China’s tech giants JD.com and Ant Group are reportedly urging the central bank to approve yuan-based stablecoins as a response to the increasing prevalence of U.S. dollar-linked digital currencies. The proposal involves launching stablecoins in Hong Kong that are backed by the offshore yuan, with the goal of enhancing the global role of the Chinese currency.

Both companies are already preparing to release stablecoins backed by the Hong Kong dollar once local regulations come into effect on August 1. However, JD.com is specifically advocating for offshore yuan stablecoins as a strategic effort to support the internationalization of the yuan. This initiative aligns with China’s broader objectives to challenge the digital finance dominance of the U.S. and expand the influence of its currency on a global scale.

Notably, China has a historical prohibition on cryptocurrency transactions, which also extends to most privately issued stablecoins. The enforcement of this ban, particularly heightened in 2021, stemmed from concerns regarding financial crimes, capital outflows, and potential risks to financial stability.

In response to these challenges, China has focused on the development and pilot testing of its own digital yuan, known as e-CNY. The introduction of this central bank digital currency (CBDC) is viewed as a means to modernize the country’s payment system and exert greater control over its financial ecosystem.

For further information, you can read about Jack Ma’s Ant International seeking stablecoin licenses in Hong Kong and Singapore.