A quiet directive from Beijing recently put the brakes on some ambitious plans in Hong Kong. For those watching the crypto space, it felt like a sudden gust of wind through a carefully built house of cards. Major Chinese tech firms, the kind that usually move mountains, found their stablecoin ambitions stalled.
- Beijing has issued a directive to major Chinese tech firms, halting their plans to launch yuan-pegged stablecoins in Hong Kong. This move comes despite Hong Kong’s efforts to establish itself as a crypto-friendly hub.
- The People’s Bank of China (PBoC) has expressed deep concerns about private companies issuing currency, fearing it could undermine monetary control and compete with China’s own digital yuan (e-CNY).
- PBoC Governor Zhou Xiaochuan highlighted risks of “excessive money issuance” and “high leverage” associated with stablecoins, deeming existing regulatory frameworks insufficient.
Ant Group, an affiliate of the e-commerce giant Alibaba, and JD.com, one of China’s largest retailers, had been keen. They wanted to launch stablecoins pegged to the yuan in Hong Kong. These weren’t small players. They had even approached the People’s Bank of China (PBoC) in closed-door meetings, pushing for authorization.
This push came at an interesting time. Hong Kong had just rolled out its new stablecoin licensing regime. The territory has been trying to position itself as a friendly spot for crypto development, a kind of regulatory sandbox, especially compared to the mainland’s more cautious approach. Seventy-seven firms, including Ant and JD.com, had shown interest in applying for these licenses, according to the Hong Kong Monetary Authority.
But then, the word came down. Regulators from the PBoC and the Cyberspace Administration of China told these tech titans to hold off. The Financial Times reported this news, citing sources close to the situation. It seems the green light they hoped for turned distinctly amber.
Why the sudden halt? Five sources told the publication that PBoC officials harbor deep concerns. They worry about private companies issuing any form of currency. It touches upon a fundamental principle of monetary control, a power usually reserved for central banks.
One source offered an even sharper point. Privately run stablecoins, they suggested, are seen as a potential challenge to China’s own central bank digital currency, the e-CNY. This digital yuan, as I’ve reported before, has faced its share of adoption struggles. It makes you wonder if the PBoC sees these private stablecoins as a rival for digital currency mindshare.
The Central Bank’s View on Stability
The PBoC’s governor, Zhou Xiaochuan, had already voiced his worries about stablecoin stability back in late August. He spoke at a closed-door financial forum, laying out his concerns with a clear, direct tone.
He pointed to two main issues. First, “excessive money issuance.” This happens, he explained, when stablecoins are issued without 100% reserve requirements. It’s a phenomenon he called “over-issuance.” Think of it like a bank promising more money than it actually holds in its vault. That’s a recipe for trouble.
His second concern was “high leverage.” This refers to the multiplier effect of monetary derivatives generated after stablecoins are issued. It’s a bit like building a towering structure on a shaky foundation. The risks grow quickly, and if something goes wrong, the fallout can be significant.
Zhou Xiaochuan acknowledged that both the US GENIUS Act and Hong Kong’s Stablecoin Ordinance try to address these problems. However, he felt their control remained “significantly insufficient.” That’s a strong statement from a central bank chief, suggesting a deep-seated skepticism about the current regulatory frameworks.
It highlights a core tension. Regulators want stability and control. The crypto world often prizes innovation and decentralization. Finding a middle ground, it seems, is proving to be quite the balancing act, especially when it involves something as fundamental as currency.
A Wider Net of Control
This isn’t an isolated incident. Beijing’s regulators have been busy elsewhere in Hong Kong’s crypto scene. They recently stepped in to slow down work on real-world asset (RWA) tokenization. This is where physical assets, like property or art, are represented as digital tokens on a blockchain.
Some top brokerages in Hong Kong were advised to pause their plans in this area. It suggests a broader strategy to manage the pace and scope of crypto innovation, even in a territory that aims to be more open.
And there’s more. In August, major brokers were also asked to stop publishing research that endorsed stablecoins. This move, previously reported by The Block, shows a consistent pattern. It’s a clear signal that mainland authorities are keen to shape the narrative and limit enthusiasm for private digital currencies, even from a distance.
The situation paints a picture of Hong Kong trying to carve out its own path, to be a hub for digital finance. Yet, the gravitational pull of mainland China’s regulatory philosophy remains strong. It’s a delicate dance between fostering innovation and maintaining control, particularly over anything that resembles money.
For now, the plans for yuan-pegged stablecoins from Ant Group and JD.com are on ice. This pause sends a clear message about who ultimately holds the reins when it comes to currency in the broader Chinese sphere of influence. It leaves many wondering what the next chapter holds for Hong Kong’s crypto ambitions and the future of private stablecoins in the region.
