《The Standard》: Stablecoin Pegged to Offshore RMB, Hong Kong Could Be a Pioneer

On July 2nd, as reported by The Paper, stablecoins have emerged as a new arena for international monetary competition. Countries are accelerating their legislative efforts to secure a favorable position in the global payment system. The discussion regarding whether China should issue a stablecoin pegged to the offshore Chinese yuan (CNH) to accelerate the internationalization of the yuan has become a hot topic in the current market. Some analysts believe that from the perspective of major power games, China has reached a critical moment that requires a response. Hong Kong could serve as a "pilot" city to issue a CNH stablecoin to explore practical application scenarios. However, the prerequisite is that regulatory challenges such as anti-money laundering must be addressed first. China has always maintained a conservative stance towards cryptocurrency. However, its recent focus on stablecoins is due to the comprehensive shift in stablecoin regulation following the tenure of former U.S. President Trump. The U.S. Congress has recently rapidly advanced the "Stablecoin Act" (GENIUS Act), and Trump has publicly expressed his hope to complete the legislation by August. This means that the 99% market share of dollar-pegged stablecoins (such as USDT issued by Tether and USDC by Circle) will legally gain access to global payment rails in the future, further solidifying the dominance of the U.S. dollar and potentially stimulating the demand for short-term U.S. Treasury bonds. The state-owned media Securities Times published a commentary stating that if stablecoins are allowed to develop in an unregulated manner, it may have a negative impact on China's financial system. On the other hand, if China gives up this efficient settlement tool, it may miss a crucial opportunity for currency internationalization. CCTV's program Jade Bird Pond Talks About the Sky also criticized that the U.S. is expanding the dollar's hegemony to the global digital finance sector through stablecoins, which may erode other countries' currency sovereignty systems. Xing Ziqiang, Chief Economist of Morgan Stanley China, predicts that Hong Kong will first promote a stablecoin pegged to the U.S. dollar and Hong Kong dollar to build technological and market trust. Then, it will expand to a CNH stablecoin. With the support of a CNH offshore yuan fund pool reaching one trillion yuan in Hong Kong, the CNH stablecoin can verify practical use cases for cross-border settlements while avoiding violations of mainland capital controls or affecting domestic financial stability.