China Plans Dual Approach to Counter USD Stablecoins

Liu Bin, Director of the Financial Research Office of Pudong Institute of Reform and Development, has emphasized the need for China to address the challenge posed by USD stablecoins through a dual-pronged approach.

Firstly, China should continue to promote the international application of the digital renminbi. This involves leveraging the digital renminbi international operation center to explore its use in various cross-border scenarios, including payments, investment and financing, and trade. The goal is to gradually expand the scope of digital renminbi applications.

Secondly, Liu Bin suggests that Shanghai should strengthen its cooperation with Hong Kong, two major international financial centers. By establishing a financial regulatory cooperation mechanism, the two regions can promote the issuance of offshore renminbi stablecoins in Hong Kong. This cooperation would involve risk prevention, fund inflow, technical standards, and account arrangements, ultimately forming a beneficial development pattern for both onshore digital renminbi and offshore renminbi stablecoins.

This analysis highlights the strategic importance of collaboration between these financial hubs in enhancing the global competitiveness of the renminbi and mitigating the risks associated with USD stablecoins. By fostering a robust regulatory framework and leveraging the strengths of both regions, China can create a more resilient and integrated financial ecosystem.