Chinese tech giants, including Alibaba-backed Ant Group and e-commerce firm JD.com, have paused their stablecoin plans under Hong Kong’s regulatory framework amid concerns raised by the mainland government over the private takeover of currency controls.
A Financial Times report detailed that these tech companies have put their stablecoin efforts on hold following instructions from multiple Chinese regulators, including the People’s Bank of China (PBoC) and the Cyberspace Administration of China (CAC).
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Is It the End of Hong Kong’s Plan?
Stablecoins are pegged to fiat currencies or other real-world assets, keeping their values stable compared with the wild swings of other cryptocurrencies. These coins have become the backbone of crypto trading and are also seen as having strong potential for streamlining global cross-border payments.
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Hong Kong aims to be a centre of the stablecoin industry and even passed legislation last May, introducing a licensing regime for stablecoin issuers in the city.
The rules mandate licensing from the Hong Kong Monetary Authority (HKMA) for any stablecoin issuers in the city or anyone issuing Hong Kong dollar-pegged stablecoins elsewhere.
The reported decision by the tech companies came after Ant Group and JD.com confirmed their participation in the pilot stablecoin programme earlier this year.
Meanwhile, the Donald Trump administration in the United States is supporting privately issued stablecoins. The US even passed the Genius Act to regulate such cryptocurrencies, following Tether’s announcement of plans to launch a US-compliant stablecoin.
Related: China’s Bid to Put the RMB on the Stablecoin Map
A Speech That Raised the Alarm
Although the Chinese regulators’ reasoning behind their resistance to stablecoins remains unclear, the Financial Times report noted that they were taking a more cautious approach following a speech by former PBoC Governor Zhou Xiaochuan last August.
“We need to be vigilant against the risk of stablecoins being excessively used for asset speculation, as misdirection could trigger fraud and instability in the financial system,” Xiaochuan said at the China Finance 40 Forum.
Meanwhile, stablecoins are not the only initiatives to have faced restrictions from Chinese regulators.
Earlier, China’s securities market watchdog reportedly advised multiple local brokerages to pause their real-world asset (RWA) tokenisation business in Hong Kong. This came after several Chinese firms, including brokerages, entered the tokenisation sector and launched RWAs in Hong Kong over the past few months.
This article was written by Arnab Shome at www.financemagnates.com.
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