the Shanghai Free Trade Zone and Hong Kong. For the onshore offshore RMB stablecoin (CNYC), there are two possible models: one is to establish a dedicated issuing institution in the free trade zone by multiple institutions; the other is to rely on the existing digital RMB operating institutions to conduct business through their branches in the free trade zone.

At the same time, offshore Renminbi stablecoins (CNHC) can be issued in cooperation by domestic and foreign institutions in Hong Kong, or by authorized domestic financial institutions through their Hong Kong branches. This can create a dual Renminbi stablecoin system that is interconnected, serving both cross-border trade settlement and enhancing the position of the Renminbi in the international financial market.

To ensure the secure operation of stablecoins, sufficient asset reserves must be established, risk management mechanisms improved, and the experience of the Free Trade Zone FT accounts should be referenced to limit the use of stablecoins through technical means. At the same time, regulatory authorities should closely cooperate with issuing institutions to strengthen monitoring of secondary market activities and prevent illegal capital flows.

In the future, we can draw on the "financial internet" concept proposed by the Bank for International Settlements to promote the collaborative development of the digital RMB, tokenized bank deposits, and stablecoins. Overall, the exploration of the RMB stablecoin should strictly control risks and proceed gradually, while also accelerating the formulation of relevant laws and regulations in order to occupy a favorable position in the global stablecoin arena.