The development of digital currencies is rapidly reshaping the global financial landscape. With blockchain and distributed ledger technologies gaining momentum, central bank digital currencies (CBDCs) and stablecoins are emerging as pivotal innovations. In a recent speech at the 2025 Lujiazui Forum, PBOC Governor Pan Gongsheng emphasized both the transformative potential and regulatory challenges posed by these technologies. As Hong Kong’s Stablecoin Ordinance prepares to take effect on August 1, discussions around stablecoin regulation—and particularly RMB-denominated stablecoins—are reaching new heights.
This moment presents a strategic opportunity: to explore a coordinated, "inside-outside integration" model for launching renminbi (RMB) stablecoins that bridge mainland China's controlled financial environment with Hong Kong’s open-market dynamics. Such an approach could enhance financial innovation, strengthen monetary sovereignty, and accelerate RMB internationalization—all while maintaining regulatory oversight and systemic stability.
The Case for a Hybrid RMB Stablecoin Strategy
Traditionally, offshore RMB activities have centered on Hong Kong, with secondary hubs in Singapore and London. These markets facilitate RMB-denominated trade, investment, and financing outside mainland jurisdiction. Meanwhile, onshore "offshore" operations—such as those within Free Trade Zones (FTZs)—allow for controlled capital mobility under strict account-based management systems.
Conventional thinking suggests piloting offshore RMB stablecoins in Hong Kong first, then gradually extending into domestic FTZs. However, Web3.0’s decentralized architecture transcends traditional geographic and regulatory boundaries. A siloed approach risks fragmentation and inefficiency.
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Instead, a synchronized development model—simultaneously advancing onshore-offshore (CNYC) and offshore (CNHC) RMB stablecoins—offers a more strategic path forward.
Why Integration Matters
- Monetary Sovereignty and Financial Security: With dollar-backed stablecoins like USDT and USDC dominating global crypto transactions, China must proactively shape its own digital currency ecosystem. Waiting for market-driven offshore solutions risks ceding control over RMB digitization.
- Scale Limitations in Hong Kong: While Hong Kong hosts the largest offshore RMB pool, it may lack sufficient liquidity to sustain a scalable, 1:1 reserve-backed RMB stablecoin without mainland support.
- Regulatory Synergy: Coordinating between mainland regulators and Hong Kong’s Securities and Futures Commission enables unified standards for anti-money laundering (AML), know-your-customer (KYC), and asset custody—critical for building trust in any stablecoin system.
Building the Onshore-Offshore Stablecoin Framework
Shanghai’s Free Trade Zone, established in 2013, has evolved into a testing ground for international financial reforms. With recent central bank initiatives—including offshore trade finance pilots in Lingang New Area—the stage is set for launching regulated RMB stablecoin experiments.
Model 1: Consortium-Based Issuance in Shanghai FTZ
A dedicated stablecoin issuing entity could be formed by a consortium of:
- Major clearing institutions
- Large commercial banks
- Leading payment platforms
- Reputable investment firms
This entity would issue CNY Coin (CNYC) on a permissioned blockchain, maintaining full reserves in RMB cash, short-term government bonds, and potentially digital RMB (e-CNY). Distribution would occur through a two-tier model:
- Wholesale layer: Authorized institutions (e.g., e-CNY operators) receive CNYC in bulk.
- Retail layer: These entities distribute CNYC to qualified enterprises and individuals.
Model 2: Direct Issuance via Digital RMB Operators
Alternatively, selected digital RMB operators could mint CNYC directly on-chain through their Shanghai FTZ branches. This leverages existing CBDC infrastructure and compliance frameworks, ensuring tighter integration with national monetary policy.
While some overseas banks are exploring tokenized deposits as stablecoin alternatives, these differ fundamentally in governance and redemption mechanisms. A true RMB stablecoin requires clear legal backing, transparent reserves, and enforceable redemption rights.
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Ensuring Compliance and Control
Regardless of issuance model, several core requirements must be met:
- Full Reserve Backing: Assets must include high-liquidity instruments such as RMB deposits, treasury bills, and digital RMB to ensure stability and interoperability with the broader monetary system.
- Robust Risk Management: Issuers must implement comprehensive internal controls, asset segregation, custodial safeguards, and real-time monitoring systems.
- Targeted Accessibility: Drawing from the FTZ’s “electronic fence” (e-fencing) model, access to CNYC should be limited via smart contracts to pre-approved entities—ensuring compliance without sacrificing efficiency.
Expanding Offshore: The Role of CNHC
For offshore use, CNH Coin (CNHC) could be issued under Hong Kong’s regulatory framework through two pathways:
- Joint ventures between mainland and Hong Kong institutions
- Local subsidiaries of authorized mainland banks or payment providers
CNHC would serve multiple purposes:
- Facilitating efficient cross-border trade settlements
- Supporting tokenized real-world assets (RWA) denominated in RMB
- Enabling compliant DeFi and tokenized commodity trading
Over time, a two-way conversion mechanism between CNYC and CNHC could be developed, mirroring existing CNY/CNH exchange arrangements but enhanced by programmable logic and real-time settlement.
Toward a Unified Digital RMB Ecosystem
To maximize impact, this dual-track strategy should align with broader financial digitization goals:
- Interoperability: Integrate CNYC and CNHC with digital RMB and tokenized bank deposits.
- Global Standards: Contribute to international frameworks like the BIS’s proposed Finternet—a “financial internet” built on unified ledgers.
- Legal Clarity: Accelerate domestic legislation governing stablecoin issuance, custody, and liability to strengthen China’s voice in global rulemaking.
As noted by the Bank for International Settlements, current stablecoins fall short in singleness (clear identity), elasticity (supply responsiveness), and integrity (fraud resistance). Any RMB stablecoin initiative must prioritize these dimensions from inception.
FAQ: Addressing Key Questions
Q: What is the difference between CNYC and CNHC?
A: CNYC refers to an onshore-offshore hybrid stablecoin issued within mainland pilot zones like Shanghai FTZ, while CNHC is fully offshore, issued under Hong Kong law for international use.
Q: Can individuals hold RMB stablecoins?
A: Initially, access will likely be restricted to qualified institutions and businesses. Individual participation may expand later under strict KYC/AML protocols.
Q: How will reserves be audited?
A: Independent third-party audits combined with on-chain transparency tools will ensure 1:1 backing. Regulatory authorities may also conduct real-time monitoring.
Q: Is this the same as digital RMB?
A: No. Digital RMB is a sovereign CBDC issued by the PBOC. RMB stablecoins are privately or semi-publicly issued tokens pegged to the RMB, operating alongside—but not replacing—e-CNY.
Q: Could this challenge the US dollar’s dominance?
A: While not an immediate replacement, a well-designed RMB stablecoin ecosystem can enhance the currency’s global utility in trade, investment, and Web3 finance.
Q: What prevents illicit use?
A: Smart contract controls, identity verification layers, and cross-jurisdictional supervision between mainland and Hong Kong regulators will mitigate risks of money laundering or unauthorized flows.
By pursuing a coordinated, risk-controlled strategy that integrates onshore innovation with offshore reach, China can position itself at the forefront of the digital currency revolution—turning technological disruption into strategic advantage.