JD.com and Ant Group Push for Yuan-Backed Stablecoins
In a strategic move aimed at bolstering the Chinese yuan’s position in global finance, JD.com, one of China’s leading e-commerce platforms, along with Ant Group, the financial technology subsidiary of Alibaba, is urging the People’s Bank of China (PBOC) to approve the use of Chinese yuan-backed stablecoins. This initiative is seen as a response to the increasing prevalence of stablecoins pegged to the US dollar, which have gained significant traction worldwide.
Urgent Need for Yuan Stablecoins
Sources have disclosed that during recent discussions with PBOC officials, representatives from JD.com made a compelling case for the urgent need of yuan stablecoins to enhance the currency’s international presence. The companies are not only lobbying for regulatory permission to issue stablecoins supported by offshore yuan in Hong Kong but are also preparing applications for stablecoin licenses in both Hong Kong and Singapore. Given the encouraging preliminary feedback from regulators, JD.com is reportedly looking to initiate the issuance of yuan stablecoins in Hong Kong before potentially extending pilot projects into China’s free trade zones.
Declining Influence of the Yuan
The backdrop to this effort is the waning influence of the yuan in global financial transactions, as evidenced by a recent decline in its share of global payments, which fell to a mere 2.89%—the lowest rate observed in nearly two years. In contrast, the dollar maintains a staggering 48% share, according to data from Swift. Wang Yongli, a seasoned expert and former deputy head of the Bank of China, expressed concerns that the inefficacy of yuan cross-border payment systems compared to US dollar stablecoins could pose a strategic threat to China’s economic aspirations.
Hong Kong’s Regulatory Framework
Alongside these developments, Hong Kong is in the midst of formalizing regulations for stablecoin operations, recently unveiling a new digital asset framework known as “LEAP”. This framework emphasizes the regulation of stablecoins and advocates for the tokenization of assets, with a focus on legal clarity, growth of the ecosystem, real-world application, and talent development. They aim to kickstart a licensing system for stablecoin issuers starting August 1, 2023, which is intended to enhance real-world use cases of stablecoins.
Future Aspirations and Market Landscape
JD.com’s founder, Liu Qiangdong, articulated plans to seek stablecoin licenses not just within China but across all major economies, coinciding with PBOC Governor Pan Gongsheng‘s announcement about establishing an international operations center for the digital yuan in Shanghai. Gongsheng envisaged a future currency ecosystem that promotes a “multipolar” currency system, in stark contrast to the current dominance of the dollar and euro in global finance.
Currently, the overall market capitalization of stablecoins exceeds $258 billion, with all top ten stablecoins linked to the US dollar. The only prominent stablecoin not tied to the dollar is the EURC, pegged to the euro, which ranks just outside the top ten by market cap. With these initiatives, JD.com and Ant Group are positioning themselves at the forefront of a new financial landscape that aims to reduce reliance on the US dollar through innovative stablecoin solutions.
