Offshore RMB Stablecoin on the Horizon: Can It Challenge Dollar Dominance?

Author | WuBlockchain Aki Chen

This article was compiled with the assistance of GPT and is shared for informational purposes only. It does not constitute any investment advice and does not represent the views or positions of Wu Blockchain. If you have any concerns regarding the form of re-publication, please contact us.

A series of recent developments suggests that an offshore Chinese yuan (CNH)-denominated stablecoin is rapidly approaching launch.According to Reuters, Chinese tech giants JD Group and Ant Group have repeatedly lobbied the People’s Bank of China (PBoC) for approval to issue a CNH stablecoin in Hong Kong. This marks a notable shift from the PBoC’s traditionally cautious stance on cryptocurrencies. Governor Pan Gongsheng has recently conveyed the central government’s more open attitude toward stablecoins — acknowledging their ability to achieve “instant settlement” and significantly streamline cross-border payment chains, while also warning of the considerable challenges they pose to financial supervision.

Previously, Guotai Junan International received approval from the Hong Kong Securities and Futures Commission (SFC) to upgrade its virtual asset trading license, sending its stock price soaring. The move was widely interpreted as a signal that China’s “national team” may be making its entry into the crypto space. With policy signals softening, industry players are gearing up for a new phase of growth. The interplay between regulatory tailwinds and emerging market opportunities is accelerating the transition of a yuan stablecoin from concept to real-world deployment.

1.Event Review

According to Yicai, on May 21, the Hong Kong Legislative Council passed the Stablecoin Bill, establishing a licensing regime for fiat-backed stablecoin issuers. On May 30, the Hong Kong SAR Government officially published the Stablecoin Ordinance in the Government Gazette, marking its formal enactment into law.

Shortly thereafter, two internet giants responded swiftly. On June 12, Ant Group announced plans to apply for stablecoin licenses in both Hong Kong and Singapore, with an additional license application planned for Luxembourg. The move is aimed at strengthening its blockchain operations and supporting its cross-border payment and treasury management services.

The move involves two subsidiaries: Ant International, headquartered in Singapore, and Ant Digital Technologies, based in Hong Kong. On June 17, JD.com also announced plans to issue a stablecoin pegged 1:1 to the Hong Kong dollar on a public blockchain. After completing B2B payments, the stablecoin will gradually expand to C2C payments.

Notably, on the same day, the U.S. Senate passed the “GENIUS Act” for stablecoins, which is regarded as the first bill in the U.S. to establish a regulatory framework for stablecoins, filling a significant regulatory gap in this area. This corporate action aligns with Hong Kong’s swift regulatory progress.

The Hong Kong Stablecoin Ordinance was officially passed by the Legislative Council at the end of May this year and will come into effect on August 1. Under the ordinance, the Hong Kong Monetary Authority (HKMA) will begin accepting license applications.Stablecoin licenses are expected to be scarce, with only a handful to be issued. However, over 40 companies are already preparing to apply, and law firms have reported that dozens more are interested, leading to fierce competition. The majority of applicants are major Chinese financial institutions and tech giants, including JD.com, Standard Chartered, RD Technologies, Ant International, and Ant Digital Technologies. Meanwhile, some small and medium-sized enterprises (SMEs) find the high entry barriers a significant challenge, leaving their chances of approval slim. This has even led to some companies exploiting the concept to artificially inflate stock prices.

The Secretary for Financial Services and the Treasury of Hong Kong, Christopher Hui, stated that the licensing system established by the new ordinance will provide appropriate regulation for stablecoin-related activities, laying the foundation for the sustainable development of Hong Kong’s stablecoin sector and the broader digital asset ecosystem. This move is seen as a milestone in promoting Hong Kong’s status as an international financial center.

2.Core Discussion and Expert Insights

Misconceptions and Definitions of Stablecoins

The prospects and positioning of the offshore Chinese yuan (CNH) stablecoin have sparked in-depth discussions among regulators, financial scholars, and market participants. From a regulatory perspective, the general consensus is that stablecoins, in essence, remain a digital representation of fiat currencies and should be incorporated into existing financial regulatory frameworks.

Wang Yongli, former Vice President of the Bank of China, emphasized that stablecoins, once regulated, are essentially tokens of fiat currencies, not independent currencies. Their development highlights the inefficiencies within the current fiat systems, and countries should leverage this technology to enhance the cross-border payment capabilities of fiat currencies. He pointed out that recent moves by the U.S. and Hong Kong to accelerate stablecoin legislation — such as requiring licensed operations, 100% reserves, and the prohibition of interest payments — have effectively strengthened the centralized nature of stablecoins, reducing decentralized risks and bringing them closer to traditional financial regulatory models.

Here, Qiao Yide, Vice President and Secretary of the Shanghai Development Research Foundation, made a clarification regarding the recent surge in stablecoin discussions:

The first common misconception is to liken stablecoins to the “blockchain version of Alipay.” This comparison is fundamentally inaccurate. Alipay is a third-party payment platform that does not have inherent monetary attributes; the funds transferred during transactions are still stored in the user’s bank account. In contrast, stablecoins are different. They inherently carry value, even though their primary use is also for payments. In a transaction, stablecoins directly represent the user’s assets, rather than merely serving as a “channel” for funds.

The second misconception is to equate the Hong Kong dollar with the “USD stablecoin.” On the surface, both share some similarities in their anchoring mechanisms — the Hong Kong dollar is fully collateralized by the U.S. dollar. However, from a legal and governance perspective, the two are fundamentally different. The Hong Kong dollar is the official currency of Hong Kong, regulated by the Hong Kong Monetary Authority (HKMA) through a pegged exchange rate system. Its issuance is controlled by three authorized banks: HSBC, Bank of China (Hong Kong), and Standard Chartered, with the proceeds from currency issuance benefiting the Hong Kong Monetary Authority’s foreign exchange reserves and serving the public interest. In contrast, USD stablecoins, represented by USDT, are issued by private companies, with the returns on reserve assets owned privately by the issuers. Taking Tether as an example, its 2023 annual profit surpassed $10 billion, and the governance and public nature of its stablecoin stand in clear contrast to the Hong Kong dollar.

The third misconception is to think of stablecoins as “decentralized.” In reality, stablecoins are highly hybridized structures with significant centralized characteristics at their core. Their peg to fiat currencies means that the issuance mechanism relies on centralized entities to manage reserves and redemption. Furthermore, the custodial arrangements, audit mechanisms, and other processes of stablecoins are largely controlled by centralized institutions. In comparison, the transaction and circulation aspects of stablecoins exhibit more decentralized features on the blockchain. Therefore, stablecoins are neither fully centralized nor entirely decentralized. A more accurate description would be: they are “credit intermediaries” empowered by technology.

Overall, stablecoins are essentially a blockchain-based representation of fiat currencies, a digital expression of trust. They leverage blockchain technology to bridge the virtual and real worlds, performing functions such as payments and settlement, and exhibiting strong transitional characteristics. From the perspective of financial development history, the popularity of stablecoins is, to some extent, a response to the inability of decentralized currencies like Bitcoin to fulfill daily monetary functions. The ideal of decentralization faces practical challenges, leading the market to “return” to the traditional monetary system. This phenomenon confirms that fiat currencies still possess significant vitality and stability within the current financial system.

Beijing Looks to Hong Kong to Explore the Path of Stablecoins and RMB Internationalization

For China, offshore Chinese yuan (CNH) stablecoins are seen as a new hope for promoting the internationalization of the renminbi. In a recent research report, Morgan Stanley pointed out that as the U.S. advances stablecoin legislation, it could further solidify the U.S. dollar’s dominant position in the global financial system. Against this backdrop, Beijing’s attention to stablecoins has significantly increased, and it is leveraging Hong Kong as a “regulatory sandbox” to explore the feasibility of stablecoins as a future alternative payment tool, while simultaneously promoting the cross-border use of the renminbi.

Former Governor of the People’s Bank of China, Zhou Xiaochuan, recently addressed the topic of stablecoins in a public forum, warning that the widespread adoption of USD-pegged stablecoins could intensify the global trend of “dollarization,” which warrants close attention. Morgan Stanley echoed this concern, further emphasizing that the rise of stablecoins does not signal the beginning of a new era of “supranational currencies” in the international monetary system. Instead, stablecoins should be seen as an extension of traditional fiat currencies within existing regulatory frameworks, with their core function being the enhancement of cross-border payment and transaction efficiency — not the replacement of sovereign currencies.

Li Yang, Chairman of the National Institution for Finance and Development, agreed with this view and added that China should take an active role in the stablecoin space by promoting the internationalization of the digital renminbi (e-CNY) and leveraging Hong Kong to develop a yuan-backed stablecoin to elevate the global standing of the RMB. He stressed that as long as sovereign states exist, the sovereign nature of currency will remain unchanged. Monetary sovereignty is a fundamental component of national sovereignty, representing the highest authority of a country in issuing and managing its legal tender. Regardless of how the underlying technology evolves, stablecoins in international payments will remain subject to exchange rate controls and capital flow regulations between national currencies.

When discussing the development path of a yuan-backed stablecoin, Morgan Stanley emphasized that it should be viewed as a potential component of the cross-border RMB settlement system, with the potential to integrate with existing financial infrastructure — including RMB swap lines, the Cross-Border Interbank Payment System (CIPS), and the global RMB clearing network.

In its report, Morgan Stanley noted a clear retreat in RMB internationalization over the past three years. The yuan’s share in global foreign exchange reserves fell from 2.8% in early 2022 to 2.2% by the end of 2024. The bank believes this trend reflects waning international confidence in China’s economic outlook, accompanied by declining capital mobility.

According to the report, the key reasons for the setback in RMB internationalization lie in persistent concerns over China’s “threefold challenges”: high leverage and debt levels, deflationary pressures, and demographic shifts. These structural issues have diminished the appeal of RMB-denominated assets and, to some extent, constrained the currency’s further expansion in international trade and reserve portfolios.

Dual-Track Model for RMB Stablecoins

Li Yang specifically noted that the United States is actively promoting stablecoin legislation, with the core objective of serving the national interests of the U.S. These include modernizing the U.S. dollar payment system, reinforcing the dollar’s global dominance, and creating trillions of dollars in new demand for U.S. Treasury bonds. The recently passed stablecoin legislation requires stablecoins to be fully backed by reserve assets in the form of U.S. dollars or U.S. Treasuries.

This means that issuers of stablecoins must either hold U.S. dollars in bank accounts or directly purchase Treasuries. Under the current financial system, however, non-U.S. sovereign entities — such as stablecoin companies — typically do not earn interest on their U.S. Treasury holdings. From this perspective, stablecoins effectively offer a mechanism of “interest-free absorption” for Treasuries: if the stablecoin market continues to expand and issuers keep increasing their holdings of Treasuries as reserves, the demand for U.S. government debt will rise silently, without requiring the U.S. government to pay additional interest — thus achieving a form of “quiet monetization.”

Of course, the reality is far more complex and constrained. On one hand, the total supply of U.S. Treasuries is massive, and even rapid growth in stablecoins is unlikely to meaningfully shift the overall market in the short term. On the other hand, the issuance of stablecoins remains subject to multiple constraints, including compliance requirements, actual market demand, and overarching macroeconomic policy.

The stablecoin mechanism has cleverly transformed the expansion of the crypto market into an extension of U.S. dollar influence on-chain.

In response, Li Yang called on China to formulate a timely strategy and break through via a “dual-track” approach: on one hand, accelerating the development of the transaction and settlement infrastructure for the central bank digital currency (e-CNY); on the other, actively exploring the growth of a yuan-backed stablecoin in offshore systems — allowing both tracks to work in tandem. This dual-track strategy has received broad support from other experts as well.

Joyde, Vice President of the Shanghai Development Research Foundation, emphasized that China must distinguish between short-term and long-term strategies, as well as between domestic and offshore approaches in facing the stablecoin wave. In the short term, China could begin with breakthroughs in the offshore market, leveraging Hong Kong’s status as an international financial center to pilot the issuance of a RMB stablecoin. Once conditions mature, the government could then assess whether and how to extend this approach to the mainland.

He stressed that RMB stablecoins should focus on specific functions such as cross-border payments — for instance, enabling settlement outside the SWIFT network and supporting regional collaboration scenarios like “PayLink” between mainland China and Hong Kong. In these domains, a yuan-backed stablecoin could complement the e-CNY by forming a coordinated “dual-track” system for domestic and offshore usage, jointly advancing the internationalization of the renminbi.

On the design of stablecoin models, industry scholars and practitioners have also proposed constructive ideas. Xiao Feng, Chairman of HashKey Group, suggested building a two-tier architecture that integrates the central bank digital currency (CBDC) with a yuan-backed stablecoin.

Specifically, he proposed that licensed stablecoin issuers be allowed to open digital renminbi reserve accounts at the central bank. The central bank digital currency would serve as the wholesale layer, while stablecoins would be issued on-chain in tokenized form for retail and cross-border use. This structure combines the achievements of the central bank’s e-CNY development with the innovative capacity of market institutions — assigning the wholesale function to the CBDC and the retail and cross-border functions to stablecoins — thereby significantly accelerating the cross-border circulation and internationalization of the renminbi.

In Xiao Feng’s view, stablecoins effectively solve the “last mile” problem in inclusive finance. Their core value lies in improving accessibility to financial services. Leading stablecoins such as USDC (USD Coin) and USDT (Tether) are already expanding the boundaries of the traditional financial system, offering efficient, low-barrier payment and settlement options for populations with limited access to conventional banking infrastructure. He believes that stablecoins and tokenization technologies will fundamentally reshape the logic of global financial markets:

“Ten years from now, stablecoins will drive tokenization to become the mainstream medium for payments and settlement, eventually replacing traditional financial infrastructure. The trend of ‘good money driving out bad’ is irreversible — because stablecoins are more efficient, lower-cost, structurally simpler, and operate 24/7.”

Accordingly, Xiao Feng stated: “As China’s international financial center, Hong Kong must keep pace with — or even take the lead in — the development of stablecoins.”

He emphasized that Hong Kong’s introduction of the Stablecoin Ordinance, making it one of the first jurisdictions globally to complete stablecoin legislation — ahead of even the United States — represents a major milestone in the establishment of a global regulatory framework for stablecoins. The ordinance not only holds significant positive implications for Hong Kong’s local fintech ecosystem, but is also seen as a key lever for advancing the internationalization of the renminbi.

In this process, Hong Kong can serve as a “testing ground” for China’s stablecoin development. Through a pilot-first approach, it can accumulate institutional, operational, and risk-control experience, enabling timely identification of issues and refinement of mechanisms. This will help lay the policy and practical foundation for broader future adoption of stablecoins in mainland China.

Once the Hong Kong pilot reaches a relatively mature stage, it may be feasible to extend the model to selected mainland regions — such as the Hainan Free Trade Port, the Guangdong–Hong Kong–Macao Greater Bay Area, and the Shanghai Free Trade Zone — by connecting offshore yuan stablecoins via Free Trade (FT) accounts.

3.Hong Kong’s Regulatory Stance: Ordinance Details and Licensing Regime

As the primary testing ground for offshore RMB stablecoins, Hong Kong’s regulatory framework and its implementation progress have attracted significant attention. The Stablecoin Ordinance adopts a dual approach combining a licensing regime and a regulatory sandbox, establishing a high-barrier entry and ongoing oversight system for stablecoin issuance and related activities.

Following the ordinance’s passage, the Hong Kong Monetary Authority (HKMA) launched the Stablecoin Issuer Sandbox in March this year, inviting interested entities to participate in pilot programs under supervisory guidance. The goal is to communicate regulatory expectations and collect industry feedback in preparation for the full implementation of the licensing regime. This sandbox mechanism reflects Hong Kong’s pragmatic regulatory philosophy — testing ahead of formal rollout, enhancing dialogue with the market, and ensuring a smoother transition once new rules take effect.

According to the ordinance and accompanying guidance, any entity engaged in issuing or operating fiat-pegged stablecoins in Hong Kong must obtain a license from the HKMA. The regulatory scope covers issuance, administration, and active promotion of stablecoins. Licensed entities must comply with stringent requirements, including but not limited to:

Adequate Reserves and Asset Security:

Stablecoins in circulation must be fully backed by an equivalent amount of high-liquidity assets. Reserve assets must be denominated in the same currency as the pegged fiat (exceptions require prior approval) and must consist of low-risk assets such as cash or bank deposits. These reserves must be segregated from the issuer’s proprietary funds and held in structures such as trusts to protect the rights of stablecoin holders.Issuers are required to establish robust reserve management and risk control mechanisms. Independent auditors must verify reserve adequacy on a monthly basis, and issuers must publicly disclose information regarding the size and composition of reserves.

Stabilization Mechanism and Redemption:

Issuers are responsible for maintaining price stability and must establish effective mechanisms to ensure the durability and reliability of the stablecoin’s peg. Holders have the right to redeem their stablecoins at the pegged rate. Under normal circumstances, redemptions should be completed within T+0 to T+1 and must not be subject to excessive fees or unreasonable conditions.This requirement safeguards user expectations regarding stablecoin liquidity and helps mitigate risks of runs and liquidity crises.

Restrictions on Business Scope:

If a stablecoin issuer intends to expand into new lines of business, it must obtain prior approval from the Hong Kong Monetary Authority (HKMA) and demonstrate that it has sufficient resources and that the proposed activities will not pose material risks to its responsibilities as a stablecoin issuer.This requirement is designed to prevent issuers from engaging in high-risk ventures that could jeopardize the stable operation of the stablecoin.

Local Entity and Governance Requirements:

Applicants must be entities incorporated in Hong Kong and maintain a physical office in the territory. Key members of senior management — such as the CEO, executives, and directors — are expected to be based in Hong Kong to enable direct oversight by regulators.In addition, issuers must meet minimum capital requirements, proposed to be the higher of HKD 25 million or 1% of the total face value of stablecoins in circulation. Senior management must possess adequate knowledge and experience in relevant fields. Any changes in control or senior personnel must receive prior approval from the regulator.

Anti-Money Laundering and Cross-Border Compliance:

Eddie Yue, Chief Executive of the Hong Kong Monetary Authority (HKMA), has specifically emphasized that the anonymity and cross-border nature of stablecoins pose heightened risks of money laundering, terrorist financing, and other illicit activities. Issuers are therefore required to demonstrate robust capabilities in Know Your Customer (KYC) and Anti-Money Laundering (AML) compliance.

If a stablecoin business involves other jurisdictions, applicants must develop a comprehensive cross-border compliance framework to ensure that both the issuer and its partners hold the necessary licenses and comply with local laws in the relevant regions. Looking ahead, Hong Kong will also strengthen international regulatory cooperation through global platforms such as the Financial Stability Board (FSB) under the G20, in order to promote the sound and orderly development of stablecoin activities worldwide.

Hong Kong regulators clearly recognize that stablecoins represent both a window of innovation and a source of potential risk.Legislative Council member Duncan Chiu has sought to cool market expectations, emphasizing that stablecoins are not speculative instruments, but rather payment tools built on blockchain technology. They do not inherently possess appreciation potential. As one of the earliest international financial centers to introduce a stablecoin regulatory regime, Hong Kong aims to strike a balance — on the one hand, mitigating financial risks while leaving room for innovation; on the other, seizing the initiative to position Hong Kong as a global model for compliant stablecoin development, thereby supporting the digital and cross-border use of fiat currencies such as the renminbi.

At the same time, Hong Kong must closely monitor emerging risks to ensure that its regulatory and legal frameworks can respond effectively if problems arise.

Currently, stakeholders across Hong Kong are demonstrating an unprecedented combination of enthusiasm and rationality toward stablecoins. The government has expressed strong public support — via policy statements and other channels — for the development of regulated stablecoins in Hong Kong, and has encouraged public-private collaboration to explore their use in government payments, cross-border trade, and other practical scenarios. The Legislative Council is actively following up on the implementation details of the Ordinance, ensuring that two accompanying notices (including the definition of professional investors, among others) are passed smoothly. Meanwhile, the city’s financial community views the stablecoin framework as a new opportunity to further consolidate Hong Kong’s role as a leading international financial center.

4.Challenging Dollar Hegemony: What Are the Chances for a Yuan Stablecoin?

The emergence of an offshore RMB stablecoin inevitably brings it face-to-face with the grand question of whether it can challenge the dominance of the U.S. dollar. For decades, the dollar has occupied a central position in the global financial and payment system — and this supremacy extends into the crypto world. Today, nearly all of the top 10 stablecoins by market capitalization are pegged to the U.S. dollar, with a combined market size of around $258 billion, effectively making the dollar the de facto settlement layer for digital assets.

In contrast, the renminbi accounts for less than 3% of traditional cross-border payments. Can a new RMB stablecoin meaningfully disrupt this status quo?

Industry experts are now comparing the two from multiple angles — including payment efficiency, institutional trust, regulatory compliance, and cross-border interoperability.

Payment Efficiency

Cross-border payments remain riddled with inefficiencies — traditional wire transfers are slow, costly, and involve multiple intermediaries. Stablecoin technology is seen as a potential remedy for these pain points. Xiao Feng noted that stablecoins can multiply the efficiency of payments and settlements while drastically reducing costs and simplifying the process. “If a technology can cut costs to one-fifth and increase speed by a factor of five, it will inevitably have enormous vitality,” he said.

However, it is important to recognize that before the implementation of formal legislation, stablecoin-based payments were largely outside the scope of KYC and anti-money laundering (AML) regulations. The perceived efficiency advantage of using stablecoins for cross-border payments was, in part, due to a regulatory gap. As regulatory frameworks mature, compliance costs for stablecoin payments are also expected to rise.

This means that a yuan stablecoin may find it difficult to leapfrog the U.S. dollar purely through payment efficiency. The efficiency gap that once existed is narrowing, and challenging dollar dominance may require more than just technical speed.

Institutional Credibility

This dimension includes two key aspects: the credibility of the underlying fiat currency, and the transparency and reliability of the stablecoin’s issuance framework.

From the perspective of the anchor currency, the U.S. dollar — backed by the strength of the U.S. economy and its mature financial system — has long been regarded by global investors and official institutions as the most reliable store of value and unit of account. The notion that “the dollar equals trust” is deeply entrenched in the international system.

Although offshore renminbi usage has expanded in recent years, it remains constrained by China’s capital controls and the relatively limited global acceptance of the RMB. As a result, a stablecoin pegged to the renminbi will likely face a trust deficit in the eyes of international users when compared to dollar-pegged stablecoins such as USDT or USDC.

To earn a comparable level of confidence, China would need to strengthen market perceptions around the stability of its macroeconomic policy, the renminbi’s exchange rate, and its convertibility.As market observers have pointed out, several concerns continue to weigh on the adoption of RMB stablecoins. These include: Is the offshore renminbi (CNH) sufficiently convertible? Are the RMB exchange rate and policy environment subject to unpredictable risks? Such questions directly impact the willingness of overseas users to hold and use a yuan-backed stablecoin.

To address these concerns, Hong Kong’s regulatory framework has been carefully designed to bolster trust. Mandatory disclosures, independent audits, and qualified asset custody requirements are intended to ensure a high level of reserve transparency and fund security. In contrast, dominant USD stablecoins such as USDT have faced longstanding scrutiny over opaque reserve compositions — especially in earlier stages, when commercial paper accounted for a significant share of their backing.

If a renminbi stablecoin adheres strictly to the Hong Kong ordinance — maintaining 100% backing in cash or cash equivalents and publishing regular audit reports — it may, in fact, surpass some USD stablecoins in terms of reserve reliability, thereby boosting market confidence.Taken together, while challenging the dollar’s dominance in terms of trust remains a long and difficult journey, a well-regulated, transparent RMB stablecoin could help narrow the trust gap with its USD counterparts.

Compliance and Global Coordination

Dollar hegemony is not only rooted in the currency itself, but also in the United States’ ability to set and enforce global financial rules. The expansion of USD stablecoins is likewise supported by the reach of the U.S. financial system — large portions of their reserves are invested in U.S. Treasury securities, providing additional demand for U.S. government debt.

Against this backdrop, the launch of a renminbi stablecoin can be seen, to some extent, as an attempt to build an alternative outside the existing international financial framework. However, for such a stablecoin to gain widespread use, its compliance status and legal legitimacy must be recognized by regulators in multiple jurisdictions.

In this regard, Hong Kong offers a viable path forward. Given the city’s role as an international regulatory bridge, a licensed issuer of a renminbi stablecoin could first establish a credible track record under Hong Kong’s regime, and then seek to obtain equivalent licenses in jurisdictions such as Singapore or Europe. This would allow gradual integration into local compliance systems and significantly enhance the legal legitimacy of cross-border RMB stablecoin circulation.

In the future, it is also possible that RMB stablecoins licensed in Hong Kong may benefit from mutual recognition or regulatory exemptions in friendly jurisdictions — facilitating the “going global” strategy of the renminbi stablecoin.By contrast, many USD stablecoins currently operate in a regulatory gray zone in various countries and regions — some are deemed illegal, while others lack clear oversight. This presents both risk and opportunity:Non-U.S. markets may adopt a more open stance toward RMB stablecoins regulated by Hong Kong, or at least treat them more favorably than unregulated U.S. stablecoins.

Therefore, in the realm of global regulatory coordination, if RMB stablecoins can firmly anchor themselves in Hong Kong and gain support from regional financial centers — such as Singapore and Dubai — they stand a chance of building a cross-border compliance network. This could allow RMB stablecoins to coexist alongside USD stablecoins, gradually capturing a share of dollar-dominated transaction volume.

Network Effects and User Base

At its core, currency competition is a battle of network effects. One key reason for the U.S. dollar’s dominance is that it is used by everyone — whether in traditional trade, investment valuation, or emerging digital transactions. The larger the network, the stronger the advantage. USD stablecoins have ridden this trend, establishing dominance in the global crypto market and forming vast liquidity networks.

For example, USDT is widely accepted across global exchanges and over-the-counter (OTC) markets, and both merchants and individuals are accustomed to using it as a medium of value.

In contrast, RMB stablecoins are starting from a weaker network position. To challenge the dollar, they must rapidly expand their own ecosystem. On the upside, China is the world’s largest trading nation with deep supply chain integration. Many emerging markets maintain close trade ties with China. If RMB stablecoins can gain early traction in areas such as cross-border e-commerce and supply chain finance, they could quickly build real transaction demand and a strong user base.

Xiao Feng noted that China’s numerous small and micro cross-border merchants could be among the biggest beneficiaries of an RMB stablecoin. These merchants have long faced significant challenges in receiving and settling cross-border payments — challenges that stablecoins can greatly alleviate.In many emerging markets today, residents already hold USDT to hedge against local currency depreciation and capital controls, thereby expanding the dollar’s influence in these regions. If a compliant RMB stablecoin were introduced and approved by local regulators, the renminbi could likewise penetrate these markets in digital form, directly competing for ground currently dominated by the dollar.Of course, network effects are not built overnight. To win user adoption, an RMB stablecoin must not only offer reliable value, low costs, and efficient payment functionality, but also develop accessible user interfaces and broad acceptance scenarios — such as wallet integration, merchant acceptance, and fiat on/off ramps.

USD stablecoins are already seamlessly supported by global crypto wallets and trading platforms, whereas the RMB stablecoin still requires ecosystem development in this regard. That said, once regulatory hurdles are cleared, market forces will likely drive rapid integration of RMB stablecoins into wallets and exchanges. After all, for commercial platforms, supporting an additional sovereign stablecoin opens the door to a vast new user base.

In summary, while a renminbi stablecoin is unlikely to shake the dominance of the U.S. dollar in the short term, the launch of an offshore RMB stablecoin has already placed a critical piece on the chessboard of global digital finance.

In the long run, whether the RMB stablecoin can meaningfully challenge the dollar will depend on the pace of China’s financial liberalization and the level of international confidence in the renminbi.

Regardless of the outcome, the contest for monetary dominance between China and the United States has already begun — this time, on the new battlefield of stablecoins.

5. Other Potential Challenges for the RMB Stablecoin

Market Trust

Trust is the foundation of any widely adopted currency. While U.S. dollar hegemony is partly supported by political and military power, it is more directly underpinned by global confidence in the dollar’s liquidity and redeemability. For a renminbi stablecoin to earn similar levels of trust, it must establish credibility across multiple dimensions.

First is policy credibility. One concern among market participants is political risk — namely, whether RMB stablecoins might be subject to sudden restrictions due to shifts in geopolitical tensions or regulatory policy. For instance, in the event of escalating U.S.-China tensions, would the Chinese government impose limits on converting offshore RMB stablecoins into U.S. dollars, or mandate review of specific transactions? These uncertainties could deter international users.To address such concerns, Chinese regulators should maintain transparency and consistency in policy, and clearly communicate the regulatory boundaries and level of support for RMB stablecoins — thereby reducing unnecessary market anxiety.

Second is operational credibility. Issuers must build a reputation for sound governance. For example, reserve funds should be custodied with internationally reputable banks, and audits should be conducted by globally recognized firms to enhance investor confidence. Hong Kong’s plan to initially license only a small number of well-capitalized and qualified institutions reflects this logic: selecting the best to set a standard for the market.

Geopolitical Pressures

As an innovation implicitly aimed at challenging the dollar’s dominance, the RMB stablecoin is inevitably subject to the dynamics of international geopolitical competition. It is foreseeable that the United States may view such developments with growing suspicion.If the RMB stablecoin begins to capture a meaningful share of global capital flows, the U.S. could respond with countermeasures. These might include prohibiting American companies and financial institutions from participating in the RMB stablecoin ecosystem, lobbying allies to reject RMB stablecoin payments, or even pressuring traditional financial infrastructure — such as SWIFT — not to cooperate with offshore RMB clearing banks involved in the stablecoin network.

Such scenarios are not far-fetched. The U.S. has previously sanctioned banks in countries like Iran and removed them from the SWIFT system. It is not inconceivable that digital currencies could one day be added to the same sanctions toolkit.

In conclusion, the offshore RMB stablecoin embodies a renewed vision for the internationalization of the renminbi, while also facing a complex and evolving set of challenges.From safeguarding domestic financial security to navigating international monetary rivalry, from ensuring technological robustness to cultivating user adoption — every step must be taken with caution and strategic clarity.The emergence of an RMB stablecoin is not about disrupting dollar dominance overnight. Rather, it marks the beginning of a long-term campaign — one in which the renminbi, through this new digital vehicle, seeks to expand its usage and global recognition, particularly in the digital economy and emerging markets.

In the years ahead, we may not witness the outright replacement of the U.S. dollar. But what we could see is the gradual erosion of its unipolar dominance. A future where the dollar, euro, and renminbi — each represented by compliant sovereign stablecoins — compete and coexist, driving the global monetary system toward a more diversified and balanced structure.

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