Deputy Director of the National Financial and Development Laboratory: The development model of RMB stable currency can be "internal and external integration"

Author: Yang Tao, Deputy Director of the National Finance and Development Laboratory

Source: National Finance and Development Laboratory

The development model of RMB stable currency can be "internal and external"

Recently, Pan Gongsheng, governor of the central bank, pointed out in his speech at the 2025 Lujiazui Forum that new technologies such as blockchain and distributed ledgers have promoted the vigorous development of central bank digital currencies and stablecoins, while also posing huge challenges to financial supervision. In fact, with the "Stablecoin Ordinance" in Hong Kong, China about to take effect on August 1, the discussion on stablecoins has also ushered in unprecedented heat recently.

Generally speaking, offshore RMB business refers to financial business denominated and settled in RMB in overseas markets. Driven by policies, it presents a pattern of development centered on Hong Kong, Singapore, London and other places. Domestic offshore RMB business reflects the dual characteristics of "onshore" and "offshore", with account management as the core operating mechanism, forming a free flow of capital under specific conditions. Correspondingly, many opinions believe that offshore RMB stablecoins should be piloted in the Hong Kong market, and when conditions are ripe, they should be explored in the domestic offshore market represented by the free trade pilot zone.

We believe that the stablecoins built on the Web3.0 world have gone beyond the traditional offshore and onshore categories. In order to better achieve strategic coordination, active supervision, and coordinated advancement, we should consider adopting a linkage development model of domestic offshore and offshore RMB stablecoins. The reason is that, first, in the face of the rapid development of dollar-collateralized stablecoins and the rapid evolution of stablecoin supervision in various countries and regions, my country urgently needs to take the initiative to conduct research and regulatory responses on stablecoins based on the perspective of financial security and monetary sovereignty, and systematically consider the reform pilot of RMB stablecoins, rather than relying on offshore RMB stablecoins to respond passively. Second, the scale of Hong Kong's RMB offshore market is limited. Under the condition of requiring a 1:1 reserve of stablecoins and legal currency assets, it may be difficult to independently support RMB stablecoins to achieve economies of scale. Third, the supervision of the issuance and trading of stablecoins involves many cutting-edge challenges such as identity authentication and anti-money laundering. Countries and regions are actively promoting regulatory innovation and looking for solutions. In this regard, relevant central departments should play a leading role in the supervision of RMB stablecoins, while seeking coordination and cooperation from Hong Kong regulatory authorities.

We have seen that since its establishment on September 29, 2013, the Shanghai Pilot Free Trade Zone has basically established a system that is aligned with international trade rules. At the same time, the central financial management department is fully supporting the construction of Shanghai International Financial Center to a higher level, and the central bank has also announced eight measures, including the pilot reform of offshore trade financial services in the Shanghai Lingang New Area. Therefore, it is possible to consider promoting the innovative exploration of relevant RMB stablecoins in the Shanghai Pilot Free Trade Zone and Hong Kong simultaneously.

As for the domestic offshore RMB stablecoin (CNY Coin, CNYC), one of the models is that clearing organizations, large commercial banks, leading payment institutions, well-known investment institutions, etc. can jointly initiate the establishment of a RMB stablecoin issuing institution in the Shanghai Free Trade Zone, explore the establishment of an on-chain issuance and operation mechanism for RMB stablecoins, and form a RMB stablecoin wholesale market for some authorized institutions (such as digital RMB operating institutions, because they have accumulated relatively rich innovation experience). Authorized institutions can exchange RMB stablecoins for qualified enterprises or individuals and build a RMB stablecoin retail market.

The second model is to rely on the branches of some digital RMB operating institutions in the Shanghai Free Trade Zone to directly mint and operate RMB stablecoins on the chain, and fully fulfill compliance responsibilities when paying to specific qualified economic entities. Of course, if banks are used as the issuers of stablecoins, then on the one hand, although the tokenized deposits explored by overseas banks or related organizations have similar characteristics to stablecoins, they are still different from the real stablecoin mechanism. On the other hand, in order to cope with the challenges of disintermediation, some overseas banks have also begun to study or try to establish technology subsidiaries or jointly establish relevant legal entities to explore the issuance of legal currency stablecoins to increase the ecological attractiveness to customers and resist the impact of the encryption industry. Therefore, the exploration of RMB stablecoins under this model still needs to clarify the specific path and focus.

It must be noted that no matter which model is adopted, several requirements must be met simultaneously. First, RMB stablecoins must have sufficient asset reserves. In addition to highly liquid assets such as RMB cash and short-term government bonds, a certain proportion of digital RMB reserves can be set up to achieve coordinated advancement with the central bank's CBDC reform pilot. Second, it requires the issuer of RMB stablecoins to establish a sound risk identification, asset isolation and custody, internal control and other compliance operation mechanisms, fulfill relevant compliance obligations for direct customers, and strive to cooperate with all parties to promote the expansion of application scenarios of RMB stablecoins and effectively cooperate with the reform priorities of the free trade zone. Third, it fully draws on the "electronic fence" characteristics of the FT account in the Shanghai Free Trade Zone, and through the innovative design of technical standards and smart contracts, the subjects who hold and use RMB stablecoins during the pilot period are limited to specific qualified institutions, enterprises or natural persons as much as possible.

At the same time, as for offshore RMB stablecoins (CNH Coin, CNHC), under Model 1, it is possible to promote domestic and foreign institutions to jointly launch a RMB stablecoin issuing institution in Hong Kong, or under Model 2, allow some domestic authorized banks or payment institutions to rely on their legal entities registered in Hong Kong to mint and issue offshore RMB stablecoins, and they must comply with the relevant laws and regulations of Hong Kong. In this way, a dual RMB stablecoin system can be formed at home and abroad, and at the same time, the exchange and interoperability mechanism of CNYC and CNHC can be explored by drawing on the existing cross-border payment and capital flow system arrangements between the mainland and Hong Kong. Among them, CNYC is mainly used to supplement and enhance the payment and settlement efficiency of cross-border trade and business activities in the short term, while CNHC aims to further strengthen Hong Kong's position in the internationalization of RMB, and can be used in compliance with the transaction settlement of on-chain financial activities and commodities, etc., especially actively exploring the support of RWA (Real-World Assets) based on RMB assets, so as to jointly work to enhance the global influence of RMB and RMB assets.

It should also be noted that domestic and foreign regulatory authorities and RMB stablecoin issuers should work together to continuously promote intelligent technology innovation, effectively identify RMB stablecoin secondary market activities in the blockchain ecosystem, and especially monitor the holding of RMB stablecoins by unqualified entities in the country to prevent illegal capital flows and prevent their use for illegal activities.

Of course, as the Bank for International Settlements (BIS) pointed out, stablecoins still have defects in the three key standards of singleness, elasticity and integrity. The reform and exploration of RMB stablecoins still need to strictly control risks, proceed step by step, and be moderate in scale. At the same time, relevant laws and regulations should be formulated as soon as possible to strengthen the voice in the global stablecoin legal game. Looking to the future, we can also learn from the "Financial Internet" (Finternet) proposed by BIS and built on the Unified Ledger, and simultaneously promote the coordinated development, complementary and win-win situation of digital RMB, bank tokenized deposits and stablecoins.