Deputy Director of the National Institute of Financial and Development: The development model of the RMB stablecoin can be "combined internally and externally".

Author: Yang Tao, Deputy Director of the National Financial and Development Laboratory

Source: National Financial and Development Laboratory

The development model of the renminbi stablecoin can be "combined internally and externally".

Recently, the governor of the central bank, Pan Gongsheng, pointed out during his speech at the 2025 Lujiazui Forum that new technologies such as blockchain and distributed ledgers are driving the vigorous development of central bank digital currencies and stablecoins, while also posing enormous challenges to financial regulation. In fact, with the Hong Kong Special Administrative Region's "Stablecoin Ordinance" set to take effect on August 1, discussions about stablecoins have recently gained unprecedented momentum.

Generally speaking, offshore RMB business refers to financial services conducted in foreign markets with RMB-denominated settlements. Driven by policy, this business model is centered around Hong Kong, while also developing in multiple locations such as Singapore and London. Onshore RMB business, on the other hand, reflects a dual characteristic of "onshore" and "offshore," operating with account management as the core mechanism, allowing for capital to flow freely under specific conditions. Correspondingly, many views suggest that offshore RMB stablecoins should be piloted in the Hong Kong market and, once conditions are ripe, explored in domestic offshore markets represented by free trade zones.

We believe that stablecoins built on the Web 3.0 world have already transcended the traditional offshore and onshore categories. To better achieve strategic coordination, proactive regulation, and collaborative advancement, we should consider adopting a linked development model of domestic offshore and foreign offshore RMB stablecoins. The reasons are as follows: First, in the face of the rapid development of USD-backed stablecoins and the swift evolution of stablecoin regulation in various countries and regions, China urgently needs to proactively conduct research and regulatory responses on stablecoins from the perspective of financial security and monetary sovereignty, systematically considering the reform pilot of RMB stablecoins, rather than passively responding by relying on foreign offshore RMB stablecoins. Second, the scale of the Hong Kong RMB offshore market is limited, and under the requirement of a 1:1 reserve of stablecoins to fiat assets, it may be difficult to independently support RMB stablecoins to achieve economies of scale. Third, the regulation of stablecoin issuance and transactions involves many cutting-edge challenges, including identity verification and anti-money laundering, and countries and regions are actively promoting regulatory innovation and seeking response strategies. In this regard, relevant central departments should play a leading role in the regulation of RMB stablecoins while seeking coordinated cooperation with Hong Kong regulatory authorities.

Since its establishment on September 29, 2013, the Shanghai Free Trade Zone has basically established a system that aligns with international economic and trade rules. At the same time, central financial management departments are fully supporting the construction of Shanghai as an international financial center to reach a higher level, and the central bank has also announced eight measures, including the pilot program for comprehensive reforms in offshore trade finance services in the new Lingang area of Shanghai. Therefore, it is possible to consider promoting relevant innovation and exploration of RMB stablecoins in sync between the Shanghai Free Trade Zone and Hong Kong.

Regarding the onshore offshore RMB stablecoin (CNY Coin, CNYC), one model is that a RMB stablecoin issuance institution can be jointly established in the Shanghai Free Trade Zone by clearing organizations, large commercial banks, leading payment institutions, and well-known investment institutions. This institution would explore the on-chain issuance and operation mechanism of RMB stablecoins and form a wholesale market for RMB stablecoins aimed at certain authorized institutions (such as digital RMB operating institutions, which have accumulated relatively rich innovation experience). Authorized institutions would exchange RMB stablecoins for qualified enterprises or individuals, thus building a retail market for RMB stablecoins.

Model two relies on branches of certain digital RMB operating institutions in the Shanghai Free Trade Zone to directly mint and operate RMB stablecoins on-chain, and when redeeming to specific qualified economic entities, fully comply with regulatory responsibilities. Of course, if banks serve as the issuing entities for stablecoins, on one hand, tokenized deposits explored by foreign banks or related organizations may have similar characteristics to stablecoins, but there are still differences from genuine stablecoin mechanisms. On the other hand, to address the challenges of disintermediation, some foreign banks have begun to research or attempt to establish tech subsidiaries or jointly set up related legal entities to explore the issuance of fiat stablecoins to enhance ecological appeal to clients and resist the impact of the crypto industry. Therefore, the exploration of RMB stablecoins under this model still needs to clarify specific paths and priorities.

It is important to note that regardless of the mode, several requirements must be simultaneously met. First, the RMB stablecoin must have sufficient asset reserves. In addition to RMB cash and short-term government bonds, which are high liquidity assets, a certain proportion of digital RMB reserves can be set up to achieve synergy with the central bank's CBDC pilot reform. Second, the issuer of the RMB stablecoin is required to establish a comprehensive compliance operation mechanism for risk identification, asset segregation and custody, and internal controls, fulfill relevant compliance obligations to direct customers, and also strive to cooperate with all parties to promote the expansion of application scenarios for the RMB stablecoin, effectively coordinating with the key reforms of the free trade zone. Third, fully leveraging the characteristics of the "electronic fence" of the FT account in the Shanghai free trade zone, through innovative design of technical standards and smart contracts, the entities holding and using RMB stablecoins during the pilot period should, as much as possible, be limited to specific qualified institutions, enterprises, or individuals.

At the same time, regarding offshore renminbi stablecoins (CNH Coin, CNHC), under Model 1, it is possible to promote the establishment of a renminbi stablecoin issuance institution jointly initiated by domestic and foreign institutions in Hong Kong, or under Model 2, allow some authorized domestic banks or payment institutions to rely on their registered legal entities in Hong Kong to mint and issue offshore renminbi stablecoins, which must comply with relevant laws and regulations in the Hong Kong region. This can form a dual renminbi stablecoin system for both domestic and foreign entities, while also drawing on existing arrangements for cross-border payments and capital flows between the mainland and Hong Kong, exploring the exchange and interconnectivity mechanism between CNYC and CNHC. Among them, CNYC is primarily used in the short term to supplement and enhance the efficiency of payment settlements for cross-border trade and business activities, while CNHC aims to further strengthen Hong Kong's position in the internationalization of the renminbi, and can be compliant for on-chain financial activities and transactions such as commodity trading, especially actively exploring support for renminbi-denominated RWA (Real-World Assets), thus jointly striving to enhance the global influence of the renminbi and renminbi assets.

It should also be noted that regulatory authorities both domestically and abroad should work together with the issuers of the RMB stablecoin to continuously promote technological innovation in intelligence, effectively identify the activities in the secondary market of RMB stablecoins within the blockchain ecosystem, especially monitoring the situation of domestic non-qualified entities holding RMB stablecoins, to prevent illegal capital flows and to guard against their use in illegal activities.

Of course, as the Bank for International Settlements (BIS) pointed out, stablecoins still have defects in three key standards: singleness, elasticity, and integrity. The reform exploration of the renminbi stablecoin still needs to strictly control risks, proceed step by step, and maintain an appropriate scale. At the same time, it is necessary to expedite the formulation of relevant laws and regulations to strengthen the discourse power in the global legal competition of stablecoins. Looking to the future, we can also draw on the "Finternet" proposed by the BIS, which is based on the construction of a Unified Ledger, to simultaneously promote the coordinated development and complementary win-win of digital renminbi, tokenized bank deposits, and stablecoins.