The idea of offshore renminbi (RMB) stablecoins has gained traction rapidly in China’s financial circles. Momentum has been building since the Hong Kong Legislative Council’s passing of the Stablecoins Bill on May 21, 2025, followed by the US Senate’s approval of the GENIUS Act on June 17. Just a day later, People’s Bank of China (PBOC) Governor Pan Gongsheng acknowledged that stablecoins could transform cross-border payments, while also presenting significant regulatory challenges.
Leading advisers have gone further, urging Beijing to embrace the opportunity. Li Yang, chairman of the National Institution for Finance & Development, argued that yuan-backed stablecoins could advance RMB internationalization, while economist Huang Yiping, a PBOC adviser, suggested that Hong Kong could be well placed to pioneer offshore RMB issuance. Industry veterans such as Wang Yongli, a former Bank of China vice president, have pressed policy makers to act swiftly, warning that US-pegged stablecoins are entrenching dollar dominance in digital finance. Meanwhile, tech giants JD.com and Alibaba (through its financial arm Ant Group), which grew out of e-commerce platforms, have lobbied to issue offshore yuan stablecoins, while also submitting applications to issue Hong Kong dollar–pegged stablecoins.
This discussion reached a climax when the GENIUS Act was signed into law by President Donald Trump on July 18 and the Stablecoins Ordinance took effect in Hong Kong on August 1. These developments were accompanied by what Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA), described in a July 23 post on the HKMA website as “overly idealistic” discussions about the disruptive potential of stablecoins for the mainstream financial system, along with a surge of speculation in the market. The frenzy grew to such an extent that in the same post Yue had to caution the public to “guard against undue speculation” over stablecoins.
But one thing was clear: the world’s financial hubs are preparing for a stablecoin-driven future, and China faces a choice: join the race or risk being sidelined.
Why Offshore Yuan Stablecoins Matter
Against the backdrop of emerging regulatory frameworks, the rapid development of stablecoins is reshaping the international payments landscape. Stablecoins have shown clear value in cross-border transactions, financial innovation and financial inclusion. With near-instant, 24/7 settlement and lower costs than traditional systems, stablecoins are increasingly seen as a potential mainstream channel for payments and settlements. As Xiao Feng, chairman of Hong Kong–based digital assets exchange HashKey Group, argued, they could eventually replace elements of traditional financial infrastructure, including payment and settlement systems.
At present, US dollar–pegged stablecoins dominate the market, accounting for nearly 99 percent of global issuance. This reinforces dollar hegemony in the digital era and threatens to marginalize non-dollar currencies in future financial ecosystems. For Beijing, the case for yuan stablecoins is therefore both defensive and strategic: to prevent being locked out of a critical new payment infrastructure, while also advancing the RMB’s global role.
An offshore yuan stablecoin issued in Hong Kong could offer China a controlled international payment channel that bypasses the SWIFT network and the US dollar. It would complement the country’s broader cross-border RMB settlement architecture, which already includes yuan swap lines, a global clearing network and the Cross-Border Interbank Payment System.
Hong Kong’s Regulatory Model: Implications for Offshore RMB Stablecoins
Hong Kong’s Stablecoins Ordinance has set a high barrier for stablecoin issuance and related activities. This framework could provide regulators in mainland China with a credible mechanism for approving offshore yuan stablecoins, potentially marking the starting point of China joining the global stablecoin competition.
The framework is deliberately stringent to create a global model for compliant stablecoin development. It requires issuers to be licensed for stablecoins issuance, to hold 100 percent high-quality reserves (such as cash, bank deposits or government bonds) in the same currency as the peg, to maintain incorporation and physical presence in Hong Kong with minimum capital requirements, to offer T+1 (within one business day) redemption at par value without unreasonable fees, and to comply with strict obligations for anti-money laundering (AML), counter-terrorist financing, know-your-customer (KYC) and cross-border compliance.
Among the toughest provisions are KYC rules. Licensed stablecoin issuers must verify the identity of each “customer stablecoin holder,” and related documents and records must be kept for at least five years, while anonymous wallets and links to decentralized finance platforms are prohibited. Issuers are also required to block access from jurisdictions that ban stablecoins, using technical measures such as Internet Protocol (IP) or Global Positioning System screening.
These rules distinguish Hong Kong’s model from the USGENIUS Act, which mandates issuers to comply with AML laws but does not impose KYC on stablecoin holders. Critics warn that Hong Kong’s strict regime could undermine stablecoins’ advantages in efficiency and privacy, reducing adoption and pushing foreign users away, and weakening the city’s potential as a global financial hub for Web3 (the third generation of the internet premised on decentralized technologies).
But regulators in Hong Kong argue that only a robust compliance framework will attract mainstream financial institutions and balance innovation with risk management. Eddie Yue has warned of the high risks of money laundering and terrorist financing posed by the anonymity and cross-border nature of stablecoins.
RMB stablecoins present a strategic opportunity for China to compete in shaping the future global payment system and to accelerate RMB internationalization.
Key Challenges and Pathway for RMB Stablecoin
For mainland regulators, the biggest concern is capital control. By design, stablecoins enable seamless cross-border transfers, potentially undermining Beijing’s ability to manage capital flows, financial stability and risk prevention. Issuing onshore RMB stablecoins would pose a direct challenge to mainland China’s capital control framework and appear at odds with its broad restrictions on cryptocurrency. This explains why consensus has formed around offshore yuan stablecoin issuance in Hong Kong as the safest initial step. This could be followed by pilot programs in mainland areas such as Lingang in Shanghai and Qianhai in Shenzhen, and in Hainan once conditions are more favourable. Experiences from Hong Kong’s issuance could provide valuable testing grounds for future onshore RMB stablecoin development.
Hong Kong, as the largest offshore yuan liquidity pool with approximately one trillion RMB, has sufficient liquidity to support the initial issuance of yuan-backed stablecoins without undermining capital controls. For long-term development, however, growth in offshore yuan liquidity supply will be necessary. The existing currency swap arrangements between the PBOC and the HKMA could be used to stabilize offshore RMB liquidity in response to redemption pressures.
Additional safeguards have been proposed to reassure Beijing. These include restricting licensed issuers to qualified mainland institutions with cross-border payment and trade experience, requiring reserves to be custodied with offshore RMB clearing banks managed by Chinese institutions, and blocking onshore access to offshore yuan stablecoins via IP monitoring. Such measures could mitigate the risk of destabilizing capital flows while still allowing controlled international expansion.
Strategic Opportunities for RMB Stablecoins
RMB stablecoins present a strategic opportunity for China to compete in shaping the future global payment system and to accelerate RMB internationalization. By enabling instant and cost-effective cross-border transactions, offshore RMB stablecoins can complement the digital yuan, forming a coordinated “dual-track” approach to advancing the cross-border yuan payment and settlement infrastructure. This could enhance overall payment efficiency, reduce transaction costs and strengthen the global role of the RMB.
If successfully launched, RMB stablecoins could carve out a distinctive niche in the global market. While dollar stablecoins such as USDT (issued by Tether) and USDC (issued by Circle) dominate, their reserve transparency and regulatory compliance have often been questioned. Hong Kong’s model emphasizes credibility and oversight, potentially giving yuan stablecoins an advantage in jurisdictions seeking compliant alternatives, such as Singapore, Europe and the United Arab Emirates.
China also has a powerful commercial engine to drive adoption: cross-border e-commerce. Millions of Chinese merchants already transact globally, and stablecoins could provide them with instant, low-cost settlement options. JD.com and Alibaba applying for stablecoin licenses in Hong Kong could accelerate this transition by embedding stablecoin payments into their platforms.
The road ahead
Despite these opportunities, challenges remain. Strict compliance requirements will inevitably erode stablecoins’ efficiency benefits. Unlike dollar stablecoins that still operate in regulatory gray zones in various jurisdictions, payment efficiency under a regulated RMB stablecoin regime could decline significantly once strict KYC and AML rules are implemented, as this efficiency advantage has so far relied partly on regulatory gaps. Striking the right balance between safety and efficiency will be essential for mass adoption.
Ultimately, the future of yuan stablecoins hinges on two questions. First, will China liberalize its financial system enough to sustain offshore liquidity and guarantee redemption under stress? And second, can Beijing build sufficient international trust in the RMB, and in Chinese financial institutions as custodians of reserve assets, to withstand geopolitical shocks or domestic policy changes?
The answers will determine whether offshore yuan stablecoins emerge as a marginal experiment or a transformative instrument in the future global financial system.
For now, the message is clear: with the U.S. and Hong Kong moving ahead, China can no longer afford to sit out the race. Offshore yuan stablecoins may not yet be a reality, but they are no longer just an idea—they are the next frontier in the contest over the future of money.
