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

Written by: Zhang Feng

Recently, discussions on the regulation and development path of stablecoins have been heating up among China’s industry, policy, and academic circles. Wang Yongli, former Deputy Governor 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 fiat currencies.” His views have attracted attention within the industry.

In today’s rapidly evolving global digital currency landscape, if we only view stablecoins from the single perspective of risk prevention, we may miss a critical strategic window. Considering the recent spirit of the 13 ministries’ inter-ministerial coordination meeting on virtual currencies and related policy logic, China’s approach to stablecoins may require a more comprehensive, flexible, and forward-looking vision.

I. The Space for Developing Non-Dollar Stablecoins: Focus on Ecosystem, China Still Has Advantages

Wang Yongli believes that the stablecoin market is already dominated by dollar-based stablecoins, leaving little room for non-dollar stablecoins. However, this judgment 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 commercial ecosystems they are based on.

China possesses 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 carve out a new path distinct from the dollar system by creating a stablecoin backed by the RMB and carried by China’s commercial ecosystem. Especially along the Belt and Road and within the Regional Comprehensive Economic Partnership (RCEP) region, there is strong demand for efficient, low-cost digital payment tools in physical trade, providing fertile ground for an RMB stablecoin.

Rather than saying “there’s little room,” it’s more accurate to say that the key lies in whether China can convert its real economy network advantage into a digital currency ecosystem advantage. If we abandon exploration simply because dollar stablecoins currently lead the market, it would be tantamount to handing over the potential rule-making power of digital finance in the future.

II. U.S. Stablecoin Legislation as a Pioneer: Many Problems Remain, But Competition Has Already Begun Overseas

Wang Yongli points out that the U.S. stablecoin legislation still faces many problems and challenges. Indeed, the U.S. is currently leading in stablecoin legislation, with regulatory frameworks emerging at both state and federal levels; its legislative process also reveals many issues, such as fragmented regulatory authority, high compliance costs, conflicts with the existing banking system, and unresolved balances between consumer protection and systemic risk.

Observing first and letting the U.S. blaze the trail, learning from its trial-and-error experience, is a rational choice for China. But this does not mean we should remain passive. The competition over stablecoins is, at its core, global market competition—especially in overseas and offshore scenarios, where the acceptance of different stablecoins depends on their convenience, credibility, and ecosystem partnerships.

China can support Chinese institutions in overseas markets, within the bounds of local legal frameworks, to issue and apply stablecoins pegged to the RMB or other baskets of currencies, engaging in market-driven competition with international mainstream stablecoins, without opening the domestic market for now. For example, in financial centers like Hong Kong, Singapore, and the Middle East, compliant RMB stablecoins can be piloted in scenarios such as trade finance and asset trading to accumulate experience and a user base.

III. The Risk of Legislative Backfire: Mainland Pauses, Hong Kong Leads, Flexible and Adaptable Layout

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

China’s strategic choices have already demonstrated flexibility: the mainland adopts a cautious attitude toward private stablecoins and has not yet opened up related businesses, while Hong Kong is actively promoting the establishment of a regulatory framework for stablecoin issuance, experimenting with the issuance of a “Hong Kong dollar stablecoin” and exploring digital asset trading. This differentiated arrangement under “one country, two systems” has created an experimental field that is both progressive and retractable.

As an international financial center with sound rule of law and free capital flows, Hong Kong is ideal for a regulatory sandbox for stablecoins, accumulating regulatory experience while controlling the risk of spillover to the mainland. If the experiment succeeds, it can inform the mainland; if significant risks arise, mainland financial stability remains unaffected. Therefore, the concern that legislation could “backfire” may underestimate China’s flexibility in institutional design and risk management capacity.

IV. To Follow or Not? Stablecoins Do Not Belong to Any Country—Ecosystems Determine Ownership

Wang Yongli’s view that “China should not follow the U.S. stablecoin path” suggests an underlying assumption that stablecoins have a strong American attribute. In reality, as a technology-driven financial tool, the attribute of stablecoins is determined to a large extent by the issuer, usage scenarios, and governance structure.

Even a dollar stablecoin, if issued by a non-U.S. institution and forms an ecosystem in a specific region, will shift its benefits and influence accordingly. In other words, “whoever issues the stablecoin owns the ecosystem.” For example, if an Asian financial institution issues a dollar stablecoin widely used in Asian regional trade, that stablecoin serves the regional economic cycle more than it reinforces U.S. monetary hegemony.

For China, the key is not whether to “follow” another country’s path, but whether it can, based on its own needs and development stage, create independently controllable stablecoin products and ecosystem systems that comply with international rules. For example, the digital RMB (e-CNY) as a legal digital currency is mainly positioned for domestic retail payments and cross-border pilots; RMB stablecoins can focus on cross-border wholesale, offshore markets, and specific commercial scenarios—the two can complement rather than substitute each other. The specific development model can, of course, be further explored.

V. Is Doing Nothing Also a Cost? Leaving Strategic Space in Global Competition

In the era of globalization, financial discourse power and payment infrastructure dominance are closely linked. If China is completely absent from the rapidly growing stablecoin sector, several consequences may follow:

First, the cross-border payment system may become even more dependent on dollar stablecoins, deepening the “path dependency” of the RMB in the digital realm; second, China could miss the opportunity to export its technology standards and business rules through the digital currency ecosystem; third, it could fall into a passive position in the future formulation of global digital currency rules.

Therefore, a more balanced strategy is to allow appropriate space for the development of the digital RMB, dollar stablecoins, and RMB stablecoins. The digital RMB, as the digital form of legal tender, should be steadily promoted, especially in cross-border payment “currency bridge” (mBridge) and other international cooperation projects to accumulate experience. For RMB stablecoins, under controllable risk, pilot projects can be allowed in offshore markets and specific trade scenarios, forming synergy with the digital RMB.

VI. Halt, or Strategic Risk Management?

Mr. Wang Yongli’s warning about stablecoin risks is of significant value, especially regarding financial security and monetary sovereignty. However, in the rapidly changing arena of digital finance, focusing only on risks while ignoring strategic opportunities may lead China to lose the initiative in the next round of financial infrastructure transformation.

The formation of the 13 ministries’ virtual currency work coordination mechanism itself indicates that China is attempting to respond to the challenges and opportunities of digital currencies in a more systematic and coordinated way. The next step should be to build on this foundation and develop a more forward-looking stablecoin development strategy:

Clearly distinguish between domestic and overseas, onshore and offshore policies; strictly control private stablecoins domestically while encouraging compliant innovation abroad.

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

Encourage enterprises, based on real trade scenarios, to pilot RMB stablecoins overseas and gradually build an 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 flies by and waits for no one. One cannot step into the same river twice. While guarding against risks, it may be the key for China to maintain its competitiveness in the digital financial era to explore the strategic value of stablecoins with greater wisdom and courage. Wang Yongli’s explanation is an important reminder, but the Chinese story of stablecoins may require a broader narrative.