By Xinmei Shen

Copyright scmp

Conflux Network, which claims to be the only regulatory-compliant public blockchain operator in mainland China, has been allowed to experiment with offshore yuan stablecoins as Beijing seeks to secure a position in the new global financial order, according to its founder.
Conflux had received a tacit green light from Chinese authorities to explore the development of offshore yuan stablecoins, and was aiming to have up to 300 million yuan (US$42.1 million) worth of tokens issued on its blockchain by the end of this year, its founder Fan Long said in an interview on Tuesday.
“Previously, we weren’t given such opportunities,” Long said. “But now that we are, we hope to build up a certain volume and more importantly, begin to address some real problems.”
Stablecoins are cryptocurrency tokens designed to maintain a fixed value, which typically matches fiat currencies such as the US dollar. Initially popular among crypto traders, stablecoins have been playing a bigger role in trade because they allow for faster settlements and lower costs.

Regulations introduced this year, including the Genius Act in the US and a new stablecoin licensing regime in Hong Kong, are set to further boost mainstream acceptance for the tokens, and Chinese experts have called for Beijing to develop stablecoins pegged to offshore yuan to advance internationalisation of the Chinese currency.
China’s attitude towards stablecoins shifted after the US began to embrace digital assets, according to Long, who is also an associate professor at the University of Toronto’s Department of Computer Science.
“I think it’s evident that China has entered a phase where it intends to act on stablecoins but hasn’t yet determined how to proceed,” Long said. “This differs from the previous outright ban.”

While the Chinese government recognised that stablecoins posed a challenge to its capital control policies, it also saw that a “Swift 2.0” situation was taking shape, Long said, referring to the global banking system.
Long said China’s thinking was, “if I participate now, I may be able to help shape the rules, and if I don’t, I risk falling significantly behind”.
“China’s digital asset policies are set to become more open, either actively or passively,” he added.
Last month, Hong Kong company AnchorX, which said it held a stablecoin licence from the Astana Financial Services Authority in Kazakhstan, launched an offshore yuan stablecoin named AxCNH, using Conflux’s blockchain technology.
AxCNH would facilitate cross-border payments and settlements for offshore Chinese enterprises and countries involved in the Belt and Road Initiative, the companies said when announcing the product last month at the Belt and Road Summit in Hong Kong, an annual conference organised by the city’s government.
“Many Chinese companies had already found themselves compelled to use stablecoins for various reasons, such as sanctions or simply inconvenience in some places,” Long said. “We hope by the end of this year we can help solve some of these problems.”
Shanghai-based Conflux was established in 2018 as a “new-type [of] research and development institution”, counting the Shanghai Science and Technology Commission as its supervising authority. It has pitched itself as the operator of the only public blockchain that is regulatory-compliant in China.
However, the company’s background has brought it scrutiny from the US amid worsening bilateral relations. In 2023, two US lawmakers proposed a bill aimed at barring federal agencies from using China-developed blockchain networks or doing business with related companies, including Conflux and the Blockchain-based Service Network.
Long wrote on social media at the time that being compliant did “not imply any governmental control”, and commented that “Capitol Hill’s got that US-China drama on repeat”.
Offshore yuan stablecoins are currently a major focus for Conflux, as the company always believed that it was “the most fundamental and meaningful thing”, according to Long. Conflux was supporting at least three companies, including AnchorX, in their plans to issue offshore yuan stablecoins on its blockchain, Long added.