When Hong Kong’s new stablecoin law took effect in August, dozens of technology and financial firms from the city and beyond rushed to apply for issuing licenses in pursuit of the advantage of quick mobility. However, Chinese tech giants have now been forced to put their ambitions on hold after Beijing stepped in and stopped their plans.
The Financial Times (FT) reports that some of the top Chinese regulators have issued instructions to Alibaba (NASDAQ: BABA) and JD.com to cancel their stablecoin plans. Citing several sources familiar with the matter, FT says the orders came from the People’s Bank of China (PBoC) and the Cyberspace Administration of China.
The PBoC is leading the campaign and has instructed Chinese companies to drop the initial stablecoin rollouts in Hong Kong. Its primary concern centers on the risk of allowing technology companies to issue and control any type of currency.
This concern has long underpinned governments’ opposition to digital assets and stablecoins. When Meta (NASDAQ: META) announced its Libra stablecoin (later renamed Diem), regulators in the US and Europe united to quit the tech giant’s plans over concerns that it could threaten monetary stability and financial sovereignty.
These concerns are more pronounced in China, where the government has tight control over the financial and technology sectors.
“The real regulatory issue is who has the ultimate right to coins – the central bank or some private company in the market?” one of the sources told the FT.
In addition to monetary stability concerns, the PBoC also considers stablecoins a competitor to it the central bank’s digital currency (CBDC) project. Once hailed as the next big thing, the digital yuan’s progress has plateaued, with the central bank driving adoption mainly through limited pilots in major cities. There have been reports that the PBoC is working on integrating the CBDC with payment systems in the Association of Southeast Asian Nations (ASEAN) states and BRICS membersbut not much has come of it.
China’s stablecoin turnaround
The warning from the Chinese regulators comes just as the Asian financial giant was reported to be warming up to stablecoins.
Several government agencies have held meetings this year to discuss the role of stablecoins in the $19 trillion economy. While no one has openly endorsed these fiat-pegged tokens, local reports have claimed their existence broad support for the sector.
For China, stablecoins go beyond just enabling faster, cheaper and 24/7 payments. They represent their best opportunity in decades to counter dominance of the US dollar in global payments.
In June, Zhu Guangyao, a former vice finance minister, called on the Chinese government to promote yuan-backed stablecoins in response to the rise of USD alternatives. Currently, over 98% of the stablecoin market is dominated by the dollar.
“We should make full use of the pilot programs in Hong Kong. The renminbi stablecoin must be integrated into the overall design of the national financial strategy,” he said at an event in Beijing.
Experts believed that Hong Kong would be the test site for one yuan stablecoin. The city has traditionally been a testing ground for China, especially with economic and technological advancements. Digital banks, for example, first became popular in the city before mainland regulators began experimenting cautiously.
Korea’s POSCO adopts JPMorgan’s Kinexys for cross-border blockchain payments
Elsewhere, South Korea’s largest trading company, POSCO International, has joined a growing number of global companies in adopt JPMorgan’s (NASDAQ: JPM) Kinexy’s blockchain platform for cross-border payments.
POSCO International is a subsidiary of POSCO, South Korea’s largest steel producer. It operates in over 50 countries and claims to make over 40,000 cross-border payments annually.
The company aims to leverage Kinexy’s Digital Payments to make these transfers cheaper, faster and instant.
Kinexys enables institutional clients to transfer funds directly over its permissioned blockchain network. Unlike traditional rails, it allows 24/7 cross-border payments in US Dollars, British Pounds and Euros. It claims to have facilitated transfers worth over $1.5 trillion, with a daily average of $2 billion.
Kinexys has taken off dozens of new customers in recent months. This week, Europe’s largest engineering firm, Siemens, adopted the platform for on-chain FX swaps. Last month, one of the largest banks in the Middle East, Qatar National Bank, announced a similar integration focused on business payments in USD.
Watch: Richard Baker on creating a smarter financial world with blockchain
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