HSBC suggests Hong Kong could lead in RMB stablecoins due to its collaboration with mainland China and new stablecoin legislation, as Chinese central enterprises explore stablecoin applications.

Executive Summary

HSBC suggests that Hong Kong could become a first-mover in RMB stablecoins, leveraging its collaboration with mainland China on digital currency initiatives and its newly enacted stablecoin legislation. This development coincides with indications that large Chinese central enterprises are actively exploring stablecoin applications, potentially to facilitate cross-border transactions and investments. This move could boost the international use of the RMB and solidify Hong Kong's position as a digital asset hub.

The Event in Detail

According to the Hong Kong Economic Times, Liu Jing, Chief Economist of HSBC Global Asset Management in the Greater China region, highlighted that People's Bank of China (PBOC) Governor Pan Gongsheng mentioned the establishment of an international operation center for the digital RMB at the Lujiazui Forum. HSBC notes that Chinese enterprises investing in Belt and Road emerging markets face currency volatility and hedging challenges, making RMB stablecoins a potentially attractive solution. The Hong Kong Monetary Authority (HKMA) requires stablecoin issuers to apply for licenses, ensuring transparency, liquidity and regulatory control. Applicants need a minimum paid-up share capital of at least HK$25 million (approximately US$3.2 million).

Market Implications

The introduction of RMB stablecoins could significantly impact cross-border payments, particularly within the Belt and Road initiative. If Hong Kong introduces RMB stablecoins, they are expected to be primarily used in early-stage enterprise payment scenarios, especially in cross-border payments. Morgan Stanley suggests that Hong Kong dollar stablecoins could help connect China's digital yuan with global digital assets, enabling real-time, low-cost transactions and supporting yuan internationalization through offshore channels.

Expert Commentary

Liu Jing pointed out that when multiple Chinese enterprises issue RMB stablecoins, the digital RMB may become an intermediary connecting various RMB stablecoins, which will help expand the international use of the RMB.

Former People's Bank of China (PBOC) Governor Zhou Xiaochuan has expressed concerns about the stability risks that stablecoins could introduce to China's financial system.

Broader Context

The PBOC has announced the establishment of an international operations center for the digital yuan (e-CNY) in Shanghai, as part of China's broader efforts to internationalize the yuan. Six major foreign banks—including Standard Bank and First Abu Dhabi Bank—have joined China's Cross-Border Interbank Payment System (CIPS), enabling more efficient international settlements in yuan. This development underscores China's commitment to modernizing global financial architecture and diversifying the tools available for cross-border payments.

PetroChina, one of China's largest state-owned energy companies, is exploring the use of stablecoins for cross-border energy trade settlements, indicating a growing interest in stablecoin innovation within China. This aligns with the broader initiative to challenge the dominance of U.S. dollar-backed stablecoins.