Chinese e-commerce giant Alibaba has signaled its intention to deploy bank-backed deposit tokens for cross-border payments, navigating a strategic path around Beijing’s increasingly rigid stance against privately-issued stablecoins. The development represents a critical pivot in how China’s technology leaders approach blockchain-based payment innovation under intensifying regulatory scrutiny.
Kuo Zhang, president of Alibaba.com, told CNBC Friday that the company plans to leverage stablecoin-like technology to streamline global transactions through its $35 billion cross-border commerce network. However, rather than issuing traditional stablecoins, Alibaba is exploring deposit tokens — blockchain-based instruments representing direct claims on commercial bank deposits and treated as regulated liabilities of issuing financial institutions.
The distinction carries profound regulatory implications. While traditional stablecoins are issued by private entities and backed by reserve assets to maintain value parity with fiat currencies, deposit tokens emerge directly from regulated banking institutions, carrying the full weight of established financial infrastructure and regulatory oversight.
Alibaba’s announcement follows closely on the heels of JPMorgan Chase’s official rollout of its JPM Coin deposit token to institutional clients earlier this week. The world’s largest bank by market capitalization has begun offering the USD-denominated token, ticker symbol JPMD, on Coinbase’s Base Layer 2 blockchain, enabling 24/7 near-instant settlement for institutional transfers.
Zhang confirmed that Alibaba is experimenting with tokenized USD and EUR through JPMorgan’s Kinexys technology platform, with plans to support additional currencies pending regulatory approvals. The company aims to launch the system by year’s end, addressing persistent inefficiencies in cross-border B2B payments where settlement delays of 48 to 72 hours remain standard.
Alibaba’s calculated approach reflects hard-learned lessons from Beijing’s recent regulatory interventions. Chinese technology giants including Ant Group — Alibaba’s financial services affiliate — and rival e-commerce platform JD.com suspended plans to issue stablecoins in Hong Kong after regulators from the People’s Bank of China and Cyberspace Administration of China explicitly directed them to halt such initiatives.
The regulatory intervention occurred despite Hong Kong’s Stablecoin Ordinance taking effect in August, establishing a comprehensive licensing framework for fiat-referenced stablecoin issuers. Both companies had expressed interest in participating in the Hong Kong Monetary Authority’s pilot program and were among 77 firms seeking licenses under the new regime.
Sources familiar with closed-door meetings told the Financial Times that PBOC officials articulated fundamental concerns about private companies issuing any form of currency, viewing such arrangements as potential threats to monetary sovereignty. “The real regulatory concern is, who has the ultimate right of coinage – the central bank or any private companies on the market?” one source explained.
Beijing’s opposition stems partly from competition concerns surrounding China’s central bank digital currency, the e-CNY or digital yuan. After years of development and deployment in limited pilot programs across major cities, the CBDC has struggled with adoption rates falling short of expectations. Regulators fear that privately-controlled stablecoins from technology giants could further undermine the digital yuan’s prospects and dilute state control over monetary policy transmission.
Former PBOC Chairman Zhou Xiaochuan articulated these concerns at a closed-door financial forum in late August, warning about stability risks associated with stablecoins and questioning whether they provide genuine value for retail payment applications. His remarks signaled a decisive shift in regulatory sentiment, cooling enthusiasm that had been building around Hong Kong’s stablecoin framework.
In early August, Chinese authorities reportedly instructed local firms to cease publishing research and holding seminars related to stablecoins, citing exploitation concerns for fraudulent activities. A subsequently-removed September report from financial outlet Caixin claimed policymakers would impose restrictions on mainland companies’ investments in cryptocurrency exchanges and related activities.
China’s regulatory stance has not entirely eliminated stablecoin development, but has redirected it toward carefully circumscribed offshore applications. In late July, Chinese blockchain platform Conflux introduced a stablecoin backed by offshore Chinese yuan, explicitly targeting offshore Chinese entities and countries involved in the Belt and Road Initiative rather than mainland circulation.
Similarly, a regulated stablecoin tied to the international version of Chinese yuan launched in late September at the Belt and Road Summit in Hong Kong, signaling its intended use for foreign exchange markets rather than domestic payments. These products reflect Beijing’s tolerance for stablecoins that serve strategic international objectives without threatening internal monetary control.
Joshua Chu, co-chair of the Hong Kong Web3 Association, articulated the prevailing consensus: “China is unlikely to issue stablecoins onshore.” The assessment captures the bifurcated reality where Hong Kong serves as an experimental sandbox for digital asset innovation while the mainland maintains stringent prohibitions.
Alibaba’s pivot to deposit tokens through established banking partnerships represents a pragmatic adaptation to regulatory realities while maintaining technological momentum. By working with JPMorgan’s regulated infrastructure, the company gains access to blockchain-based payment efficiencies without triggering sovereignty concerns that doomed independent stablecoin initiatives.
The approach may establish a template for other Chinese technology companies seeking to participate in digital asset innovation without running afoul of Beijing’s red lines. Rather than challenging state control over currency issuance, they leverage existing financial institutions’ regulated status to access blockchain technology’s operational benefits.
For global observers, the episode illuminates fundamental tensions between technological innovation and state prerogatives in controlling monetary systems. While Western jurisdictions grapple with how to regulate privately-issued stablecoins, China has effectively foreclosed that option for domestic players, channeling innovation through state-approved institutions instead.
The outcome underscores that regardless of technology’s transformative potential, nation-states retain ultimate authority over what constitutes acceptable forms of money within their jurisdictions – a reality even the world’s most powerful technology companies cannot circumvent.
