Beijing Pressure Forces Chinese Tech Firms to Suspend Stablecoin Projects

Chinese tech firms have put their plans to issue stablecoin in Hong Kong on hold after clear instructions from Beijing. These tech firms, including Ant Group and JD.com, had indicated interest earlier in the year to join in launching stablecoin or tokenized financial products.

Beijing Seeks Clarity Over Stablecoin Coinage Rights

However, as per the report, the People’s Bank of China (PBoC) and the Cyberspace Administration of China (CAC) are concerned about proprietary rights. The regulatory bodies want clarification on who has the ultimate right of coinage. This could be because of the PBoC’s launch of digital yuan.

According to sources familiar with the suspension, both the People’s Bank of China and the Cyberspace Administration of China are interested in who owns what. The regulators want a clear answer to the question, “Does the coin belong to the central bank or any private companies on the market?”

This concern is capable of slowing the process and true nature of crypto operations, which thrives on decentralization.

The authorities are, however, concerned as they believe that without a clear regulatory framework, malicious actors could leverage crypto assets for fraud.

Hong Kong Regulators Warn of Rising Stablecoin Risks

Notably, Hong Kong Securities and Futures Commission (SFC) executive director Ye Zhiheng has cautioned that the city’s stablecoin regulation makes it prone to fraud risk. His comments were sparked by the double-digit losses stablecoin companies suffered shortly after the regulation became operational.

The Chinese authorities are uncomfortable with digital currency growth and the expansion of offshore digital asset ventures. In September, several companies were allegedly directed to suspend their real-world asset (RWA) tokenization plans in Hong Kong.

The directives follow a pattern that has raised concerns among market watchers, particularly as tokenization was gaining traction in the region. Within the last 14 days, a Hong Kong-based arm of China Merchant Bank had tokenized its $3.8 billion money market fund on Binance Chain.

Yuan-Backed Stablecoins Could Be Beijing’s Strategic Alternative

Interestingly, China’s State Council had in August hinted at the possibility of allowing the use of yuan-backed stablecoins. This is targeted at strengthening the global use of the Chinese fiat and turning attention away from the U.S. dollar.

Financial experts consider this as a possible fallout of the geopolitical tension and trade war between Washington and Beijing.