China halts stablecoins? Wang Yongli's explanation may not be enough

Author: Zhang Feng

Recently, discussions around the regulation and development path of stablecoins have been heating up among China’s industry, policy, and academic circles. Wang Yongli, former Vice President of the Bank of China, publicly stated that China should be wary of stablecoin risks, emphasizing that it is “not appropriate to vigorously develop stablecoins pegged to legal tender.” His views have drawn significant attention within the industry.

In today’s fast-evolving global digital currency competition, viewing stablecoins solely from a risk prevention perspective may cause us to miss a critical strategic window. In light of the recent inter-ministerial coordination meeting on virtual currency and related policy logic, China’s approach to the stablecoin issue may require a more comprehensive, flexible, and forward-looking perspective.

1. Room for Non-USD Stablecoin Development: Focus on Ecosystem, China Still Has Advantages

Wang Yongli believes the stablecoin market is already dominated by USD stablecoins and that the space for non-USD stablecoins is limited. However, this assessment overlooks the “ecosystem attribute” of stablecoins. The value of stablecoins lies not only in their stability pegged to a fiat currency but also in the payment scenarios, financial infrastructure, and business ecosystems they support.

China boasts the world’s most complete manufacturing supply chain, the largest e-commerce network, and leading mobile payment penetration. In areas such as cross-border trade settlement, supply chain finance, and cross-border e-commerce payments, it is entirely possible to develop a stablecoin backed by the RMB and carried by the Chinese business ecosystem, forging a new path distinct from the USD system. Especially along the “Belt and Road” and within the Regional Comprehensive Economic Partnership (RCEP) region, there is strong demand in the real economy for efficient, low-cost digital payment tools, providing fertile ground for an RMB stablecoin.

Rather than saying “there’s little room,” the key lies in whether China can convert its real economy network advantage into a digital currency ecosystem advantage. Abandoning exploration simply because USD stablecoins currently lead the market would be tantamount to handing over future rights to set digital financial rules.

2. U.S. Stablecoin Legislation: Challenges Remain, but Overseas Competition Has Begun

Wang Yongli argues that U.S. stablecoin legislation still faces many issues and challenges. Indeed, the U.S. is at the forefront of stablecoin legislation, with state and federal regulatory frameworks gradually taking shape. The legislative process has exposed problems such as fragmented regulatory authority, high compliance costs, conflicts with the existing banking system, and unresolved balances between consumer protection and systemic risk.

Observing and letting the U.S. take the lead to learn from its trial-and-error experience is a rational choice for China. However, this does not mean we should be content merely to watch. Stablecoin competition is, at its core, global market competition. Particularly in overseas and offshore scenarios, the acceptance of different stablecoins depends on their convenience, credibility, and ecosystem partnerships.

China can, without opening its domestic market, support Chinese institutions in issuing and applying RMB- or multi-currency-pegged stablecoins in overseas markets compliant with local laws, competing with mainstream international stablecoins. For example, in financial centers such as Hong Kong, Singapore, and the Middle East, China could promote compliant RMB stablecoins in trade finance, asset transactions, and other scenarios, accumulating experience and a user base.

3. Legislative Backlash Risks: Mainland Cautious, Hong Kong Leads, Flexible Deployment

Wang Yongli believes that stablecoin legislation could seriously backfire on stablecoins. The implication may be that if China legislates on stablecoins, it could inadvertently fuel their disorderly expansion and even threaten the existing monetary system. While this concern has some merit, completely avoiding regulation and innovation is not the best approach.

China’s policy choices have already shown flexibility: the mainland remains cautious about private stablecoins and has not opened related businesses, while Hong Kong is actively developing regulatory frameworks for stablecoin issuance, attempting to issue a “HKD stablecoin” and exploring digital asset trading. This differentiated arrangement under “One Country, Two Systems” creates a flexible testing ground.

As an international financial center with sound rule of law and free capital flow, Hong Kong provides a sandbox for stablecoin regulation, enabling the accumulation of regulatory experience while containing risk spillover to the mainland. If successful, it can inform mainland policy; if significant risks arise, mainland financial stability remains unaffected. Thus, fears of legislative “backlash” may underestimate China’s flexibility and risk management in institutional design.

4. To Follow or Not? Stablecoins Belong to No Country—Ecosystem Determines Ownership

Wang Yongli’s view that “China should not follow the U.S. stablecoin path” assumes stablecoins inherently have strong American attributes. In reality, as a technology-driven financial instrument, stablecoins derive their attributes largely from their issuers, use cases, and governance structures.

Even a USD stablecoin, if issued by a non-U.S. institution and widely adopted in a particular region, will see its benefits and influence decentralized accordingly. In other words, “whoever issues the stablecoin owns the ecosystem.” For example, if an Asian financial institution issues a USD stablecoin widely used in Asian trade, that stablecoin primarily serves regional economic circulation, not necessarily strengthening U.S. monetary hegemony.

For China, the key is not whether to “follow” any particular path, but whether it can, based on its own needs and development stage, build an independently controllable, internationally compliant stablecoin product and ecosystem. For example, the digital RMB (e-CNY) as legal digital tender is mainly aimed at domestic retail payments and cross-border pilots; RMB stablecoins could focus on cross-border wholesale, offshore markets, and specific commercial scenarios. The two can complement rather than substitute each other. Of course, specific development models can be further explored.

5. Is Doing Nothing Also Costly? Leaving Strategic Space in Global Competition

In an era of globalization, financial discourse power and payment infrastructure dominance are closely linked. If China completely withdraws from the fast-growing stablecoin track, several consequences may follow:

First, cross-border payment systems may become even more dependent on USD stablecoins, deepening the “path dependence” of the RMB in the digital realm; second, China would miss the chance to export its technical standards and business rules through the digital currency ecosystem; third, it risks becoming passive in future global digital currency rulemaking.

Therefore, a more balanced strategy is to leave appropriate development room for the digital RMB, USD stablecoins, and RMB stablecoins. The digital RMB, as the digital form of legal tender, should advance steadily, especially by gaining experience in international cooperation projects such as “mBridge” for cross-border payments. As for RMB stablecoins, pilot projects should be allowed in offshore markets and specific trade scenarios under controllable risks, enabling synergy with the digital RMB.

6. Stop or Strategically Manage Risk?

Mr. Wang Yongli’s warning on stablecoin risks carries significant weight, especially regarding financial security and monetary sovereignty. However, in the rapidly changing digital finance competition, focusing only on risks while overlooking strategic opportunities may cause China to lose the initiative in the next wave of financial infrastructure transformation.

The formation of the 13-ministry virtual currency coordination mechanism shows that China is trying to address the challenges and opportunities of digital currency systematically and collaboratively. Going forward, a more forward-looking stablecoin development strategy could be based on this foundation:

Clearly distinguish between domestic and overseas, onshore and offshore policies: Strictly control private stablecoins domestically while encouraging compliant innovation overseas.

Support Hong Kong in building an international digital asset and stablecoin innovation center, and strengthen regulatory cooperation and experience sharing with it.

Encourage enterprises to pilot RMB stablecoins overseas based on real trade scenarios, gradually building up the ecosystem.

Strengthen international cooperation, actively participate in the formulation of international stablecoin regulatory standards, and promote the establishment of a diversified global digital currency system.

Time flows on, never ceasing. No one can step into the same river twice. While guarding against risks, exploring the strategic value of stablecoins with greater wisdom and courage may be the key for China to remain competitive in the digital finance era. Wang Yongli’s explanation serves as an important reminder, but the story of stablecoins in China may require a broader narrative.