The US-China stablecoin game: How can Hong Kong become a strategic pivot for the digitalization of the Renminbi?

Author | Wu Says Blockchain Aki Chen

Recently, a series of developments indicate that offshore RMB stablecoins are accelerating their emergence: According to Reuters, mainland technology giants JD Group and Ant Group have repeatedly lobbied the People's Bank of China to be the first to issue stablecoins denominated in offshore RMB (CNH) in Hong Kong. Compared to its previously conservative and cautious attitude towards cryptocurrencies, the Governor of the People's Bank of China, Pan Gongsheng, has also expressed the central bank's open stance on stablecoins, recognizing their ability to significantly shorten the cross-border payment chain with "payment is settlement," while also emphasizing the substantial challenges they pose to financial regulation. Previously, Guotai Junan International received approval from the Hong Kong Securities and Futures Commission to upgrade its virtual asset trading platform, resulting in a surge in stock prices, which is also seen as a signal of the "national team" entering the cryptocurrency industry. Under the policy "breakthrough," market players are gearing up, and RMB stablecoins are transitioning from concept to practical implementation.

####1. Event Review

According to a report by Yicai, on May 21, the Hong Kong Legislative Council passed the "Stablecoin Bill" to establish a licensing system for fiat-backed stablecoin issuers in Hong Kong; on May 30, the Hong Kong Special Administrative Region government published the "Stablecoin Bill" in the government gazette, meaning the "Stablecoin Bill" officially became law. Subsequently, two internet giants responded actively. On June 12, Ant Group announced that it would apply for a stablecoin license in Hong Kong and Singapore, and also intended to seek permission in Luxembourg, mainly to strengthen its blockchain business in the future to support its cross-border payment and fund management services. This involves two of its subsidiaries: one is Ant International, headquartered in Singapore, and the other is Ant Digital Technologies, with its overseas headquarters in Hong Kong. On June 17, JD.com also stated that it would issue a stablecoin in Hong Kong based on a public blockchain and pegged 1:1 to the Hong Kong dollar, and after completing B-end payments, it would develop penetration into C-end payments. Notably, on the same day, the U.S. Senate also passed a stablecoin "Genius Act," regarded as the first bill in the U.S. to establish a regulatory framework for "stablecoins," filling a regulatory gap in this area. Corresponding to corporate actions is the rapid advancement of Hong Kong's regulatory authorities. The "Stablecoin Bill" in Hong Kong was officially passed by the Legislative Council at the end of May this year and will come into effect on August 1. According to the bill, the Hong Kong Monetary Authority will begin accepting license applications. Stablecoin licenses are scarce, with only single digits expected to be issued, but over 40 companies are already preparing to apply, with law firms reporting that dozens more are interested, resulting in intense competition. Applicants are almost exclusively leading Chinese financial institutions and internet giants, including JD.com, Standard Chartered, Yuanbi, Ant International, and Ant Digital Technologies. Some small and medium-sized enterprises have slim chances of applying due to high thresholds, and there have even been instances of companies attempting to hype their stock prices by riding on the concept. The Secretary for Financial Services and the Treasury, Xu Zhengyu, stated that the licensing system established by the new regulations will provide appropriate oversight for stablecoin-related activities and lay the foundation for the sustainable development of stablecoins and the entire digital asset ecosystem in Hong Kong, which can be seen as a milestone in promoting Hong Kong's status as an international financial center.

####2. Core Discussions and Expert Explanations

#####Misconceptions and Definitions of Stablecoins

The prospects and positioning of offshore RMB stablecoins have sparked in-depth discussions among regulatory officials, financial scholars, and market participants. From a regulatory perspective, there is a consensus that stablecoins essentially remain a digital representation of fiat currency and should fall under the existing financial regulatory framework. Wang Yongli, former vice president of the Bank of China, emphasized that stablecoins, once included in the regulatory framework, are essentially tokens of fiat currency rather than independent currencies. Their development highlights the inefficiencies of the existing fiat currency system, and countries should leverage their technology to enhance the cross-border payment capabilities of fiat currencies. He pointed out that the recent acceleration of stablecoin legislation in the United States, Hong Kong, and other regions—requiring licensed operations, 100% reserves, and prohibiting interest payments—has effectively strengthened the centralized attributes of stablecoins while weakening decentralized risks, bringing them closer to traditional financial regulatory domains. Here, Qiao Yide, vice president and secretary of the Shanghai Development Research Foundation, clarified the recent craze for stablecoins:

The first common misunderstanding is to liken stablecoins to "the blockchain version of Alipay." This statement is essentially inaccurate. Alipay is a third-party payment platform that does not possess monetary attributes; the funds it transmits during transactions remain stored in users' bank accounts. Stablecoins, on the other hand, inherently have value-bearing functions, although their primary use is also for payments. In transactions, stablecoins directly represent the users' assets rather than merely serving as a "channel" for funds.

The second misunderstanding is comparing the Hong Kong dollar to the "USD stablecoin." On the surface, there is a certain similarity in the anchoring mechanism — the issuance of the Hong Kong dollar is fully backed by the US dollar. However, from the perspective of legal attributes and governance structure, there are fundamental differences between the two. The Hong Kong dollar is the legal tender of Hong Kong, regulated by the Monetary Authority through a linked exchange rate system, with the issuance rights held by the three note-issuing banks: HSBC, Bank of China, and Standard Chartered. The profits from note issuance belong to the Hong Kong Exchange Fund, serving the public interest. In contrast, USD stablecoins, represented by USDT, are primarily issued by private companies, and the profits from reserve assets are privately owned by the issuers. For example, Tether's profits exceeded 10 billion USD in 2023, and there are significant differences in the governance and public nature of its stablecoin.

The third misunderstanding is the belief that stablecoins are "decentralized." In fact, stablecoins are a highly hybrid structure that still possesses significant centralized characteristics at their core. Their peg to fiat currency means that the issuance mechanism relies on centralized entities to manage reserves and redemptions; at the same time, the custody arrangements and auditing mechanisms of stablecoins are mostly controlled by centralized institutions. In contrast, their trading and circulation aspects reflect more decentralized characteristics on-chain. Therefore, stablecoins are neither completely centralized nor can they be considered fully decentralized; a more accurate description is that they are "credit intermediaries" underpinned by technology.

Overall, stablecoins are essentially a mapping of fiat currency onto the blockchain, representing a digital expression of credit. They utilize blockchain technology to connect the virtual and real worlds, taking on functions such as payment and settlement, and possess a strong transitional nature. From the perspective of financial development history, the popularity of stablecoins is, to some extent, a response to the inability of decentralized currencies like Bitcoin to fulfill daily monetary functions — the ideal of decentralization encounters practical landing dilemmas, leading the market to 'return' to traditional currency systems. This phenomenon precisely confirms that fiat currency still possesses strong vitality and stability within the current financial system.

#####Beijing explores the path of stablecoin and Renminbi internationalization through Hong Kong

For China, offshore RMB stablecoins are seen as a new hope to promote the internationalization of the RMB. Morgan Stanley pointed out in its latest research report that as the United States advances stablecoin legislation, it may further consolidate the dollar's dominant position in the global financial system. Against this backdrop, Beijing's attention to stablecoins has significantly increased, and it is using Hong Kong as a 'regulatory sandbox' to explore their feasibility as a future alternative payment tool while promoting the cross-border use of the RMB.

Zhou Xiaochuan, former governor of the People's Bank of China, recently mentioned the issue of stablecoins in public and pointed out that the widespread use of US dollar stablecoins may exacerbate the global trend of "dollarization," which deserves high vigilance. Morgan Stanley agrees with this and further points out that the rise of stablecoins does not mean that the international monetary system will usher in a new phase of "supranational currency." It emphasizes that the essence of stablecoins is still an extension of traditional fiat currencies under the existing regulatory framework, and their core role is to enhance the efficiency of cross-border payments and transactions, rather than to replace existing sovereign currencies. Li Yang, chairman of the National Finance and Development Laboratory, also agrees with this view and adds that China should actively engage in the stablecoin field, promote the internationalization of the digital renminbi (e-CNY), and use Hong Kong to develop renminbi stablecoins to enhance the international status of the renminbi. He emphasizes that we must firmly remember that as long as sovereign countries exist, the sovereign nature of currency will not change. Currency sovereignty is an important component of national sovereignty and represents each country's highest authority to issue and manage its own currency domestically. Regardless of how its technological path evolves, stablecoins cannot bypass the foreign exchange regulation and capital flow restrictions between currencies in international payments.

When discussing the development path of the Renminbi stablecoin, Morgan Stanley pointed out that it should be seen as a potential component of the cross-border Renminbi settlement system, expected to work in synergy with existing financial infrastructure, including Renminbi swap agreements, CIPS (Cross-Border Interbank Payment System for Renminbi), and the global Renminbi clearing service network. Morgan Stanley noted in its report that the internationalization of the Renminbi has seen a significant retreat over the past three years. Its share in the global reserve currency system has decreased from 2.8% at the beginning of 2022 to 2.2% by the end of 2024. The bank believes this trend reflects weakening confidence in the outlook for the Chinese economy in international markets, along with a corresponding decline in capital liquidity. The main reasons for the setbacks in Renminbi internationalization stem from ongoing concerns about China's "triple challenges" — high leverage debt, deflationary pressures, and demographic changes. These structural issues have diminished the market's attraction to Renminbi assets and, to some extent, limited the further expansion of the Renminbi in international transactions and reserves.

#####Dual Track Parallel Model of RMB Stablecoin

Li Yang specifically mentioned that the United States is actively promoting stablecoin legislation, aimed at serving the national interests of the dollar: including modernizing the dollar payment system, consolidating the international dominance of the dollar, and creating trillions of dollars in new demand for U.S. Treasury bonds, as the recently passed stablecoin bill requires sufficient backing with dollars or U.S. Treasury bonds as reserve assets. This means that stablecoin issuing institutions must either hold dollars in bank accounts or directly purchase U.S. Treasury bonds. However, under the current financial system arrangements, non-U.S. government entities (such as stablecoin companies) typically do not earn interest returns on U.S. Treasury bonds. From this perspective, stablecoins provide a new mechanism for "interest-free resolution" for U.S. Treasury bonds: if the stablecoin market continues to expand and issuers keep increasing their holdings of U.S. Treasury bonds as reserves, the market demand for U.S. Treasury bonds will inadvertently be further boosted, without the government having to pay additional interest costs, forming a kind of "silent resolution". Of course, the reality is often more complex and severe. On one hand, the total amount of U.S. Treasury bonds is enormous, and even if stablecoins grow rapidly, it is still difficult to shake the overall stock in the short term; on the other hand, the issuance of stablecoins is still subject to multiple restrictions such as compliance, demand, and macroeconomic policy.

The stablecoin mechanism cleverly transforms the expansion of the cryptocurrency market into the extension of the dollar's influence on the blockchain. Therefore, he calls for China to come up with a response strategy as soon as possible, achieving a breakthrough through "dual-track progress": on one hand, accelerating the construction of the central bank's digital RMB transaction settlement system, and on the other hand, actively exploring the development of RMB stablecoins in the offshore system, so that both can work in synergy. This "dual-track" approach has also been echoed by several experts. Qiao Yide, vice president of the Shanghai Development Research Foundation, believes that in the face of the stablecoin wave, China needs to distinguish between short-term and long-term, as well as domestic and offshore strategies: in the short term, it can first break through in the offshore market by piloting the issuance of RMB stablecoins relying on Hong Kong as an international financial center; once conditions are ripe, it should reassess whether and how to promote it domestically. He emphasized that RMB stablecoins should focus on specific functions such as cross-border payments, for example, bypassing SWIFT for cross-border settlements and the mainland-Hong Kong "Payment Link" regional cooperation scenarios, leveraging advantages in these areas to form a "dual-track" coordination with the central bank's digital RMB, and jointly promoting the internationalization of the RMB.

In the design of stablecoin models, industry scholars and practitioners have also provided constructive ideas. Xiao Feng, chairman of HashKey Group, suggested constructing a "dual-layer architecture" of central bank digital currency (CBDC) and RMB stablecoin. The specific approach is to allow licensed stablecoin issuers to open digital RMB reserve accounts at the central bank and issue RMB stablecoins for retail and cross-border use in the form of on-chain tokens, using central bank digital currency as wholesale layer funding. This design combines the results of the central bank's research and development of digital RMB with the innovative power of market institutions, allowing the central bank digital currency to assume wholesale functions while stablecoins are used for cross-border and retail payments, thereby greatly accelerating the cross-border circulation and internationalization process of the RMB. In Xiao Feng's view, stablecoins truly address the "last mile" problem in inclusive finance, with their core value being to enhance the accessibility of financial services. Mainstream stablecoins represented by USDC (USD Coin) and USDT (Tether) are expanding the boundaries of the traditional financial system, providing efficient and low-threshold payment and settlement methods for people who cannot easily access the banking system. He believes that stablecoins and tokenization technology will profoundly change the operational logic of global financial markets: "In ten years, stablecoins will drive tokenization to become the mainstream payment and settlement tool, ultimately replacing traditional financial infrastructure. The trend of 'good money driving out bad money' is irreversible, as stablecoins are more efficient, lower in cost, simpler in structure, and support 7×24 hours of round-the-clock trading."

Therefore, Xiao Feng stated: "As China's international financial center, Hong Kong must keep up with and even lead the development trend of stablecoins. The launch of the 'Stablecoin Regulation' in Hong Kong, which is the first in the world to complete the legislative process for stablecoins ahead of the United States, marks an important step in the global construction of stablecoin systems. This regulation not only has significant positive implications for Hong Kong's local fintech ecosystem, but is also seen as an important support for promoting the internationalization of the renminbi. In this process, Hong Kong can serve as a 'testing ground' for China's development of stablecoins, accumulating experience in institutional design, market operation, and risk prevention through a pilot approach, timely identifying problems, and improving mechanisms to lay a policy and practical foundation for the broader promotion of stablecoins on the mainland in the future. After the pilot of stablecoins in Hong Kong matures, consideration may be given to connecting offshore renminbi stablecoins through free trade accounts (FT) in specific areas of the mainland, such as Hainan Free Trade Port, Guangdong-Hong Kong-Macau Greater Bay Area, and Shanghai Free Trade Port.

####3. Hong Kong Regulatory Attitude: Regulatory Details and Licensing System

As the preferred testing ground for offshore RMB stablecoins, Hong Kong's regulatory system design and implementation progress have attracted significant attention. The "Stablecoin Regulation" establishes a high-threshold admission and ongoing regulatory system for stablecoin issuance and related activities through a combination of a "licensing system + sandbox testing". After the regulation was passed, the Hong Kong Monetary Authority launched the "Stablecoin Issuer Sandbox" program in March this year, inviting interested institutions to conduct pilot projects under regulatory guidance, so that the regulatory authorities can communicate expectations and gather industry feedback to prepare for the formal implementation of the system. This sandbox mechanism demonstrates the pragmatic side of Hong Kong's regulation: testing ahead of legislation completion, enhancing communication with the market, and ensuring smoother and more feasible implementation of new regulations. According to the regulations and supporting guidelines, anyone engaged in the issuance of stablecoins pegged to fiat currency or related activities in Hong Kong must obtain a license issued by the Monetary Authority. The regulatory scope covers aspects such as stablecoin issuance, management, and active promotion, and licensed institutions must strictly adhere to various requirements, including but not limited to:

1. Adequate Reserves and Asset Security: Stablecoins in circulation must be fully backed by equivalent high-liquidity assets. The reserve assets must be consistent with the pegged currency (special cases require approval), which can be cash, bank deposits, and other low-risk assets, and must be kept separate from the issuer's own funds, ensuring the rights of the holders through structures such as trusts. The issuer should establish a sound reserve management and risk control mechanism, with independent audits conducted monthly to verify the adequacy of reserves and disclose information about the reserve size, composition, and other details to the public.

2. Stability Mechanism and Redemption: The issuer is responsible for maintaining the stability of the currency value and must establish effective mechanisms to ensure the lasting reliability of the stablecoin's pegged exchange rate. Holders have the right to redeem the stablecoin at the pegged price, and under normal circumstances, redemptions should be completed within T+0 to T+1 days, and no excessively high fees or unreasonable conditions should be imposed. This provision safeguards users' expectations for the liquidity of the stablecoin and prevents runs and liquidity risks.

3. Scope of Business Restrictions: If a stablecoin issuer intends to expand into new business areas, it must obtain prior approval from the monetary authority and demonstrate that it has sufficient resources and that the new business will not pose significant risks to its stablecoin issuance responsibilities. This measure prevents issuers from jeopardizing the stable operation of the stablecoin by engaging in high-risk activities.

4. Local Entities and Governance: The applicant must be an entity registered in Hong Kong and have a physical office in the region. The main management team (such as the CEO, executives, and directors) should be based in Hong Kong to allow direct oversight by regulatory authorities. In addition, the issuer must meet the minimum capital requirement, set at no less than 25 million HKD or 1% of the circulating stablecoin's par value (whichever is higher). The executive team must possess sufficient knowledge and experience in the relevant field, and any changes in control or management must be approved by regulators in advance.

5. Anti-Money Laundering and Cross-Border Compliance: The President of the Hong Kong Monetary Authority, Eddie Yu, emphasized that the anonymity and cross-border circulation of stablecoins pose risks and challenges related to money laundering and terrorist financing. He requires issuers to have sufficient capabilities in anti-money laundering (KYC/AML). If the stablecoin business involves other jurisdictions, applicants must develop a comprehensive cross-border compliance plan to ensure that they and their partners hold the necessary licenses and comply with local regulations in relevant areas. In the future, Hong Kong will also strengthen cross-border regulatory cooperation through international platforms such as the G20 Financial Stability Board, promoting the healthy and orderly development of stablecoin activities globally.

The regulatory authorities in Hong Kong are keenly aware that stablecoins present both innovation opportunities and inherent risks. Hong Kong Legislative Council member Wu Jietzhuang emphasized the need to "cool down" the market, stating that stablecoins are not speculative tools, but rather a payment method based on Blockchain technology that does not possess appreciation potential. As an international financial center that was among the first to establish a regulatory framework for stablecoins, Hong Kong aims to reserve development space for emerging business models while preventing financial risks. On one hand, it wants to seize the opportunity to position Hong Kong as a "global model" for the compliance of stablecoins, facilitating the digital cross-border use of fiat currencies such as the Renminbi; on the other hand, it also needs to closely monitor potential risks to ensure that "in the event of problems, the regulatory and legal frameworks can be effective."

Currently, all parties in Hong Kong are exhibiting an unprecedented attitude of both enthusiasm and rationality towards stablecoins: the government has publicly expressed support for the development of compliant stablecoins in Hong Kong through policy declarations, and encourages both the public and private sectors to jointly explore the feasibility of using licensed stablecoins in scenarios such as government payments and cross-border trade; the Legislative Council is closely following up on the implementation details of the regulations to ensure the smooth passage of the two accompanying announcements (including the definition of professional investors, etc.); the Hong Kong financial sector also sees this as a new opportunity to consolidate Hong Kong's status as an international financial center.

####4. The Challenge of Dollar Hegemony: What Are the Chances for the Renminbi Stablecoin?

The brewing of offshore RMB stablecoins inevitably faces the grand proposition of "challenging the hegemony of the US dollar." The US dollar has long monopolized the core position of the global financial and payment system, and this is also true in the crypto world: currently, nearly all of the top ten stablecoins by market cap are pegged to the US dollar, with a total scale of about 258 billion US dollars, making the US dollar effectively the default settlement layer in the digital asset space. The share of the RMB in traditional cross-border payments is less than 3%. Can the emerging RMB stablecoin shake up this pattern? The industry has conducted comparisons from aspects such as payment efficiency, institutional credit, compliance, and cross-border collaboration.

#####Payment Efficiency

There are pain points in the field of cross-border payments, where traditional wire transfer paths are long, costs are high, and speeds are slow. Stablecoin technology is expected to greatly improve this situation. Xiao Feng commented that stablecoins have significantly increased payment and settlement efficiency while reducing costs by several times, and the intermediary links have been greatly reduced. If a technology can reduce costs to one-fifth of the original and increase speed by five times, it will undoubtedly have tremendous vitality. However, it is worth noting that prior to the introduction of the legislation, stablecoin payments were not subject to KYC and anti-money laundering regulations. Although using stablecoins for cross-border payments is technically more efficient, this difference is somewhat due to regulatory disparities, and as regulations become standardized, the compliance costs for stablecoins may also rise. This makes it difficult for the renminbi stablecoin to use payment efficiency as a revolutionary point to overtake and challenge the dominance of the US dollar.

#####System Credibility

This dimension involves two layers of meaning: one is the credit of the anchor currency itself, and the other is the transparency and credibility of the stablecoin issuance arrangement. From the perspective of the anchor currency, the US dollar, due to the economic strength and advantages of the US financial system, has long been regarded by global investors and official institutions as the most reliable store of value and pricing currency, with "USD = credit" deeply rooted internationally. Although offshore RMB is continuously expanding its use, its global credit image is relatively weaker than that of the US dollar, restricted by China's capital account controls and the limited international acceptance of the RMB. This means that a stablecoin pegged to the RMB must gain the same level of trust as US dollar stablecoins (such as USDT and USDC) in the eyes of international users, which requires sufficient confidence support from China in terms of macro policy stability, RMB value stability, and convertibility. As the market is concerned, the doubts faced by RMB stablecoins include: Is the convertibility of offshore RMB (CNH) smooth enough? Are there unpredictable risks in the RMB exchange rate and policies? These directly affect the willingness of overseas users to hold and use RMB stablecoins. The regulatory framework in Hong Kong has been carefully designed for the trust mechanism of stablecoins: mandatory information disclosure, independent audits, and qualified asset custody will ensure that the reserve transparency and fund security of RMB stablecoins reach a high level. In contrast, the currently dominant US dollar stablecoins (such as USDT) have faced criticism in their early stages for lack of reserve transparency and excessively high ratios of commercial paper. If RMB stablecoins strictly adhere to Hong Kong regulations and maintain 100% cash equivalents, regularly publishing audit results, they may even surpass some US dollar stablecoins in terms of reserve reliability, thereby enhancing market confidence. Overall, RMB stablecoins have a long way to go to challenge the US dollar's hegemony in terms of credit, but through rigorous regulation and transparent mechanism design, at least the gap in "trust deficit" with US dollar stablecoins can be narrowed.

#####Compliance and Global Collaboration

The dominance of the US dollar is reflected not only in the currency itself but also in the United States' authority to formulate and enforce global financial rules. The expansion of dollar stablecoins relies on the influence of the US financial system—large reserves of dollar stablecoins are directed towards US Treasury bonds, providing additional demand support for US debt. In this context, the launch of the renminbi stablecoin is, to some extent, a way to "start anew" outside the existing international financial framework, and its compliance and legal status need to gain recognition from regulatory authorities in various countries to be widely used. In this regard, Hong Kong offers a viable path: because Hong Kong's licenses possess an international jump-off nature, if licensed renminbi stablecoin issuers can establish a credible record in Hong Kong, they can then seek to apply for corresponding licenses in places like Singapore and Europe, gradually integrating into the local compliance systems, which would significantly enhance the legitimacy of cross-border circulation of the renminbi stablecoin. In the future, it is possible that stablecoins licensed in Hong Kong could gain mutual recognition or exemption treatment in friendly jurisdictions, which would help the renminbi stablecoin "go global." In comparison, dollar stablecoins are still often outside regulation in many countries/regions (some are considered illegal, while others lack clear rules), which is both a risk and an opportunity: markets outside the US may be more open to renminbi stablecoins regulated by Hong Kong, at least not more conservative than their treatment of unregulated US stablecoins. Therefore, in terms of global coordination and compliance, as long as the renminbi stablecoin can firmly maintain Hong Kong as its base and seek support from regional financial centers (such as Singapore, Dubai, etc.), there is an opportunity to create a cross-border compliance network that coexists alongside dollar stablecoins, thereby gradually capturing a portion of the dollar's trading share.

#####Network Effects and User Base

The competition of currencies is ultimately a competition of network effects. An important reason for the hegemony of the US dollar is that everyone is using the US dollar, whether it is traditional trade, investment pricing or emerging digital transactions, and the bigger the network, the stronger the advantage. The US dollar stablecoin follows this trend and dominates the global crypto market, forming a vast liquidity network. For example, USDT is widely circulated on global exchanges and over-the-counter markets, and merchants and individuals are also accustomed to using it as a value intermediary. The RMB stablecoin started late and is inherently in a weak network position, and must quickly expand its own network to challenge the US dollar. On the one hand, China has the world's largest trade volume and supply chain system, and many emerging markets have close trade ties with China. Xiao Feng pointed out that many small and micro cross-border merchants in China will be one of the biggest beneficiaries of RMB stablecoins, which have greatly facilitated this process in the past when they had difficulties in cross-border collection and settlement. Many emerging-market residents are already holding USDT to hedge against local currency depreciation and capital controls, amplifying the dollar's influence in these regions. If there are compliant renminbi stablecoins that enter the market in the future and are approved by local regulators, then the renminbi may also penetrate these markets digitally and compete for the U.S. dollar. Of course, network effects don't happen overnight. In order to win the favor of users, in addition to providing stable and reliable value and low-cost and efficient payment experience, RMB stablecoins also need to create convenient user interfaces and a wide range of acceptance scenarios, including wallet support, merchant acceptance, exchange channels, etc. The USD stablecoin has been seamlessly supported by global crypto wallets and trading platforms, while the RMB stablecoin still needs ecological construction in this regard. However, once the regulatory barriers to compliance are removed, market forces will push various wallets and exchanges to quickly access the RMB stablecoin, after all, for commercial entities, the addition of a sovereign stablecoin means the addition of a large market of potential users.

In summary, it is difficult for the Renminbi stablecoin to shake the dominance of the US dollar in the short term, but the launch of the offshore Renminbi stablecoin has already placed a key piece on the chessboard of digital finance. In the long run, whether the Renminbi stablecoin can challenge the US dollar also depends on China's own pace of financial opening and the international community's confidence in the Renminbi. Nevertheless, in this new battlefield of stablecoins, the competition between China and the US over monetary dominance has already begun.

####5. Other Potential Challenges of the Renminbi Stablecoin

#####Market Trust

For any currency to be widely adopted, trust is the cornerstone. The hegemony of the US dollar is supported by political and military factors, but more directly, it is based on the global users' confidence in the dollar's payment and liquidity. For the RMB stablecoin to gain similar trust, it needs to establish credit endorsements on multiple levels. First, policy credibility. The market is concerned about "political risks," including: will there be sudden restrictions on RMB stablecoin due to geopolitical or regulatory winds? For example, if Sino-US relations become tense in the future, could the Chinese government limit the offshore RMB stablecoin's exchange for US dollars or require scrutiny of specific transactions? These questions may raise concerns among some international users. In response, Chinese regulators should maintain policy transparency and consistency, clearly outlining the regulatory boundaries and supportive stance for the RMB stablecoin to eliminate unnecessary suspicion. Second, operational credibility. The stablecoin issuing institution needs to build a reputation, such as choosing internationally reputable banks for custody and involving globally renowned auditing firms to enhance the trust of international investors. The initial plan in Hong Kong to issue licenses to a few strong licensed institutions is based on this consideration: selecting the best among the best to create a demonstration benchmark.

#####Impact of International Political Environment

As an innovation aimed at challenging the dominance of the US dollar, the RMB stablecoin is inevitably influenced by international gamesmanship. It is foreseeable that the United States may hold reservations about it. Once the RMB stablecoin begins to capture a certain share of global capital flows, the United States may suppress it in various ways, such as: requiring American companies and financial institutions not to participate in the RMB stablecoin network, lobbying its allies to refuse RMB stablecoin payments, and even pressuring traditional networks like SWIFT not to cooperate with relevant offshore RMB clearing institutions. This is not alarmist — in the past, the United States has sanctioned banks in countries such as Iran, removing them from SWIFT, and it cannot be ruled out that digital currencies may also be included in the sanction toolbox in the future.

In short, the offshore RMB stablecoin carries the new dream of RMB internationalization, while also facing the complex tests of reality. From domestic financial security to international currency competition, from technical security to user cultivation, every step must be taken steadily and methodically. The emergence of the RMB stablecoin does not mean that it will shake the dominance of the US dollar overnight, but rather marks the beginning of a protracted battle — in the vast realm of the digital economy and emerging markets, the RMB will strive for more usage and recognition through this new vehicle of stablecoin. In the coming years, we may not see the replacement of the US dollar's status, but we may see the pattern of the dollar's dominance gradually rewritten: multiple fiat stablecoins such as the US dollar, euro, and RMB will coexist and compete, and the global monetary system will evolve towards a more diversified and balanced direction.

Reference Article: