The evolution of digital finance continues to accelerate, with stablecoins emerging as a pivotal innovation at the intersection of blockchain technology and traditional monetary systems. As global regulators refine their approaches to digital assets, China stands at a strategic juncture—poised to shape the future of the renminbi (RMB) in the digital economy. Recent statements by central bank officials and regulatory developments in Hong Kong underscore growing momentum behind RMB stablecoin initiatives. This article explores a coordinated, "inside-outside" framework for developing both onshore-offshore and offshore RMB stablecoins, aiming to enhance financial innovation, strengthen monetary sovereignty, and support the internationalization of the RMB.
The Rise of Stablecoins and Regulatory Momentum
In a keynote speech at the 2025 Lujiazui Forum, PBOC Governor Pan Gongsheng highlighted how blockchain and distributed ledger technologies are driving rapid advancements in central bank digital currencies (CBDCs) and private-sector stablecoins. These innovations bring transformative potential but also pose significant challenges for financial supervision. With Hong Kong’s Stablecoin Ordinance set to take effect on August 1, regulatory clarity is beginning to emerge in key offshore RMB markets.
This moment presents a strategic opportunity: rather than reacting passively to external developments, China can proactively design a dual-track model for RMB stablecoin development—one that integrates tightly with domestic financial reforms while leveraging offshore hubs like Hong Kong for global reach.
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Toward a Coordinated “Inside-Outside” Strategy
Traditional distinctions between onshore and offshore RMB markets are increasingly blurred in the Web3.0 era. Instead of treating them as separate domains, a more effective approach involves synchronizing innovation across both ecosystems:
- Strategic Autonomy: With dollar-backed stablecoins dominating cross-border settlements, China must assert control over its digital monetary destiny. A coordinated RMB stablecoin strategy ensures active oversight rather than reactive adaptation.
- Scalability Constraints: Hong Kong's offshore RMB pool, while significant, may not independently support large-scale stablecoin issuance under full 1:1 reserve requirements. A linked system allows liquidity sharing and risk diversification.
- Regulatory Synergy: Combating money laundering, ensuring KYC compliance, and monitoring decentralized transactions require advanced tools and cross-jurisdictional coordination. Central oversight paired with local enforcement creates a robust governance framework.
Leveraging Shanghai’s Free Trade Zone as an Innovation Lab
Since its launch in 2013, the Shanghai Pilot Free Trade Zone (FTZ) has served as a testing ground for financial liberalization. With recent policy support—including eight new measures announced by the PBOC to boost offshore trade finance in the Lingang New Area—the stage is set for integrating digital asset innovation into broader financial reform.
Two potential models for onshore-offshore RMB stablecoin (CNYC) development within the FTZ include:
Model 1: Consortium-Based Issuance
A joint venture comprising clearing houses, major commercial banks, leading payment platforms, and institutional investors could establish a dedicated stablecoin issuer within the FTZ. This entity would manage the on-chain minting and redemption of CNYC, operating a wholesale market for authorized intermediaries—such as digital RMB service providers—who then distribute stablecoins to qualified enterprises and individuals.
Model 2: Institution-Led Direct Issuance
Alternatively, select digital RMB operators could issue CNYC directly via their FTZ branches, using smart contracts to enforce compliance during distribution to vetted economic actors. While some overseas banks have experimented with tokenized deposits, true stablecoins require distinct governance, transparency, and redemption mechanisms—differences that must be clearly addressed in any domestic trial.
Key Requirements for Onshore-Offshore Stablecoin Success
Regardless of the model chosen, several foundational elements are essential:
- Robust Reserves: CNYC should be backed not only by cash and short-term government bonds but also by a strategic allocation of digital RMB holdings, aligning with ongoing CBDC pilots.
- Compliance Infrastructure: Issuers must implement rigorous risk identification, asset segregation, custodial controls, and internal audits. They should also collaborate with ecosystem partners to expand use cases in trade finance, supply chain payments, and cross-border commerce.
- Controlled Accessibility: Drawing inspiration from the FTZ’s “electronic fence” (FT account system), technical standards and programmable smart contracts can restrict stablecoin access to pre-approved institutions, corporations, or accredited individuals during pilot phases.
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Expanding Offshore Reach with CNH Coin (CNHC)
Parallel to onshore efforts, offshore RMB stablecoin (CNHC) development in Hong Kong can amplify the international role of the RMB:
- Model 1: A joint venture between mainland and Hong Kong entities establishes a licensed issuer under Hong Kong’s regulatory framework.
- Model 2: Authorized Chinese banks or payment firms leverage their Hong Kong subsidiaries to mint CNHC in compliance with local laws.
Such a dual-system architecture enables interoperability between CNYC and CNHC—facilitated by existing cross-border payment channels like CIPS and Linked Exchange Rate System frameworks. In practice:
- CNYC enhances efficiency in cross-border trade settlements within controlled environments.
- CNHC supports broader use in global DeFi applications, commodity trading, and real-world asset (RWA) tokenization—particularly RMB-denominated assets—boosting the global footprint of Chinese financial instruments.
Safeguarding Integrity Through Smart Oversight
To prevent misuse and ensure systemic stability, regulators and issuers must deploy advanced monitoring tools capable of tracking stablecoin flows across public blockchains. Special attention should be paid to detecting unauthorized holdings by non-qualified entities within mainland China. Collaborative supervision between central authorities and Hong Kong regulators will be critical in maintaining integrity across jurisdictions.
Addressing Global Standards and Future Vision
As noted by the Bank for International Settlements (BIS), current stablecoins face shortcomings in singleness (clear identity), elasticity (resilience under stress), and integrity (resistance to manipulation). Any RMB stablecoin initiative must prioritize risk containment, incremental scaling, and legal preparedness.
Looking ahead, China could contribute to the BIS vision of a “Financial Internet” (Finternet)—a unified ledger infrastructure enabling seamless interaction among CBDCs, tokenized bank deposits, and regulated stablecoins. Such integration would position the RMB at the heart of a new, interoperable financial ecosystem.
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Frequently Asked Questions
Q: What is the difference between CNYC and CNHC?
A: CNYC refers to an onshore-offshore RMB stablecoin issued within mainland China’s pilot zones (like Shanghai FTZ), subject to domestic oversight. CNHC is its offshore counterpart, issued in Hong Kong under local regulations, designed for international use.
Q: How are RMB stablecoins different from digital yuan?
A: Digital yuan (e-CNY) is a central bank-issued CBDC. RMB stablecoins are typically issued by private or consortium entities but fully backed by RMB assets. They serve complementary roles—CBDCs for sovereign digital money, stablecoins for programmable finance and DeFi integration.
Q: Will RMB stablecoins be available to retail users?
A: Initially, access will likely be limited to qualified institutions and businesses during pilot phases. Broader retail availability depends on regulatory progress and risk assessment.
Q: Are RMB stablecoins legal tender?
A: No. While backed by RMB reserves, they are not legal tender. Their use will be confined to specific licensed scenarios until further regulatory guidance is issued.
Q: How do RMB stablecoins support financial innovation?
A: They enable faster cross-border payments, facilitate tokenization of real-world assets (RWAs), enhance liquidity in DeFi markets, and promote smart contract-based financial services—all while maintaining alignment with monetary policy goals.
Q: What prevents misuse or capital flight through stablecoins?
A: Strict know-your-customer (KYC) protocols, asset reserve audits, transaction monitoring via blockchain analytics, and technical fencing (e.g., smart contract restrictions) help mitigate risks of illicit activity or uncontrolled capital outflows.
By pursuing a synchronized “inside-outside” strategy, China can lead in shaping responsible, innovative digital currency frameworks that uphold financial stability while advancing the global relevance of the renminbi.