China pauses local tech giants’ stablecoin plans
The People’s Bank of China and Cyberspace Administration of China has stepped in to stop tech and ecommerce giants including Alibaba’s Ant Group and Jindong Shangcheng from getting involved in a pilot stablecoin program in Hong Kong, or issuing other virtual assets like tokenized bonds, sources told FT.
The intervention reportedly came in the wake of apprehensions about giving corporations a free hand to issue currencies, and concerns that private stablecoins could challenge the Chinese central bank’s e-CNY digital renminbi initiative.
Hong Kong’s Monetary Authority began accepting applications for a stablecoin issuance pilot program in August. The same month, former People’s Bank of China governor Zhou Xiaochuan called for caution amid “the risk of stablecoins being excessively used for asset speculation, as misdirection could trigger fraud and instability in the financial system.”
Touting the already cost-effective nature of existing payment systems, Zhou called for a “careful assessment of the true demand of tokenization as a technical foundation” before stablecoins’ rollout.
A tale of two systems
Chinese authorities’ rethink of private stablecoins comes following last week’s news that a cabal of US, European and Japanese banks including Goldman Sachs, Deutsche Bank and MUFG are working on a 1:1 reserve-backed form of digital money using blockchain for payments, stock, bond and fund issuance and trading.
