tl;dr
Hong Kong and mainland Chinese regulators are increasingly engaging with stablecoins, signaling a possible relaxation of China's strict digital asset policies. A recent meeting hosted by Shanghai SASAC gathered officials and industry leaders to discuss the $260 billion stablecoin market, emphasizing...
One of Hong Kong’s top financial regulators recently convened a meeting centered on stablecoin risks and opportunities, signaling a potential easing of China’s strict stance on digital assets. The Shanghai State-owned Assets Supervision and Administration Commission (SASAC) hosted over 60 government officials, policymakers, and industry leaders to discuss the burgeoning stablecoin market, now valued at $260 billion with daily trading volume surpassing $200 billion.
SASAC director He Qing emphasized the need for “greater sensitivity to emerging technologies” and strengthened research on digital currencies. A policy expert from Guotai Haitong Securities highlighted the rapid growth of stablecoins, their regulatory challenges, and potential benefits, while suggesting strategies to encourage adoption. This dialogue reflects a broader shift as mainland Chinese entities increasingly explore stablecoin possibilities, particularly concentrated in Shanghai, the country’s financial hub known for regulatory innovation.
Key players like JD.com and Ant Group have applied for stablecoin issuance licenses in Hong Kong, lobbying for authorization of digital tokens backed by offshore yuan. Stablecoins pose a complex challenge for China: they could enhance the yuan’s global use, which currently lags behind other currencies in international trade at under 3%, yet threaten China’s conservative financial policies by facilitating transactions bypassing traditional banking systems.
Morgan Stanley recently noted that ignoring stablecoins risks leaving China behind in the global digital infrastructure race. A yuan-pegged stablecoin could bolster China’s competitive edge, complementing the somewhat stalled digital yuan CBDC. Experts argue that Hong Kong’s advanced regulatory environment and offshore renminbi market make it an ideal testing ground, shielding China from direct risks while fostering innovation.
Capital controls and strict currency regulations remain significant hurdles, limiting the flow of funds in and out of China. However, the rapid expansion of stablecoins globally—expected to exceed $400 billion this year and potentially reach $1.6 trillion to $3.7 trillion by 2030 according to Citi—demands that China take action. Xiao Feng, chairman of Hong Kong’s regulated exchange HashKey, stressed that Chinese traders already use USD-pegged stablecoins for global payments, a trend confirmed by Crypto HK’s observation of a fivefold surge in stablecoin trading volume among Chinese users since 2021.