China Unveils Yuan-Backed Stablecoin Plan via Hong Kong Regulatory Framework

China is advancing plans to launch its first yuan-backed stablecoin through Hong Kong, aiming to increase the global use of the renminbi and challenge the dominance of U.S. dollar-backed stablecoins. The initiative, outlined by the People’s Bank of China, is expected to be implemented under the regulatory framework of the Hong Kong Stablecoins Ordinance, which took effect on August 1, 2025 [8]. This move aligns with broader efforts to internationalise the renminbi and enhance its role in cross-border transactions, particularly in the digital economy [2].

Under the new Hong Kong regulations, only licensed institutions are permitted to issue stablecoins, which must be fully backed by fiat reserves, including the yuan. This structured approach emphasizes transparency, liquidity, and regulatory control, distinguishing it from decentralized cryptocurrencies. Institutions such as Harvest Global Investments and RD Technologies are already conducting pilot programs with the Hong Kong Monetary Authority (HKMA) to explore potential cross-border use cases [8].

Governor Pan Gongsheng of the People’s Bank of China has emphasized the importance of developing stablecoins under China’s specific regulatory conditions, focusing on accessibility and liquidity in global markets [1]. The initiative could reshape liquidity dynamics in Asian crypto markets and influence the development of stablecoin technology, particularly in institutional settings [8]. Analysts suggest that increased participation in Hong Kong’s offshore RMB ecosystem may offer both opportunities and challenges for existing USD-backed stablecoins [8].

Despite these developments, cryptocurrency remains illegal in mainland China, with all trading, mining, and exchange activities prohibited under current laws. Enforcement has intensified in 2025, targeting offshore platforms catering to Chinese users. However, Hong Kong’s distinct regulatory environment allows for controlled experimentation with digital currency solutions, aligning with the “one country, two systems” framework.

Meanwhile, China continues to develop its central bank digital currency (CBDC), the Digital Yuan (e-CNY), which is being tested in select cities. Unlike the Hong Kong-backed stablecoins, the e-CNY is state-issued and designed for domestic use. The yuan-backed stablecoin project is a separate, internationally oriented initiative aimed at enhancing the global reach of China’s digital financial infrastructure [8].

The broader strategy reflects a cautious yet strategic push by Chinese authorities to explore regulated digital currency models. While the mainland remains closed to crypto activities, Hong Kong’s framework serves as a sandbox for innovation, allowing China to maintain financial stability while engaging with global digital finance trends. This approach may influence regulatory models in other countries seeking to balance innovation with oversight [8].

As yuan-backed stablecoins move closer to international deployment, their impact on global trade and financial systems will likely become a focal point for policymakers and financial institutions. The controlled rollout through Hong Kong highlights China’s intent to assert a stronger role in the evolving digital currency landscape while maintaining strict financial oversight.