JD.com and Ant Group have urged China’s central bank to give the go-ahead to yuan-pegged stablecoins in Hong Kong so they can compete globally. The offshore yuan will peg the stablecoins and aim to end the monopoly of the U.S. dollar-backed digital tokens worldwide.
The two companies want the go-ahead to promote international usage of the yuan in digital financial products and trade. Chinese tech giants are convinced that introducing a stablecoin pegged with the offshore yuan will aid the country’s longtime desire for currency internationalization.
JD.com cited the same in backchannel talks with the People’s Bank of China and the necessity of introducing the same was reinforced. Ant Group is planning to get licenses for stablecoins in both Hong Kong and Singapore. This will help the company expand its digital financial services in more regions.
Hong Kong will start enforcing new stablecoin rules on August 1. JD.com and Ant Group plan to take advantage of these rules for their stablecoins tied to the Hong Kong dollar.
Their venture stands the risk of failing to contribute to yuan internationalization as the Hong Kong dollar is tied to the U.S. dollar. JD.com management only expects an offshore yuan-pegged coin to bridge the gap effectively.
Yuan stablecoin push counters dollar dominance in digital trade
The market for stablecoins is still small at $247 billion but should grow to $2 trillion by 2028. U.S. dollar-backed tokens lead the circulation of the global supply of stablecoin at more than 99%.
China’s market share of global payments in currency in May dipped to 2.89%, and the issue is growing more urgent for Beijing policymakers. Most of the Chinese exporters now prefer the application of dollar-priced stablecoins like USDT for rapid settlements with foreign buyers.
Hong Kong’s largest crypto OTC exchange has reported that mainland China buyers’ volumes of USDT trades have increased five times since 2021. Exporters say unstable currency values and global political tensions are key reasons they avoid regular banking. These issues push them to use faster and more reliable digital payment options instead.
China still prohibits cryptocurrencies, but authorities closely monitor developments in the digital currency space. PBOC Governor Pan Gongsheng acknowledges that stablecoin growth brings regulatory challenges that require quick action.
JD.com has proposed piloting the offshore yuan-pegged stablecoin in China’s free trade zones after its initial launch in Hong Kong. Reports suggest that regulators are viewing the proposal favorably.
D.com and Ant Group are facilitating yuan-denominated stablecoins outside mainland China to promote wider international use of the yuan. Their goal is to strengthen the yuan’s global presence while reducing the digital dominance of the U.S. dollar.
