Written by: Xiao Sa Legal Team
In recent years, stablecoins have been moving from a niche segment of cryptocurrency assets to the forefront of global financial infrastructure construction. On May 21, the Hong Kong Legislative Council passed the (Stablecoin Ordinance Draft), and on June 17, the U.S. Senate passed the (Guidance and Establishment of the U.S. Stablecoin National Innovation Act) (referred to as the (Genius Act)), making stablecoins a hot topic in the financial community.
A number of forward-looking enterprises have begun to explore at the intersection of 'compliant digital finance' and 'universal stablecoin payments'. JD Finance, Yuan Coin Technology, and others have started exploring on-chain payments and stablecoin scenarios. Standard Chartered Bank, Anli International, and HKT in Hong Kong have also jointly launched a compliant stablecoin payment network, providing an important paradigm for the future transformation of the financial industry. Today, I will use the cases of these three 'pioneers' as a starting point to discuss the challenges and responses that traditional financial institutions in mainland China may encounter in the wave of stablecoins, and how to fully leverage their latecomer advantages to catch this wave.
01 Current basic situation of three groups (companies) building stablecoin businesses.
JD Coin Chain Technology focuses on cross-border payments and supply chain finance, with clearly defined stablecoin application scenarios closely integrated with payment services. According to the relevant statements of JD Coin Chain Technology CEO Liu Peng, the JD stablecoin is a stablecoin pegged 1:1 to fiat currencies such as the Hong Kong Dollar (HKD) or US Dollar (USD) based on a public chain. The first phase is tentatively set to issue stablecoins pegged to the Hong Kong Dollar and US Dollar, with specific conditions to be adjusted based on regulatory and market demands. It has not yet been officially issued and has entered the second phase of sandbox testing, mainly targeting retail and institutional clients with mobile and PC application products. The testing scenarios mainly include cross-border payments, investment transactions, and retail payments, aiming to enhance the efficiency of fund circulation among enterprises and achieve global remittance among enterprises through stablecoin licenses, thereby reducing the costs of global cross-border payments.
Yuan Coin Technology primarily plans to issue a Hong Kong Dollar stablecoin HKDR, anchored at a 1:1 ratio with the Hong Kong Dollar, selecting Ethereum as the underlying blockchain. It will use smart contracts to automatically execute issuance and redemption mechanisms, ensuring that each stablecoin is backed by sufficient fiat currency reserves. Users can exchange HKDR with fiat currency through compliant exchanges or payment platforms, thus achieving efficient fund circulation. The reserve assets of HKDR consist of highly liquid assets stored in independent accounts at licensed financial institutions and are audited by third parties to ensure transparency, fully complying with Hong Kong's (Stablecoin Regulations) regulatory requirements. The characteristics of Yuan Coin Technology's stablecoin construction include flexible compliance structure design and support for RWA scenario implementation. The aim is to create a regulatory-compliant and scalable stablecoin system to serve the needs of cross-border settlement, asset trading, and the digital transformation of financial institutions.
Standard Chartered Bank, Animoca Brands, and HKT have established a joint venture to participate in the Hong Kong Monetary Authority's 'Stablecoin Issuer Sandbox', jointly promoting a compliant stablecoin pegged to the Hong Kong Dollar. This project brings together the strengths of the three parties: Standard Chartered provides bank-level fund custody and risk control, fully leveraging strong financial strength and rich operational experience; Animoca Brands contributes Web 3 technology (especially in the blockchain field); and HKT utilizes its advantages in communication resources to promote the integration of mobile wallets with payment scenarios, aiming to improve the efficiency of cross-border and local payments and achieve widespread application of stablecoins in the Greater Bay Area and Hong Kong's financial ecosystem.
02 The Impact of the Stablecoin Wave on Traditional Financial Institutions in Mainland China
The financial model of stablecoins differs significantly from that of traditional finance, possessing a series of characteristics that traditional finance lacks. This will inevitably have a substantial impact on the business of traditional financial institutions in mainland China.
Firstly, stablecoins, with their real-time on-chain settlement, low costs, and high efficiency, are challenging the traditional payment systems dominated by banks, weakening their monopoly position in cross-border payments, settlements, and intermediary services.
Secondly, the blockchain technology that stablecoins rely on possesses capabilities such as asset programmability and automatic execution of smart contracts, driving the evolution of financial assets towards tokenization and challenging the traditional account systems and custody models of banks.
Finally, the widespread application of stablecoins is often accompanied by the rise of decentralized architectures and new financial ecosystems, giving birth to numerous 'non-bank institutions' as financial innovation entities, which risks marginalizing banks. Especially in offshore RMB markets such as Hong Kong, Macau, and Southeast Asia, stablecoins are expected to become an important complementary tool for the internationalization of the RMB.
03 Realistic Difficulties for Traditional Financial Institutions in Mainland China to Catch the Stablecoin Wave
Even recognizing the value and trend of stablecoins, traditional financial institutions in mainland China still face many practical obstacles to 'catching the wave', mainly stemming from the immaturity of the relevant government regulatory and normative systems.
On the one hand, the People's Bank of China has always taken a cautious or even 'closed' regulatory attitude towards stablecoins and cryptocurrency assets. Although DC/EP (Digital Currency/Electronic Payment) has made progress, there is still a lack of clear compliance paths for market-based pegged stablecoins. This makes it difficult for banks to participate directly in the design, issuance, and trading of stablecoins. The thriving development of stablecoin businesses in places like Hong Kong and Singapore is mainly due to the regulatory 'sandbox' mechanism providing a protective and experimental environment for fintech trials, while the mainland financial regulatory system has yet to establish a similar mechanism, leading to high innovation costs and potentially further compliance risks.
On the other hand, the greatest value of stablecoins lies in 'cross-border payments' and 'on-chain asset circulation', but there are still significant restrictions on the flow of funds under capital accounts in mainland China, with strict regulation on the direction of funds, making it difficult for many stablecoin models to achieve 'closed-loop circulation' locally.
04 Transformation Thoughts and Suggestions for Traditional Financial Institutions in Mainland China
The wave of stablecoins cannot be avoided, and the key to catching this wave is to clarify one’s positioning and actively layout. The Sa Sister team believes that in the current wave and impact of stablecoins, traditional institutions in mainland China can adopt the following transformation strategies:
(1) Start from B-end industrial payments to reconstruct enterprise settlement networks.
As JD Finance shows, by introducing quasi-stablecoin tools in industrial chain payments, it can bypass the regulatory pressure on the C-end (consumer side) and create efficiency advantages on the B-end (merchant side), accumulating experience for stablecoin business on the C-end after subsequent regulatory relaxation. Stablecoins can be developed as 'accounting units' under an alliance chain architecture, supporting scenarios such as supply chain finance, warehousing procurement, and inter-enterprise payment terms, and gradually transition to more complex on-chain asset services once the timing is right.
(2) Strengthen collaboration with technology companies and fully utilize technological empowerment.
In an interview with the 21st Century Business Herald, Yuan Coin Technology CEO Liu Yu candidly stated that Yuan Coin Technology's core management team integrates members from various backgrounds, including those from major internet finance companies and traditional banks, which can provide experience for compliance and risk control. Many core members also have experience in web 3, as stablecoins connect the fiat world with the digital currency world, thus they must be able to speak 'the language of both worlds'. As practice shows, traditional financial institutions can collaborate with stablecoin technology companies through investments, alliances, and SPV cooperation to participate in pilots with lower risks, empower stablecoin businesses with technology, and gradually gain control over the technology.
(3) Actively carry out pilots in Hong Kong and Macau to further promote cross-border cooperation.
Referring to the pathways of international banks like Standard Chartered, mainland institutions can establish subsidiaries or joint laboratories in Hong Kong, advancing stablecoin payments, settlements, asset tokenization, and other businesses within the Hong Kong-Macau 'regulatory sandbox', and then use the name of serving foreign capital to feed back into mainland business. They can fully utilize the financial opening policies of Hong Kong and Macau, connect with companies like Standard Chartered and Yuan Coin Technology that have infrastructure, promote tokenized deposits and stablecoin payment pilots, learn from the advanced experiences of related enterprises, and prepare for the development of mainland business.
In summary, despite numerous challenges, mainland financial institutions still have pathways to 'catch the wave', with the key being to recognize their positioning, advance step by step, actively collaborate, and pilot as soon as possible. However, it is important to note that this must be carried out within a compliant framework, and cannot violate the existing regulatory system in mainland China, otherwise, the losses will outweigh the gains.
05 Final Thoughts
If the past financial system was a 'water management system', primarily focused on liquidity, then the stablecoin system is more like an 'electric power system': efficient, programmable, and capable of cross-border reach. Traditional financial institutions in mainland China cannot and should not miss this infrastructure revolution in the financial sector. JD Finance, Yuan Coin Technology, and the collaboration among the three parties in Hong Kong have already provided practical references for mainland financial institutions. The wave of stablecoins has arrived; the key is whether we have the courage to fundamentally reconstruct the mechanisms, rather than just being 'a bank on the chain'. In addition to courage, we must also maintain a clear mind, ensuring that everything is legal and compliant.