Is it too late for the "old money" in the mainland to enter the stablecoin market?

In recent years, stablecoins have been moving from a niche in the encryption asset sector to the forefront of global financial infrastructure development. On May 21, the Hong Kong Legislative Council passed the "Stablecoin Ordinance Draft," and on June 17, the U.S. Senate passed the "Guidance and Establishment of the U.S. Stablecoin National Innovation Act" (referred to as the "GENIUS Act"). For a time, stablecoins became a hot topic in the financial circle.

A number of forward-looking enterprises have begun exploring the intersection of "compliant digital finance" and "stablecoin universal payments." Companies such as JD Finance and Yuan Coin Technology have already started on-chain payment and stablecoin scenario exploration, while Standard Chartered Bank, ANRI International, and Hong Kong Telecommunications in Hong Kong have also jointly launched a compliant stablecoin payment network, providing an important paradigm for the transformation of the financial industry in the future. Today, Sister Sa will take the cases of these three "pioneers" as a starting point to discuss the challenges and responses that traditional financial institutions in mainland China may encounter in the wave of stablecoins and how to fully leverage their latecomer advantages to catch up with this trend.

01 Current Basic Situation of the Three Groups (Families) of Stablecoin Businesses

JD Coin Chain Technology focuses on cross-border payments and supply chain finance, with clear application scenarios for stablecoins and a close integration with payment services. According to remarks by JD Coin Chain Technology CEO Liu Peng, the JD stablecoin is a stablecoin based on a public chain and pegged 1:1 with fiat currencies such as the Hong Kong Dollar (HKD) or US Dollar (USD). The first phase tentatively plans to issue stablecoins pegged to the Hong Kong Dollar and US Dollar, with specific situations adjusted based on regulatory and market demand. Currently, there has been no formal issuance, and it has entered the second phase of sandbox testing, primarily targeting retail and institutions with mobile and PC application products. The testing scenarios mainly include cross-border payments, investment transactions, and retail payments. The aim is to enhance the efficiency of capital flow between enterprises and enable currency exchange between global companies through stablecoin licenses, thereby reducing the costs of global cross-border payments.

Yuan Coin Technology plans to issue the Hong Kong dollar stablecoin HKDR, which is pegged 1:1 to the Hong Kong dollar, using Ethereum as the underlying blockchain. It will utilize smart contracts to automatically execute the issuance and redemption mechanisms, ensuring that each stablecoin is backed by sufficient fiat reserves. Users can exchange HKDR for fiat through compliant exchanges or payment platforms, facilitating efficient capital flows. The reserve assets for HKDR consist of highly liquid assets held in independent accounts at licensed financial institutions, and transparency is ensured through regular third-party audits, fully complying with Hong Kong's "Stablecoin Regulations". The characteristics of Yuan Coin Technology's stablecoin construction include a flexible compliance structure design and support for RWA scenario implementation. The goal is to create a regulated and scalable stablecoin system to serve the needs of cross-border settlement, asset trading, and the digital transformation of financial institutions.

Standard Chartered Bank, Animoca Brands, and Hong Kong Telecommunications (HKT) have jointly established a joint venture to participate in the Hong Kong Monetary Authority's "stablecoin issuer sandbox," working together to promote a compliance stablecoin pegged to the Hong Kong dollar. The project leverages the strengths of the three parties: Standard Chartered provides bank-grade fund custody and risk control, fully utilizing its strong financial strength and rich operational experience; Animoca Brands contributes Web3 technology (especially in the blockchain field); while Hong Kong Telecommunications is responsible for leveraging its advantages in communication resources to promote the integration of mobile wallets and payment scenarios, aiming to improve the efficiency of cross-border and local payments, serve institutions and individual users, and achieve the widespread application of stablecoins in the Greater Bay Area and Hong Kong's financial ecosystem.

02 Impact of the Stablecoin Wave on Traditional Financial Institutions in Mainland China

The financial model of stablecoins differs significantly from that of traditional finance, possessing a series of characteristics that traditional financial models lack, which will inevitably bring a substantial impact on the business of traditional financial institutions in mainland China.

First of all, stablecoins, with their on-chain real-time settlement, low cost, and high efficiency characteristics, are challenging the bank-dominated traditional payment systems, weakening their monopoly in cross-border payments, clearing, and intermediary services.

Secondly, the blockchain technology that stablecoins rely on has capabilities such as asset programmability and automatic execution of smart contracts, promoting the evolution of financial assets towards tokenization and challenging the traditional account systems and custody models of banks.

Finally, the widespread application of stablecoins is often accompanied by the rise of decentralized architectures and new financial ecosystems, giving birth to a large number of "non-bank institutions" as financial innovation entities, which poses a risk of marginalization for banks. Especially in offshore markets for the Renminbi in Hong Kong, Macau, and Southeast Asia, stablecoins are expected to become an important complementary tool for the internationalization of the Renminbi.

03 The Real Challenges for Mainland Traditional Financial Institutions to Catch Up with the Stablecoin Trend

Even though aware of the value and trend of stablecoins, traditional financial institutions in mainland China still face many practical obstacles in "catching up with the trend," mainly stemming from the immaturity of the related government regulations and standards.

On one hand, the People's Bank of China has always adopted a prudent, even "closed-loop regulation" attitude towards stablecoins and encryption assets. Although DC/EP (Digital Currency/Electronic Payment) has made progress, there is still a lack of a clear compliance path for market-oriented anchored stablecoins. This makes it difficult for banks to directly participate in the design, issuance, and trading of stablecoins. The thriving development of stablecoin businesses in places like Hong Kong and Singapore is mainly due to the regulatory "sandbox" mechanism, which provides protection and a trial-and-error environment for fintech experiments. In contrast, the mainland financial regulatory system has yet to establish a similar mechanism, leading to high innovation costs and potentially further triggering compliance risks.

On the other hand, the greatest value of stablecoins lies in "cross-border payments" and "on-chain asset circulation". However, there are still significant restrictions on capital flows in mainland China, with strict regulations on the direction of funds, making it difficult for many stablecoin models to achieve a "closed-loop circulation" locally.

04 Transformation Ideas and Suggestions for Traditional Financial Institutions in Mainland China

The wave of stablecoins cannot be avoided, and the key to riding this wave lies in clarifying one's own positioning and actively planning. The Sa Sister team believes that, amidst the current wave and impact of stablecoins, traditional institutions in the mainland can adopt the following transformation strategies:

(1) Starting from B-end industry payments, reconstructing the enterprise clearing and settlement network

As shown by JD Finance, by introducing quasi-stablecoin tools into the payment of the industrial chain, it is possible to bypass the high regulatory pressure on the C-end (consumer end), form efficiency advantages on the B-end (merchant end), and accumulate experience for the subsequent landing of stablecoin business on the C-end after regulatory relaxation. Taking the industrial financial scenario as a breakthrough, stablecoins can be developed as "accounting units" under the alliance chain architecture, supporting scenarios such as supply chain finance, warehousing procurement, and inter-company payment terms, gradually transitioning to more complex on-chain asset services when the time is right.

(2) Strengthen collaboration between technology companies and fully leverage technology empowerment

In an interview with the 21st Century Economic Report, Liu Yu, CEO of Yuan Coin Technology, candidly stated that the core management team of Yuan Coin Technology integrates members from various backgrounds, including those from major internet finance companies and traditional banks, which can provide experience in compliance and risk control. Many core members also have web3 experience, as stablecoins connect the fiat world with the digital currency world, so it is essential to be able to speak "the language of both worlds." As practice has shown, traditional financial institutions can collaborate with stablecoin technology companies through investments, alliances, and SPV partnerships to participate in pilot projects with lower risks, empower stablecoin businesses with technology, and gradually gain technical initiative.

(3)** Actively carry out pilot projects in Hong Kong and Macau to further promote cross-border cooperation**

Referring to the path of international banks like Standard Chartered, mainland institutions can establish subsidiaries or joint laboratories in Hong Kong to promote stablecoin payments, settlements, and asset tokenization in the Hong Kong-Macau "regulatory sandbox", and then support mainland operations under the guise of serving foreign capital. They can fully utilize the financial opening policies of Hong Kong and Macau to connect with companies like Standard Chartered and Yuanbi Technology that have infrastructure, promote pilot projects for tokenized deposits and stablecoin payments, learn advanced experiences from relevant enterprises, and prepare for the development of mainland businesses.

Overall, despite numerous challenges, financial institutions in the mainland still have a way to "catch up with the trend." The key lies in recognizing their positioning, progressing in steps, actively cooperating, and launching pilot projects as soon as possible. However, it is important to note that this must be done within a compliant framework and must not violate the existing regulatory system in the mainland, otherwise the costs will outweigh the benefits.

05 Final Words

If the past financial system was a "water supply system", primarily focused on liquidity, then the stablecoin system is more like an "electricity system": efficient, programmable, and capable of cross-border reach. Traditional financial institutions in mainland China cannot and should not miss this infrastructure revolution in the financial sector. JD Finance, Yuanbi Technology, and the Hong Kong tripartite cooperation have already provided practical references for mainland financial institutions. The wave of stablecoins has arrived, and the key lies in whether we have the courage to fundamentally reconstruct the underlying mechanisms, rather than just being a "bank on the chain". Besides courage, we must also maintain a clear mind, with everything being legal and compliant as a prerequisite.