Copyright scmp
Beijing’s recent moves to rein in mainland Chinese firms’ stablecoin and tokenisation initiatives in Hong Kong may have rattled the city’s crypto sector, but the Chinese government’s increased openness to digital assets overall had not changed amid competition with the US, experts said. The People’s Bank of China (PBOC) recently summoned a number of mainland firms under its jurisdiction, asking them to wait for its instructions before moving forward with their stablecoin initiatives in Hong Kong, according to a person familiar with the matter who declined to be named due to its sensitivity. The targeted firms included banks and non-bank payment service providers, the person said. The Chinese central bank and the Cyberspace Administration of China have asked Ant Group and JD.com “not to move ahead” with their stablecoin projects, the Financial Times reported last week. Ant Group and JD.com did not respond to requests for comment. Ant Group is an affiliate of Alibaba Group Holding, owner of the Post. The directive reflects Chinese regulators’ attempts to cool down months of fervour surrounding stablecoins and real-world asset (RWA) tokenisation in Hong Kong, which has been allowed to develop its digital asset sector since 2022. China’s securities watchdog also reportedly advised mainland brokerages recently to pause RWA projects in Hong Kong over concerns about overheating in the market. However, such guidance appears to be directed at mainland-incorporated firms engaging in such activities offshore, and “should not be read as a blanket rejection of Hong Kong’s digital asset agenda”, said Joy Lam, founder of Clarient Advisory, a Hong Kong-based firm focused on digital asset strategies. Still, many firms that previously promoted their tokenisation initiatives in Hong Kong are becoming more cautious and have adopted a lower profile. CMB International Asset Management, a subsidiary of China Merchants Bank, deleted a statement it published on WeChat last week announcing a tokenised USD Money Market Fund in partnership with BNB Chain, the blockchain developed by cryptocurrency exchange Binance. While Beijing’s moves have dampened the confidence of some participants in Hong Kong’s digital asset sector, China still recognised the major role crypto could play in its competition with the US, according to Yifan He, founder and CEO of Hong Kong-based Red Date Technology, which operates a payment infrastructure for regulated digital currencies. China has increased its exploration of digital assets this year, as the Trump administration promotes digital asset development in the US. In the latest example, Study Times, the official newspaper of the Central Party School of the Chinese Communist Party, wrote in an article on Tuesday that blockchain-based digital currencies would become a “hidden battlefield in geopolitical competition”. The post was deleted by Wednesday afternoon. “The most important factor right now is [what the US does],” said He. “The more aggressively the US promotes [digital assets], the more compelled China is to react because of competition between the two countries, especially when monetary policy is almost the most important policy in the realm of economics.” Mainland regulators’ efforts to rein in stablecoin and RWA activities in Hong Kong reflect persistent concerns from Beijing about capital controls, despite Hong Kong having been given the green light to develop itself as a digital asset hub. Stablecoins and RWA tokenisation involved monetary control, cross-border capital flows and investor protection, said Bo Tang, head of the Institute for Financial Research at the Hong Kong University of Science and Technology. Stablecoins fundamentally functioned as a “narrow bank” that issued liabilities fully backed by safe assets, so they could create pressure on traditional financial intermediaries by “siphoning off deposits, reshaping credit channels and introducing new types of systemic risk”, Tang said. In future, Hong Kong should focus on institution-led initiatives such as tokenisation of government bonds, and regulated stablecoins for trade settlement, leveraging its role as a bridge between East and West, according to Tang. “By aligning its frameworks with mainland concerns while still offering global connectivity, Hong Kong can remain a credible international hub for digital finance, rather than a grey-zone playground,” he added.
