China’s Regulatory Stance on Cryptocurrency
In the latest development concerning China’s regulatory stance on cryptocurrency, Alibaba’s cross-border e-commerce division is reportedly exploring the creation of a deposit token. This initiative comes in light of Beijing’s ongoing campaign against stablecoins. Kuo Zhang, the president of Alibaba, shared details in a CNBC interview, indicating that the company aims to employ a stablecoin-like technology that can enhance efficiencies in international transactions.
Proposed Deposit Token
The proposed deposit token would function as a blockchain-based asset that directly correlates with commercial bank deposits and is recognized as a regulated responsibility of the bank that issues it. This concept is reminiscent of conventional stablecoins, which are traditionally created by private institutions and secured by tangible assets to maintain their stability.
Market Reactions and Regulatory Pushback
This news follows a recent move by JPMorgan Chase, the globe’s largest bank by market value, which has begun providing its deposit token to institutional customers. Furthermore, the report highlights the hesitance among Chinese firms to delve into stablecoin ventures, as major players like Ant Group and JD.com have recently halted plans to issue stablecoins in Hong Kong due to pushback from regulators in Mainland China.
Beijing’s officials have appeared to be resolutely opposed to the development of a stablecoin sector in the country. Earlier in July, Ant Group and JD.com had expressed interest in exploring Hong Kong’s pilot stablecoin initiative, along with intentions to introduce tokenized financial products, including digital bonds. Reports surfaced as well that other financial institutions, such as HSBC and the Industrial and Commercial Bank of China, also harbored ambitions relating to stablecoins in Hong Kong as of early September.
However, a now-withdrawn report from the Chinese financial publication Caixin indicated that firms in Hong Kong might have to withdraw from activities associated with cryptocurrencies. Regulators seem poised to implement limitations on the investments that mainland Chinese companies can make into cryptocurrencies and related exchanges, further tightening the grip on this sector.
Government Decrees and Future Prospects
In an earlier decree issued in August, it was reported that Chinese authorities had instructed local enterprises to halt research dissemination and prevent seminars revolving around stablecoins, based on apprehensions regarding their potential misuse for fraudulent purposes.
Nonetheless, the connection between China and the world of stablecoins is not entirely nonexistent. Recently, in late July, the blockchain company Conflux introduced a new stablecoin linked to the offshore Chinese yuan. This initiative is targeted towards entities outside of China, particularly those involved in the Belt and Road Initiative. Similarly, a stablecoin anchored to the international version of the Chinese yuan was launched in September, intended strictly for foreign markets during the Belt and Road Summit in Hong Kong.
Analysts suggest that true circulation of stablecoins within the Chinese mainland is unlikely, with experts like Joshua Chu from the Hong Kong Web3 Association asserting that onshore issuance of stablecoins in China appears improbable.
