jakiro
Author:Charlie Liu
While Wall Street and Silicon Valley are immersed in the warm atmosphere of the Thanksgiving long weekend, perhaps the last big news about stablecoins this year came from across the ocean in Beijing.
Last Friday, the central bank led 13 major national ministries and commissions to convene a coordination mechanism meeting to crack down on virtual currency trading speculation.The core spirit of the media release after the meeting is very clear, that is, virtual currency-related business activities are illegal financial activities, and stable coins are clearly defined as a type of virtual currency and must not be used as currency in the market.
For readers who have been paying attention to the mainland market, this argument is all too familiar: the 2021 policy documents are still valid, the red lines have not been loosened, and have even been drawn more clearly.Whether it is Bitcoin or various air coins, especially the stablecoins that are very popular this year, they are all included in the frame of “illegal financial activities” and continue to be the focus of financial security.
If your life and work are mainly in the Mainland, the conclusion is actually very simple: just don’t touch it.
But for the majority of friends who are involved in overseas business or whose work focus is overseas, it is actually worth thinking a little more.
Since the beginning of this year, the U.S. Congress has passed the federal-level Stablecoin Act, the GENIUS Act, incorporating “payment stablecoins” into a unified national regulatory framework; in Hong Kong, the Stablecoin Ordinance has officially come into effect on August 1, and applications for fiat currency-anchored stablecoin licenses have begun to be accepted.Stablecoins are positioned in the two financial centers of the East and West as “financial infrastructure that is conditionally incorporated into the compliant payment system”, rather than simply being treated as a “currency circle toy”.
The same type of tools are “targeted for severe crackdowns” on the mainland, but are “key regulations + corrections” for opening up financial markets globally.In this contrast, the inconspicuous sentence in the central bank’s press release—“closely tracking and dynamically evaluating the development of overseas stablecoins”—is worthy of our careful scrutiny.
Considering that we are in a complex global political and economic situation, as well as the wave of technological and financial disruption brought about by AI and crypto, what we need to think about is,At a stage where stablecoins are rewriting the global payment landscape and digital dollars have penetrated into the financial systems and daily economic lives of many countries, what kind of monetary boundary is China drawing?
Thoughtful red lines
From a macro and regulatory perspective, the mainland’s financial market needs this red line.
In the past ten years, we have suffered too much from the word “financial innovation”.Shadow banking, P2P, campus loans, pseudo-mutual asset management, financialization of education and training… The beginning of each round of stories is very moving: inclusive finance, technological empowerment, and improved efficiency.The end of the story often backfires: systemic risks, local social events, and trust that cannot be repaired for a long time.
In this context, as long as something satisfies several things at the same time – high volatility, high leverage, low entry threshold, and technically difficult to completely penetrate – the regulatory intuition must be to “tighten it first and then talk about it.”And virtual currency just accounts for them all.
From defining Bitcoin as a “virtual commodity” in 2013, to halting ICOs and financial institutions’ involvement in 2017, to ten departments jointly issuing a document in 2021 to completely ban trading and mining, this line has been tightening.What this meeting did was to make up for this trajectory:Stablecoins are also clearly included in the virtual currency box and named separately.
Why even include stablecoins?This year’s global stablecoin craze has made everyone see these two core characteristics of it.
First, stablecoins are more “money-like” and therefore more sensitive.
When ordinary people look at Bitcoin, they will naturally feel a sense of distance due to the high volatility and obscure technical threshold.But looking at stablecoins like USDT and USDC that carry the slogan “1:1 USD on the chain”, it is easy to equate them to currencies.But the problem is that its essence is not currency, but a form of circulation/expression of currency.
And since it can be seamlessly connected with bank accounts, wealth management products, and cross-border payment systems, once problems such as reserve fraud, runs, and runs occur, the speed and scope of transmission to the real financial system will be far beyond that of a purely speculative asset.
Second, stablecoins naturally have “cross-border” attributes.
It is technically a string of digital symbols that can be transferred between global nodes at any time.If we ignore it and let it go, especially in today’s unprecedentedly complex and stressful period of the onshore financial system – real estate deleveraging, local debt, shadow banking, platform economy – and then add a large-scale asset class whose prices fluctuate with external sentiments and can bypass some traditional controls, the complexity of the system will rise to a higher level.
Under such constraints, reaffirming that “the policy document is still valid”, clarifying the nature of stablecoins in mainland China, and classifying them into the column of “illegal financial activities” are, to put it bluntly, reducing the burden on this already difficult macro game.
From this perspective, the red line in the Mainland is not an impulse, but a realistic choice to reduce the probability of chaos getting out of control.
A tendency independent of will
The problem is, the outside world won’t hit the brakes just because we stop.
Judging from the mainstream representatives of the financial and technology axis in Europe and the United States: Visa, JPMorgan, and SWIFT, stablecoins in the past year have heralded the restructuring of clearing and payment networks, and even banking and investment systems.Stablecoins and tokenization will be the new bottom layer of the global financial system.
In the United States, the core of the GENIUS Act is a balance similar to that of the maritime law system:Not only did they admit that stablecoins had grown too big to disappear, but they also didn’t want them to continue to grow wildly in the regulatory vacuum, so they simply included “payment stablecoins” with a clear framework..Who can issue, how much, what the underlying assets must be, how to audit, and how to disclose are all written into the law.
From that moment on, the U.S. dollar stablecoin was officially upgraded from “grey innovation” to “new infrastructure running on a compliance track.”For banks, payment institutions, and technology platforms, stablecoins are no longer just crypto-native toys (native people on the chain), but a payment tool that can be connected to their own systems in compliance with regulations.
What’s more interesting is,Emerging markets have given stablecoins a fertile ground that no one expected.
In countries such as Argentina, Turkey, Venezuela, and Nigeria with high inflation, long-term exchange rate pressure, and frequent foreign exchange controls, many ordinary people have no time to discuss the logic of currency prices. What they face is another set of realities: how to maintain purchasing power as much as possible after wages are paid.For this group of people, opening an “on-chain USD account” on their mobile phone is an option with the lowest threshold, controllable cost, and not too restricted by the local banking system.
In major labor-exporting countries such as the Philippines, as well as major remote work countries such as Argentina, Brazil, Nigeria, and Romania, stablecoins are increasingly appearing in cross-border remittance channels.Overseas workers use USDT to send money back home, and local licensed institutions can implement it in the legal currency world, or directly hold the associated wallets of offshore exchanges – the remittance cost and arrival speed are often more friendly than traditional channels.
Put these pieces together, and you will find a reality that is hard to avoid: Based on the two simple but necessary functions of payment and value storage, stablecoins have become the “de facto digital dollar infrastructure” in many countries.
From China’s perspective, what’s really worthy of concern about this matter is not “how many people use it to speculate in currencies and make a fortune”, but:When the digital dollar has penetrated the capillaries of overseas markets relying on the Internet, how will the RMB prepare to occupy the market and minds in the same organic ecosystem?
The deep meaning of “dynamic evaluation of overseas stablecoins”
Let’s look back at the sentence “Closely track and dynamically evaluate the development of overseas stablecoins.”
There are actually two core points here:
The first one is“overseas”.
The second one is“evaluation”.
The word “outside the country” first draws the boundary of the space to death: it cannot be done within the country.Virtual currency-related businesses are illegal financial activities, and the same is true for stable coins. They do not have the legal status of currency and cannot be circulated and used in the market.The meaning of this sentence to related industries in the mainland is actually very simple and crude: don’t have any illusions within the red line.
“Assessment” has another meaning.It indirectly acknowledges one thing: This overseas stable currency infrastructure has already grown up and is related to our interests – whether it is Hong Kong, the Belt and Road Initiative, or Asia, Africa and Latin America in a broader sense – a simple and arbitrary “don’t see, don’t listen, don’t touch” is irresponsible for the future of this big country.
Hong Kong is a very direct window.After the Stablecoin Regulations came into effect, the issuance of fiat-anchored stablecoins was included in the Hong Kong Monetary Authority’s licensing system. There are rules to follow for who can issue, how to issue, and how they will be subject to prudential supervision after issuance.
From the perspective of the central government, this is simply the “Xiaogang Village” 40 years from now: you can see whether the compliance framework can block most mines, how banks, payment institutions and stablecoin issuers compete, whether users can accept the experience, and whether the connection with Wall Street and London can resist external risks.
Looking further outward, nodes along the Belt and Road, such as the Astana International Financial Center in Kazakhstan, also have our stablecoin test fields.Can offshore RMB-denominated stablecoins be used in trade settlements between local and Chinese companies to effectively reduce exchange rate fluctuations and cross-border costs?
Or, as I imagined in my previous article, can the linkage with the export of electricity and AI computing power create a new closed loop for the circulation of offshore RMB stable coins?
These issues cannot be deduced by just deducing them in the conference room. All the black and white cats must be let out for a run.
At that time, the reform and opening up was first conducted in Shenzhen, Pudong and several special zones to see if it could be promoted; today, in Hong Kong and in the financial centers of some friendly countries, “digital renminbi related tools under supervision, offshore renminbi stable coins, and their interaction with US dollar stable coins” will be tried first, and then we will see whether certain practices should be pushed forward in the future.
Therefore, I prefer to understand it as a dual-track arrangement:
On the one hand, there is a clear attitude towards the domestic territory – this line will not waver just because of the excitement outside;
On the other side, there is a calm judgment about foreign countries——The digital dollar is already on the way, and the RMB cannot afford to lose in the future currency war..Then all we can do is to conduct serious research and experiments without touching our own bottom line, and cross a new river by feeling the stones.
Conclusion: Determination within the red line, courage beyond the blue
Since the beginning of this year, I have been chatting with many overseas teams, financial institutions, and overseas investors, and everyone is surprisingly consistent in one judgment:The emergence of stablecoins means that we no longer just have one more currency, but have quietly become a new global financial base.
For the United States, it is the dollar chain or even the chain of everything, and it is the next level expansion of the dollar system.
For many emerging market countries, it is a tool for citizens to hedge their currency risks and make up for the shortcomings of local financial infrastructure.
For China, it is an unavoidable multiple-choice question – we cannot simply relax domestic policies, but if we are absent for a long time abroad, we will also have to pay the price.
From the perspective of someone who is engaged in macro, overseas, and financial technology, I understand and respect the mainland’s choice to maintain this red line at the current stage.
Behind this line is an economy that is digesting excess production capacity, dealing with local debt, facing the sequelae of real estate and a turning point in demographic structure, and is highly sensitive to systemic risks.
But at the same time, if we don’t even have the courage and imagination to “stand on the same playing field as the digital dollar” in overseas compliance scenarios, the impact may be more profound than any policy tightening.
So this is the “dual mandate” before policymakers in the new era:
Within the red line, maintain stability; outside the blue ocean, strive for options.
