Animoca executives: The Central Bank of China is changing its stance on stablecoins and has acknowledged their role in the financial system.

For a long time, the People's Bank of China has maintained a cautious and even skeptical attitude towards Crypto Assets and stablecoins. However, with the rapid evolution of the global financial landscape, especially with the promulgation of the U.S. GENIUS Act, China's stance on stablecoins seems to be undergoing a subtle shift. Evan Ayuang, the president of Animoca Group, pointed out in an interview that although there was a previous skeptical attitude, the People's Bank of China has gradually recognized the role of stablecoins in the financial system and may view them as an important tool to respond to the dominance of the U.S. dollar and promote the internationalization of the renminbi.

From Skepticism to Urgency: China's Shift in Stance on Stablecoins

In 2021, the Central Bank of China warned that global stablecoins could pose risks and challenges to the "international monetary system, payment and clearing systems, monetary policy, and management of cross-border capital flows." This statement comes from the People's Bank of China's white paper on its digital yuan project, reflecting the People's Bank of China's deep skepticism towards private sector digital currencies, especially Facebook's Libra.

However, although Libra has never been officially released, stablecoins like Tether's USDT and Circle's USDC have now deeply penetrated the global (especially Asian) financial system, making processes such as supply chain financing more efficient than ever before. As a result, Beijing's cautious attitude towards stablecoins is being replaced by a sense of urgency. The reason stablecoins have been brought to the forefront is that they are seen as another way for the dollar to solidify its position in the Asian financial system, which is not something Chinese authorities are pleased with.

Evan Ayuang stated that China's interest in stablecoins has been growing. This situation has been ongoing for some time, but as stablecoins become mainstream on Wall Street, this interest will only intensify. He believes that the pressure point lies in the recently enacted GENIUS Act, which for the first time clarified the regulatory provisions for Central Bank-supported stablecoins in the United States and reinforced their position in the global financial system. In fact, it can be seen as a digital extension of dollar hegemony, which China cannot afford to ignore.

Hong Kong: A Key Participant in the Internationalization Strategy of the Chinese Renminbi

As China examines the "GENIUS Act", their view is that the United States is chasing this field. If the US dollar is currently the primary reserve currency, then in the context of trade tensions and direct bilateral trade agreements, the use of these conventional stablecoins circulating in the financial system for currency settlement is always crucial.

This sharply contrasts with the tone of the People's Bank of China 2021 white paper, which described stablecoins as unstable and speculative, conflating them with the more volatile Crypto Assets. But as Evan pointed out, the focus of the discussion has shifted. Beijing now sees the necessity to compete on the blockchain track, particularly through regulated offshore Renminbi (CNH) stablecoins, which could help make the country's currency—Renminbi, or colloquially, RMB—a more practical option for offshore settlements.

"If you want to make the Renminbi more internationalized while keeping it within a controllable range, then this is it. Offshore Renminbi is it," Evan said. "Stablecoins are a way to internationalize the Renminbi; they can ensure the effectiveness of currency control while allowing you to achieve offshore status."

Regulated stablecoins, whether Hong Kong dollars or offshore Renminbi, can be tied to assets within China and incorporated into public chains, creating a new important financial track for China. The use cases of the electronic Renminbi typically revolve around the Central Bank and institutions. Stablecoins issued in Hong Kong or through public chain infrastructure provide a vehicle for the internationalization of the Renminbi while not violating China's capital control regulations.

Another option might be to establish a liquidity pool in Hong Kong to provide a settlement venue for HKD, offshore RMB, and e-CNY transactions. He stated that, of course, Beijing is also concerned about HKD stablecoin, as Hong Kong has an independent legal framework, making it a "sandbox" for China.

Global Stablecoin Competition: Liquidity Beyond the US Dollar

Evan predicts that even international business-to-business payments will prefer tokenized fiat currencies over licensed Central Bank Digital Currencies (CBDC). Moreover, this shift is not limited to China. "After the United States passes the GENIUS Act, everyone will do this. Every country will consider this issue. Ultimately, every country will have a regulated stablecoin," he said.

This is not about overthrowing the US dollar, considering the liquidity of the US dollar, this is an impossible task. He said, "When I trade with partners in Southeast Asia, the liquidity of non-US dollar stablecoin pairs is strong enough to conduct such transactions." This shows that the development of stablecoins will provide more diverse options for global trade and payments, allowing even currencies outside the US dollar to enhance their international liquidity through the form of stablecoins.

Conclusion:

The white paper of the People's Bank of China in 2021 regarded stablecoins as a threat. Four years have passed, and Beijing seems to gradually accept the idea that stablecoins will play an important role in the future financial order. This global stablecoin competition driven by the U.S. GENIUS Act is forcing countries to re-examine their digital currency strategies. Hong Kong, as China's "sandbox," plays a key role in the exploration of the Hong Kong dollar and offshore renminbi stablecoins, promising to open new avenues for the internationalization of the renminbi. The rise of stablecoins will not only change the global payment landscape but will also have a profound impact on the monetary policies and financial regulations of various countries.