China is currently reassessing its stringent stance on cryptocurrencies, particularly by allowing fiat-referenced stablecoins (FRS) to assist in the internationalization of the renminbi (RMB). Despite the ongoing ban on crypto trading and mining in the mainland that has been in effect since 2021, Hong Kong is emerging as a controlled environment for testing these developments. On August 1, 2025, the region implemented a licensing regime tailored specifically for stablecoin issuers. An upcoming event, the iFX EXPO Asia, will focus on discussions surrounding these stablecoin initiatives.
The effectiveness of this dual strategy to potentially lessen the dollar’s stronghold in digital international transactions remains to be seen.
While the mainland has upheld a firm policy against cryptocurrency activities, recent discussions among senior policymakers have raised the possibility of utilizing yuan-backed stablecoins for global transactions. The State Council has been evaluating a draft roadmap that could introduce RMB-linked stablecoins and set objectives for overseas RMB usage along with a risk-control framework, marking a departure from the previous outright rejection of privately issued digital currencies.
Regulators continue to highlight concerns associated with such currencies, including risks related to money laundering, terrorist financing, and the potential destabilization of China’s capital account.
Hong Kong has established itself as a pivotal point for the development of RMB-linked stablecoins. The introduction of the Stablecoins Ordinance (Cap. 656) on August 1, 2025, created a comprehensive framework that requires authorization for the issuance or promotion of specific stablecoins, categorizing unauthorized activities as criminal offenses. To facilitate compliance, the Hong Kong Monetary Authority (HKMA) issued supervisory guidelines outlining prudential standards and anti-money laundering (AML) measures.
Licensed issuers must adhere to stringent conditions, including maintaining a 1:1 reserve backing with liquid assets, ensuring immediate redemption at par value, segregating client assets, and submitting regular financial statements and audits. This regulatory approach effectively restricts market access to only approved entities, thereby maintaining a closely monitored environment for stablecoin operations.
A focal point of the HKMA’s guidelines involves rigorous customer identification protocols. Issuers are obligated to perform due diligence on all holders of their stablecoins, often leveraging regulated third-party entities for customer verification. While transactions between non-verified wallets may escape scrutiny, issuers are still tasked with overseeing overall token circulation and identifying potential risks.
Thus far, the HKMA’s measured approach indicates that only a limited number of licenses will be issued initially, focusing on business-to-business applications such as trade settlements rather than widespread retail offerings.
However, new challenges have emerged as reports indicate Beijing’s cautious stance towards the digital asset landscape in Hong Kong. The securities watchdog has urged some mainland brokerages to halt their real-world asset (RWA) tokenization efforts in the region, amid a broader effort to regulate stablecoin research and sponsorship. Despite high interest—with dozens of firms expressing a desire for stablecoin licenses—the regulatory environment remains complex and subject to rapid changes based on mainland directives.
Meanwhile, outside of Hong Kong, the launch of the AxCNH stablecoin in Kazakhstan in September 2025 reflects emerging opportunities for RMB-linked tokens in regulated markets. This venture underscores the potential for stablecoins amidst ongoing regulatory development, while the HKMA reiterates that no stablecoin issuers were authorized in Hong Kong at this time.
Chinese technology firms are keenly exploring the issuance of offshore RMB stablecoins through Hong Kong channels, driven by interests in simplified trade financing and quicker settlement processes. Brokers have also noted an uptick in license applications, spurred by mainland investors eager to capitalize on new business opportunities amid the recent regulatory shifts.
The adoption of stablecoins could pave the way for more efficient cross-border payments, which are traditionally hampered by slow and costly correspondent banking systems. A successful implementation may improve trade and supplier payments across regions. However, achieving liquidity, ensuring credible backing, and fostering international cooperation remain pivotal for the widespread acceptance of RMB-linked stablecoins.
With the US dollar dominating the global stablecoin market and accounting for upwards of 99% of supply, China’s attempts to shift this balance occur against a backdrop of the RMB capturing just a small percentage of global payments. Measures taken to enhance the liquidity infrastructure for RMB transactions in Hong Kong may provide foundational support for eventual stablecoin adoption. Nonetheless, the success of these initiatives will largely depend on navigating the dynamic regulatory landscape and ensuring compliance across jurisdictions.