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In mainland China, cryptocurrencies remain banned. But stablecoins, or digital tokens pegged to traditional currencies, are starting to draw interest from local policymakers. As Hong Kong prepares to implement its stablecoin licensing rules on August 1, it is positioning itself as a test bed for what could become one of the most significant steps in creating a digital renminbi that circulates offshore.
This is an important time for Beijing, thanks to a surge in dollar stablecoin usage among Chinese exporters, coupled with the openness of the People’s Bank of China to digital financial instruments. For now, US dollar-denominated stablecoins account for more than 99 per cent of the global market, reflecting its role as the default currency for international trade and financial settlement. The renminbi remains constrained by limited offshore circulation. It makes up less than 3 per cent of total cross-border transactions, and is subject to tight capital controls.
Yet a viable renminbi stablecoin, especially one issued offshore through regulated Hong Kong entities, has the potential to disrupt this entrenched dependence on the dollar. Counterparties anywhere could trade a digital token that represents a claim on renminbi, yet the underlying currency itself would remain in China, safeguarding Beijing’s capital controls.
Two Chinese groups stand to benefit most from such a shift. Ecommerce group JD.com and fintech Ant Group, lobbying to issue renminbi pegged stablecoins, stand to gain new revenue streams in transaction fees, reserve yield and settlement services. Circle Internet, the recently-listed dollar stablecoin company, has shown this model can be profitable: it made $1.7bn of revenue and over $150mn of earnings last year.
For JD.com, stablecoins would be a much needed practical tool that can improve the efficiency of trade finance and settlement across its retail and logistics businesses. It would help streamline settlement for its merchants and logistics partners and allow JD to offer faster and lower cost cross border payments to exporters. In the near term, regional supply chain vendors or platform-based sellers, who prioritise speed and lower transaction costs, would be the most likely to accept stablecoin payments.
For Ant the opportunity would be even greater. Considering an average 2 per cent yield on reserves, in line with yields on short-term Chinese government bonds, interest alone would mean a significant boost to earnings, even before accounting for transaction fees and payment infrastructure revenue. It would gain access to recurring income streams from functions traditionally monopolised by banks and global card networks.
These new revenue streams would still be exposed to interest rate changes and regulatory shifts, and are contingent on whether the stablecoin gains real traction. But for companies like JD.com and Ant Group, this represents a rare chance to move away from platform-driven growth towards revenue less exposed to consumer cycles and a more stable and predictable earnings base — while helping to promote China’s international monetary status in the process.
june.yoon@ft.com
