Source: Bloomberg Businessweek/Chinese Edition
Written by Yin Chen
Editor: Deng Yongjun
In early June of this year, Liu Peng, CEO of JD Coinlink, accepted an interview with (Bloomberg Businessweek/Chinese Edition), where he emphasized that stablecoins are not equivalent to cryptocurrencies like Bitcoin or Ethereum, but are similar to mobile payments, both being 'payment tools'. As a veteran in the payment industry, Liu Peng was deeply involved in the design and promotion of 'WeChat Pay' as a core member. He later managed payment operations for large enterprises such as Huawei. Now, Liu Peng says he senses a similar 'feeling' to the explosive growth of mobile payments—he believes that payment-type stablecoins will serve as a new financial infrastructure in the Web 3 era, playing a 'disruptive' positive role in scenarios such as international trade.
Decentralization, low transfer costs, transaction transparency and traceability… Stablecoins pegged to fiat currencies are leveraging their many advantages to move from the crypto world into a broader traditional financial system. On May 30, Hong Kong officially published the (Stablecoin Regulation), marking that this international financial center will clarify the regulation of stablecoin activities related to Hong Kong and the Hong Kong dollar through a licensing system. As early as December 2023, Hong Kong announced the implementation of a licensing system for fiat stablecoin issuers; in July 2024, three institutions, including JD Coinlink, entered the sandbox (hereafter referred to as 'sandbox') launched by the Monetary Authority to conduct stablecoin-related testing.
Liu Peng revealed that the scenario testing of JD Coinlink in the 'sandbox' is progressing smoothly, with plans to launch stablecoins pegged to the Hong Kong dollar and other currencies.
JD Coinlink was registered in Hong Kong in March 2024 and is a subsidiary of JD Technology Group, which is a business group under JD Group (9618.HK), a leading e-commerce company in mainland China. Despite its short establishment time in Hong Kong, Liu Peng believes that one of JD Coinlink's first-mover advantages is having a 'cold start' scenario from zero to one, namely the JD e-commerce ecosystem. The group has not publicly disclosed the specific number of third-party merchants on the platform; however, Liu Peng mentioned during his participation in Hong Kong FinTech Week in October 2024 that if compliant stablecoins can be issued, 'the vast number of merchants on the JD platform' could use stablecoins for upstream and downstream settlements to improve efficiency and manage funds more flexibly overseas.
In fact, in a market where the two major US dollar stablecoins, USDT and USDC, account for over 80%, stablecoins issued by licensed issuers in Hong Kong need to find additional attractiveness, including usage scenarios, besides their 'compliance' advantage. Among them, cross-border payments are undoubtedly where many stablecoin issuers showcase their capabilities. At the same time, retail payments also play a positive role in enhancing the market penetration and brand building of stablecoins.
As of August 1 this year, the (Stablecoin Regulation) will officially take effect. Globally, regions such as Singapore, the European Union, and the United States have successively brought payment-type stablecoins under regulation, and this existing stablecoin market, which currently has a scale of about $250 billion, is becoming increasingly attractive.
Looking ahead, will compliant stablecoins drive a paradigm shift in payments, evolving from 'offline to online' mobile payments to 'online to on-chain'? Can the rapidly legislating Hong Kong use stablecoins to consolidate and enhance its key position in international trade? In an era where multiple currencies are pegged to stablecoins, how will the global payment and financial system change?
In May of this year, JD stablecoins entered the second phase of self-testing in the 'sandbox'. What is the latest progress?
As of early June, we primarily conducted testing on Hong Kong dollar stablecoins and will soon conduct testing on other fiat stablecoins. Based on market demand, we expect the simultaneous issuance of two types of stablecoins. Unlike the first phase, which mainly tested product functionality and technical details, the second phase focuses on testing the use of stablecoins in three practical scenarios: cross-border payments, investment trading, and retail payments.
In the cross-border payment scenario, we plan to expand users through both direct customer acquisition and indirect customer acquisition (for example, cooperating with compliant wholesalers). In the investment trading scenario, we are negotiating cooperation with global compliant exchanges with the aim of listing JD stablecoins in different regions. The first retail aspect to land will be JD Global Sale's Hong Kong and Macau site, where users can be the first to use stablecoins for shopping in JD's self-operated e-commerce scenario.
When is JD Coinlink expected to receive a stablecoin issuer license and launch stablecoins on compliant exchanges? What are your initial thoughts on the issuance scale?
The specific timetable depends on regulation. We expect to receive a license in early Q4 of this year and simultaneously launch JD stablecoins. JD stablecoins will be issued on a public blockchain, allowing anyone to publicly view data such as issuance volume.
Currently, the most notable application scenario for stablecoins is cross-border payments, where a large number of transactions use USDT and USDC. How can compliant stablecoins issued in Hong Kong establish a foothold in this market?
First of all, 'compliance' itself is the core competitiveness. As regulations come into effect and business progresses, the market's understanding of this will gradually mature. As a newly issued compliant stablecoin, the goal of JD stablecoins is not to compete in scenarios like crypto-native or investment trading, but to explore new 'battlefields', namely connecting the traditional cross-border trade settlement market. This market has a large number of real enterprises, cross-border trade participants, payment technology companies, etc., all of whom need safe, compliant, transparent, and auditable stablecoin services. Therefore, both in product design and customer acquisition methods, we will have certain targeted strategies. We expect that regions such as Asia-Pacific, the Middle East, Africa, South America, and Europe will be the first to use stablecoins issued in Hong Kong for payment settlements in international trade.
Many fintech companies have achieved cost reduction and efficiency improvement in cross-border payments through blockchain technology and localized strategies. Recently, the founder of a leading cross-border payment company raised questions, believing that the value of stablecoins in G10 currency cross-border transactions is limited. What is your view on such opinions?
Stablecoins are a system engineering project and not solely dependent on any single product for success. The competitiveness of compliant stablecoins lies not only in their low cost, high efficiency, and excellent user experience but also in having a stable custody mechanism, a secure clearing and settlement channel, and a credible operational logic to protect the rights of holders. As a stablecoin issuer, we are also willing to cooperate with cross-border payment companies to build a stablecoin ecosystem.
Which links within the JD ecosystem will first apply stablecoins? How can JD improve the market acceptance of JD stablecoins outside of the existing JD ecosystem?
The JD ecosystem's global sale's Hong Kong and Macau payment scenarios will be the first to use JD stablecoins for payment settlements. Outside the JD ecosystem, given the differences in industry characteristics, transaction timeliness, and capital clearing logic, we plan to tailor stablecoin payment solutions for different industries. Currently, JD stablecoins will reduce transfer time from several days to seconds, with costs at least halved compared to traditional transfers, and on-chain capital turnover will be faster. These advantages are believed to attract participants in international trade to adopt JD stablecoins.
When it comes to fund turnover, we are very curious about how supply chain financial services related to cross-border payments will evolve in the era of stablecoin payments.
Stablecoin issuers can only issue stablecoins and cannot engage in staking, lending, or paying interest. Therefore, for supply chain financial services, we will explore cooperation with licensed institutions that have the relevant qualifications. From the perspective of program design, we are sorting out the scenarios of JD International Logistics. Theoretically, with authorization from all parties, small and medium-sized enterprises going abroad can put (overseas) warehouse orders and other data on the blockchain and use stablecoins for payment and financing, significantly improving efficiency throughout the process. Of course, everything must comply with relevant laws and regulations.
Regarding payments, what do you see as the similarities and differences between current stablecoin payments and mobile payments you studied years ago?
Many people understand payment-type stablecoins as cryptocurrencies like Bitcoin or Ethereum, which are completely different. The stablecoins of Web 3, like mobile payments of Web 2, are essentially payment tools aimed at reducing costs and increasing efficiency through advanced technology and business models, enhancing user experience, and promoting inclusive financial development. Just as mobile payments have propelled the rapid development of the mobile internet industry, will payment-type stablecoins as Web 3 infrastructure play a similar role?
From a technical perspective, unlike the centralization of mobile payments, stablecoins are based on a decentralized technical architecture; from a product structure perspective, stablecoins also have an issuance system that products like 'WeChat Pay' do not. Because of this, the regulation of stablecoins is relatively complex, and it cannot rely solely on compliance in a single region, but must coordinate global compliance.
Especially in mainland China, mobile payments have almost 'replaced' cash. Where might the 'threshold' be for stablecoins in relation to traditional financial infrastructure?
In just five years, mobile payments have completely surpassed cash in terms of transaction volume, user coverage, and scenario penetration. One core driving factor is the low-cost popularization of QR codes. From setting up expensive POS machines to printing a few QR code stickers, the significant reduction in payment settlement costs has, to some extent, driven small and micro businesses to fully integrate mobile payments. While it may be too absolute to say that stablecoins can 100% replace the current financial infrastructure, many real financial service scenarios will indeed undergo significant changes. From a B2B perspective, large transactions may be the first to adopt stablecoins, especially in cross-border payment scenarios with high friction costs, significant exchange rate fluctuations, and long processing times; from a B2C perspective, to thoroughly stimulate users' motivation to use stablecoin payments, it may require a phenomenon-level product and application similar to 'WeChat Red Envelopes' in 'WeChat Pay'.
As practitioners, how do you think the ecosystem of Hong Kong's stablecoin industry should be improved?
The key is to establish a risk-based, pragmatic and flexible open ecosystem in accordance with the requirements of the (Stablecoin Regulation), where regulators, issuers, wholesalers, scenario providers, users, and investors must cooperate with each other. Fund settlement is both the last link in all businesses and the beginning of business; we need to seize this breakthrough, leveraging Hong Kong's role as an international financial center and trading hub to expand the circulation and usage of stablecoins issued in Hong Kong across multiple regions, further establishing Hong Kong as an international stablecoin settlement hub.
Hong Kong is not only a global trading center but also an offshore RMB hub. Will there be plans to issue offshore RMB stablecoins here?
In terms of product technology, there is little difference between issuing offshore RMB stablecoins and Hong Kong dollar stablecoins. Moreover, potential application scenarios for offshore RMB stablecoins already exist, such as the Belt and Road Initiative. JD Coinlink has always supported and promoted the issuance of offshore RMB stablecoins in the future, but we not only need to consider commercial logic but also conduct comprehensive evaluations from legal compliance and other aspects. Ultimately, whether offshore RMB stablecoins can be issued still depends on mainland regulations.
