Global stablecoin regulation takes shape, "China plan" can be piloted in free trade zones.

Authors: Zhao Zhongxiu, Deng Jun, Zhang Shuyu

As major global economies successively advance legislation on stablecoins and cryptocurrencies, the Hong Kong Special Administrative Region has become a frontier for China's cryptocurrency policy experimentation and alignment with international regulations.

On the afternoon of July 17, 2025, the United States passed stablecoin legislation - the “Guidance and Establishment of the U.S. Stablecoin National Innovation Act” (hereinafter referred to as the “GENIUS Act”). This is the first federal law in the United States specifically targeting payment stablecoins, providing a compliance pathway for the industry, while also sending a clear signal to the world: the challenges and impacts of cryptocurrency on global financial governance represent a profound shift concerning sovereign credit, the future form of monetary systems, and global governance models.

The U.S. “GENIUS Act” primarily focuses on the compliance of payment stablecoins, reserve transparency, and subject licensing, with two core points: First, it ensures that the U.S. dollar's dominance extends into the cryptocurrency space, allowing for global cryptocurrency flow, trading, and settlement to occur within the framework of the dollar, greatly consolidating the dollar's position as the “pricing anchor” of digital currency; Second, stablecoin issuers are required to purchase nearly 80% of their reserves in short-term U.S. Treasury securities, creating a continuous and substantial incremental demand from the digital currency sector for the U.S. Treasury, expanding the demand base for U.S. government debt, and strengthening the government's ability to issue debt.

This is different from the legislative approach of the European Union. On October 10, 2022, local time, the EU legislative body voted to pass the Markets in Crypto-Assets Regulation (MiCA). The overall idea of MiCA is “risk prevention,” focusing more on systemic risks and the regulation of multinational platforms, primarily centered around financial stability and monetary sovereignty, with the aim of curbing the impact of large platforms on regional monetary systems.

The underlying logic of the Hong Kong Special Administrative Region is to deeply anchor to the US dollar standard, align with the dynamics of US regulation, and fulfill its role as an Asian financial center. The Hong Kong Special Administrative Region reflects its adaptation to American-style regulation in aspects such as legislation, licensing, transparency of reserves, and B2B (business-to-business) access, thereby maintaining the HKD-USD pegged exchange rate system.

As Hong Kong Special Administrative Region gradually deepens its exploration in the field of stablecoins, mainland China should also base itself on its own circumstances and combine the experiences of the US, Europe, and Hong Kong to create a unique “China Stablecoin Plan” through pilot innovations, serving both the real economy and ensuring financial security and monetary sovereignty.

This article will elaborate on the rationale and experimental path for China to establish a regulatory framework for the “Renminbi Stablecoin.”

1. China should explore the establishment of a regulatory framework for stablecoins

Since the beginning of 2024, the global cryptocurrency landscape has been undergoing historic changes.

In January 2024, the Bitcoin exchange-traded fund (ETF) was officially launched after being approved by the U.S. Securities and Exchange Commission, marking a landmark event for the cryptocurrency asset class as it gained adoption by a sovereign financial system and entered the capital markets. The formal implementation of the “GENIUS Act” further propelled the U.S. cryptocurrency industry towards its first step of becoming “sunshine”.

The Legislative Council of Hong Kong passed the “Stablecoin Regulation Bill” on May 21, 2025, which officially came into effect on August 1 of the same year, making it one of the few important financial centers in the world with a legal licensing mechanism for stablecoins, taking a key step for Hong Kong to once again become an “Asian Crypto Financial Hub.” A “stablecoin” is a type of cryptocurrency that is pegged to stable assets (such as the US dollar, gold, etc.) and aims to reduce price volatility, providing a stable store of value and medium of exchange. From this definition, the Hong Kong dollar, which is linked to the US dollar, can also be seen as a type of US dollar stablecoin.

In the author's view, with the legislation of stablecoins becoming a reality in several major jurisdictions around the world, China should not miss this historic opportunity. In response to this trend, China can establish a new mechanism to expand the “internationalization of the renminbi”. Mainland China should also make pilot arrangements on a prudent basis, focusing on exploring the cross-border payment application scenarios of stablecoins.

After the “sunshine” of the US dollar stablecoin, the biggest challenge in the short term may be the difficulty in finding compliant payment scenarios, which will limit the growth of the stablecoin market size. According to statistics from JPMorgan, the demand for stablecoins mainly comes from their role in cryptocurrency trading — as cash equivalents in the crypto ecosystem — while the payment function accounts for only a small portion of the demand — about 6%.

However, in some scenarios of import and export trade in China, stablecoins have begun to play a role. As a type of cryptocurrency, stablecoins have the advantages of decentralization, peer-to-peer transactions, low cost, and high efficiency, which are inherent in blockchain technology. In international trade, especially when trading with countries or regions where exchange rate fluctuations are significant and obtaining US dollars is difficult, stablecoins have practical applications for cross-border payments. Research conducted by the author in Yiwu, the world’s small commodity center in Zhejiang, also shows that stablecoins have become an important tool for cross-border payments, as they effectively solve the problem of stable payments when conducting cross-border trade transactions with unstable regions.

Modern currency has undergone a long journey from barter to a general equivalent, and then evolved into modern credit currency. However, for a country's currency to generate credit, it must be supported by real production and trading demands, and production and international trade are China’s advantages. According to statistics from the Ministry of Industry and Information Technology, by September 2025, the added value of China's manufacturing industry will account for nearly 30% of the global total, maintaining the largest scale in the world for 15 consecutive years. According to data from the General Administration of Customs, in terms of imports and exports, China surpassed the United States in 2013 with a total import and export volume of 4.16 trillion USD, becoming the world's largest goods trading nation, and has maintained this position continuously until 2024. In 2024, China's total import and export value reached 6.16 trillion USD, of which exports were 3.6 trillion USD, an increase of 5.9%; imports were 2.6 trillion USD, an increase of 1.1%.

If, in China's foreign trade, the use of RMB stablecoins for cross-border payments in certain scenarios can expand the influence of RMB internationalization and supplement the existing RMB cross-border settlement mechanism. In addition to developing RMB 1:1 pegged stablecoins, it may even be worth considering the development of hybrid stablecoins.

Promoting the establishment of a “Renminbi stablecoin” can also hedge against the financial security risks brought about by the current complex fluctuations in geopolitical situations. The original intention of “globalization” is to pursue efficiency; during the strong dollar era, the dollar once promoted the efficiency of the world economy globally. However, now, the United States has placed security above economic efficiency, and China needs to calmly consider how to hedge against the risks brought about by the severe fluctuations of U.S. tariffs and other economic policies. Currently, the frequent use of extraterritorial jurisdiction, export controls, and sanctions by the United States will inevitably lead to the fragility and inefficiency of financial systems in certain regions. Developing a “Renminbi stablecoin” will help China establish more solid business relationships with existing trading partners and closer industrial chain connections.

2. It is recommended to pilot the application of stablecoins in the free trade zone.

To prudently carry out stablecoin-related businesses and regulation in mainland China, it is recommended to open pilot programs from the Free Trade Pilot Zones (hereinafter referred to as “FTZ”), such as the Qianhai Free Trade Zone in Shenzhen adjacent to the Hong Kong Special Administrative Region and the Hainan Free Trade Port.

Specific suggestions for the pilot Free Trade Zone include:

(1) Establish a “Cross-border Financial Technology Laboratory”. A joint working group will be established in the free trade zone, involving local financial regulatory authorities, the foreign exchange administration, and the Hong Kong Monetary Authority (HKMA). Together, they will design and operate a closed “cross-border stablecoin regulatory sandbox,” clarifying the access and exit mechanisms for participating institutions, business scope, limit ceilings, and risk disposal plans.

(2) Establish a “Whitelist” System for Stablecoins. Connect with the stablecoin issuance license system of the Hong Kong Monetary Authority to create a “whitelist” of stablecoins eligible for entry into the free trade zone sandbox pilot. Initially, priority can be given to Hong Kong licensed institutions issuing HKD stablecoins or offshore RMB stablecoins that are supported by high-quality asset reserves.

(3) Establish Offshore RMB Stablecoin Innovation Pilot. Encourage and guide licensed financial institutions in the Hong Kong Special Administrative Region of China to pilot the issuance and circulation of stablecoins fully backed by offshore RMB at a 1:1 reserve ratio within the free trade zone sandbox. This can be used for pricing in bulk commodity trade, cross-border e-commerce payments, and supplementary testing for the “digital currency bridge” project, among others. This helps to weaken the dominance of the US dollar as a reserve stablecoin and explores new paths for the internationalization of the RMB.

(4) Supporting Cross-Border Trade Payments and Settlements. Compared to traditional bank wire transfers, stablecoin payments can achieve real-time settlement 24/7, significantly reducing remittance fees and time costs.

The free trade zone can provide financial innovation policies and tax incentives, allowing foreign trade enterprises registered in the free trade zone with a genuine background in import and export trade to use stablecoins from the “white list” when settling with counterparties in Hong Kong, China.

As more enterprises join and the payment network of stablecoins expands, transaction costs are further reduced, liquidity is enhanced, and scale network effects are formed. This not only improves the capital turnover efficiency of enterprises within the free trade zone, but also opens up a brand-new, digital, and efficient channel for the cross-border circulation of RMB beyond the traditional banking system. In the future, this mature model of “Hong Kong issuance + free trade zone settlement” will be replicated and promoted to countries and regions along the “Belt and Road”.

(5) Promote Digital Trade and Intellectual Property Financing. Encourage technology companies and cultural creative enterprises in the free trade zone to register their digital assets, such as software, film copyrights, and patents, on the blockchain for rights confirmation, and use them as collateral to obtain stablecoin financing from financial institutions in Hong Kong through smart contracts. The free trade zone can explore financial applications based on on-chain stablecoins (such as USDT, USDC, and RMB stablecoins): for example, on-chain bills, credit certificate settlements, etc. This can activate the intangible assets of enterprises and solve the financing difficulties faced by technology light asset enterprises.

(6) Build a Joint “Regulatory Technology” Platform. Develop a real-time monitoring system jointly with the Free Trade Zone and Hong Kong, utilizing blockchain technology for in-depth supervision of every stablecoin transaction within the sandbox. Focus on monitoring anti-money laundering, anti-terrorist financing, and capital movement situations, ensuring all transactions are traceable and auditable, effectively addressing the regulatory challenges posed by anonymity.

(7) Strengthening Blockchain Infrastructure Construction. It is recommended that policy funds support financial infrastructure: blockchain payment underlying platforms (supporting various stablecoins), compliant wallets and smart contract interfaces, on-chain auditing systems for stablecoin circulation data, and third-party on-chain identity verification and credit scoring systems. Building a complete on-chain financial “highway” is essential to attract more scenarios and applications.

While expanding the application scenarios of stablecoins, strict risk prevention and control mechanisms should also be established, specifically including:

(1) Strict Institutional and Individual Access. Sandbox participating institutions must be corporate entities that have compliant entities in both the Free Trade Zone and the Hong Kong Special Administrative Region. Stablecoin trading is strictly limited to B2B (business-to-business) scenarios, and mainland individual investors are prohibited from participating.

(2) Transparent Reserve Audits. Require stablecoin issuers to regularly (e.g., monthly) submit reserve audits issued by a third-party authoritative accounting firm to regulatory authorities and publicly disclose them to ensure the adequacy and safety of reserve assets.

(3) Tracking and Preventing Compliance Arbitrage and Capital Flow Risks. Strengthen the security audits and automated monitoring of smart contracts, establish an emergency “pause switch” and vulnerability tracing mechanism, and create a multi-level security testing and practical drill system. Focus on tracking risks related to large abnormal movements, unusual transactions, and cross-border capital flows. Implement full-link identity verification and anti-money laundering standards for all participating institutions, and combat potential channels such as “underground banks” and “compliance arbitrage.”

(Author Zhao Zhongxiu is the President of the University of International Business and Economics; Deng Jun is the Vice Dean of the China Institute of Finance at the University of International Business and Economics; Zhang Shuyu is an Associate Professor at the School of Economics, Beijing Technology and Business University)