China has requested a halt to the promotion of stablecoins domestically due to concerns over risks, while simultaneously promoting similar projects in Hong Kong and the international market.
Chinese regulators recently issued a directive requiring domestic businesses to stop promoting, organizing seminars, and publishing research related to stablecoins. According to sources from Bloomberg, this decision stems from authorities' concerns about the potential misuse of stablecoins for fraudulent activities and triggering speculative behavior driven by herd mentality.
Christopher Wong, a currency strategist at Oversea-Chinese Banking Corp., assesses that policymakers in Beijing are taking pragmatic actions to prevent individual investors from entering the market without understanding the risks.
Previously, banks were required to enhance monitoring and warn about high-risk cryptocurrency asset transactions, particularly related to cross-border gambling and illegal financial activities. The aim is to protect the stability of the domestic financial system from the volatility of digital assets.
However, the overall picture shows a complex and highly calculated strategy. While the mainland implements strict regulations, Hong Kong has emerged as a legal testing framework for stablecoins. This special region recently launched a new stablecoin issuance framework, paving the way for activities that are banned on the mainland.
A clear example is the Hong Kong branch of Standard Chartered Bank – one of three institutions authorized to issue Hong Kong banknotes – announcing a joint venture with Web3 company Animoca Brands to develop a stablecoin pegged to HKD. Chinese tech giants like JD.com and Ant Group are also advancing plans to apply for stablecoin issuance licenses in Hong Kong and Singapore.
Unrestricted activities in Hong Kong. CNH-pegged stablecoin projects are being developed with the aim of serving the international market. The Conflux blockchain network has introduced a CNH-backed stablecoin, while AnchorX's AxCNH project has gained approval in Kazakhstan. These currencies are designed to serve organizations outside the mainland and countries involved in the Belt and Road Initiative.