Stablecoins are tools, not strategies. This article is from Golden Finance and is compiled, compiled and written by Foresightnews. (Summary: Hong Kong's Stablecoin Law came into effect on 8/1, HKMA Raymond: Stablecoins are not speculative tools, and the three major thresholds constitute the moat of Hong Kong dollars) (Background supplement: Peter Schiff "I understand bitcoin, so I don't hold it": I can't understand that US bond stablecoins are not as good as gold reserves US dollars) On May 19, Xing Ziqiang, chief economist of Morgan Stanley China, also led the publication of a research report "Stablecoins and RMB Internationalization?". Let's take a look at what foreign brokerages think about stablecoins and their impact on RMB internationalization. The full text is as follows: We believe that China's recent new interest in stablecoins is due to concerns that US stablecoin legislation could expand US dollar dominance. China's central bank is using Hong Kong as a testing ground for future payment alternatives. But tokenization alone will not internationalize the renminbi, and the real job lies in domestic reforms. Why is Beijing concerned about stablecoins now? The US Senate passed the GENIUS Act, which requires that USD stablecoins must have sufficient support, marking a turning point. If passed in the House of Representatives, the bill would essentially convert dollar-pegged stablecoins (currently accounting for 99% of the stablecoin market) into synthetic dollars and embed them deeply into the global payments system, boosting demand for U.S. Treasuries. In our view, this is not a challenge to the dominance of the dollar – it further strengthens it. Stablecoins are not new currencies, but new distribution channels for existing currencies. They extend the dollar's reach suite to cryptocurrency, Web3, and emerging markets through low-cost, near-instant settlements. For China, ignoring this trend risks falling behind in the race for digital infrastructure, especially as stablecoins increasingly serve as a mechanism to bypass traditional banking networks. China's central bank's shift – from ban to blueprint Since September 2021, cryptocurrency trading has been considered illegal in mainland China due to regulators' concerns about financial stability risks. But Governor Pan Gongsheng's speech at this week's Lujiazui Forum signaled a policy shift: he called for a multipolar global monetary system and promised to secure international transactions. As efficiency gains and technology matures, digital RMB and stablecoins are being proposed as viable alternatives to cross-border settlements. In particular, Governor Ban pointed out that digital technology has exposed the weaknesses of traditional cross-border payment systems, which are inefficient and vulnerable to geopolitical risks. RMB Stablecoins – Prospects and Constraints At present, the settlement of cross-border digital RMB mainly relies on the M-Bridge Project, a multi-central bank digital currency platform developed by the Bank for International Settlements (BIS). But the project is still small, with only five central banks involved, and the withdrawal of the Bank for International Settlements in October 2024, which could slow the pace of future expansion kits. In theory, RMB stablecoins are decentralized, easily accessible and efficient, and are a good complement to cross-border transactions. However, domestic bans, remaining capital controls, and a lack of global recognition dominated by US dollar stablecoins have all limited the development of RMB stablecoins. Hong Kong – Strategic "sandbox" Hong Kong was the first jurisdiction in the world to pass stablecoin legislation, which has been in effect since August 1. The Stablecoin Act requires stablecoins to be backed by 100% high-quality reserves and pegged to the corresponding currency (whether USD, HKD or offshore RMB) – effectively paving the way for offshore RMB stablecoins to be legal. Under the legislation, Hong Kong will first promote stablecoins pegged to the US dollar and Hong Kong dollar to build technical and market trust, followed by stablecoins pegged to offshore RMB. Relying on Hong Kong's deep offshore RMB liquidity pool (about RMB1 trillion), offshore RMB stablecoins will provide verification for practical application scenarios of cross-border settlement without violating mainland capital controls or affecting onshore financial stability. The increased use of offshore RMB will also drive demand for RMB assets such as offshore RMB government bonds and central government notes. Stablecoins are tools, not strategies To be clear, the rise of stablecoins does not imply the creation of a new "super-sovereign" international monetary system. In fact, stablecoins are just an extension of the existing regulated fiat currencies used to facilitate cross-border transactions. In this sense, we believe that the development of RMB stablecoins should be seen as a potential component of China's cross-border RMB settlement infrastructure, which also includes RMB swap agreements, RMB cross-border payment systems (CIPS), and a global RMB clearing service network. While Beijing is accelerating the construction of cross-border settlement infrastructure, the internationalization of the renminbi has regressed over the past three years, with the renminbi's share of global reserve currencies falling to 2.2% by the end of 2024, up from 2.8% at the beginning of 2022. This is mainly due to concerns that China's "triple D challenges" (debt, deflation and demographics) have weakened capital flows, offsetting the growth in the use of the renminbi in trade. This means that the key to increasing the global use of the renminbi lies in global confidence in China's economic growth potential. To this end, we believe decisive structural measures are needed to rebalance the economy through consumption-pull and break the deflationary cycle, including social welfare reforms, debt restructuring, tax reform, and a pro-growth regulatory environment. All of these are difficult reforms that can only be carried out in a gradual manner (see Is China Rebalancing?, May 28, 2025), which means that the road to renminbi internationalization is likely to be long and full of twists and turns. Related reports The shock wave of the US dollar stablecoin is flying to the east, how will China respond? The Road to the Dollar Reformation: How Are Stablecoins Reshaping the Global God of Finance in the Digital Age? Stablecoin "Sino-US route dispute": Hong Kong's B-side breakthrough and the mainstream conspiracy of the United States [Morgan Stanley: Why has China recently begun to pay attention to stablecoins? This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".
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Morgan Stanley: Why has China recently begun to follow stablecoins?
Stablecoins are tools, not strategies. This article is from Golden Finance and is compiled, compiled and written by Foresightnews. (Summary: Hong Kong's Stablecoin Law came into effect on 8/1, HKMA Raymond: Stablecoins are not speculative tools, and the three major thresholds constitute the moat of Hong Kong dollars) (Background supplement: Peter Schiff "I understand bitcoin, so I don't hold it": I can't understand that US bond stablecoins are not as good as gold reserves US dollars) On May 19, Xing Ziqiang, chief economist of Morgan Stanley China, also led the publication of a research report "Stablecoins and RMB Internationalization?". Let's take a look at what foreign brokerages think about stablecoins and their impact on RMB internationalization. The full text is as follows: We believe that China's recent new interest in stablecoins is due to concerns that US stablecoin legislation could expand US dollar dominance. China's central bank is using Hong Kong as a testing ground for future payment alternatives. But tokenization alone will not internationalize the renminbi, and the real job lies in domestic reforms. Why is Beijing concerned about stablecoins now? The US Senate passed the GENIUS Act, which requires that USD stablecoins must have sufficient support, marking a turning point. If passed in the House of Representatives, the bill would essentially convert dollar-pegged stablecoins (currently accounting for 99% of the stablecoin market) into synthetic dollars and embed them deeply into the global payments system, boosting demand for U.S. Treasuries. In our view, this is not a challenge to the dominance of the dollar – it further strengthens it. Stablecoins are not new currencies, but new distribution channels for existing currencies. They extend the dollar's reach suite to cryptocurrency, Web3, and emerging markets through low-cost, near-instant settlements. For China, ignoring this trend risks falling behind in the race for digital infrastructure, especially as stablecoins increasingly serve as a mechanism to bypass traditional banking networks. China's central bank's shift – from ban to blueprint Since September 2021, cryptocurrency trading has been considered illegal in mainland China due to regulators' concerns about financial stability risks. But Governor Pan Gongsheng's speech at this week's Lujiazui Forum signaled a policy shift: he called for a multipolar global monetary system and promised to secure international transactions. As efficiency gains and technology matures, digital RMB and stablecoins are being proposed as viable alternatives to cross-border settlements. In particular, Governor Ban pointed out that digital technology has exposed the weaknesses of traditional cross-border payment systems, which are inefficient and vulnerable to geopolitical risks. RMB Stablecoins – Prospects and Constraints At present, the settlement of cross-border digital RMB mainly relies on the M-Bridge Project, a multi-central bank digital currency platform developed by the Bank for International Settlements (BIS). But the project is still small, with only five central banks involved, and the withdrawal of the Bank for International Settlements in October 2024, which could slow the pace of future expansion kits. In theory, RMB stablecoins are decentralized, easily accessible and efficient, and are a good complement to cross-border transactions. However, domestic bans, remaining capital controls, and a lack of global recognition dominated by US dollar stablecoins have all limited the development of RMB stablecoins. Hong Kong – Strategic "sandbox" Hong Kong was the first jurisdiction in the world to pass stablecoin legislation, which has been in effect since August 1. The Stablecoin Act requires stablecoins to be backed by 100% high-quality reserves and pegged to the corresponding currency (whether USD, HKD or offshore RMB) – effectively paving the way for offshore RMB stablecoins to be legal. Under the legislation, Hong Kong will first promote stablecoins pegged to the US dollar and Hong Kong dollar to build technical and market trust, followed by stablecoins pegged to offshore RMB. Relying on Hong Kong's deep offshore RMB liquidity pool (about RMB1 trillion), offshore RMB stablecoins will provide verification for practical application scenarios of cross-border settlement without violating mainland capital controls or affecting onshore financial stability. The increased use of offshore RMB will also drive demand for RMB assets such as offshore RMB government bonds and central government notes. Stablecoins are tools, not strategies To be clear, the rise of stablecoins does not imply the creation of a new "super-sovereign" international monetary system. In fact, stablecoins are just an extension of the existing regulated fiat currencies used to facilitate cross-border transactions. In this sense, we believe that the development of RMB stablecoins should be seen as a potential component of China's cross-border RMB settlement infrastructure, which also includes RMB swap agreements, RMB cross-border payment systems (CIPS), and a global RMB clearing service network. While Beijing is accelerating the construction of cross-border settlement infrastructure, the internationalization of the renminbi has regressed over the past three years, with the renminbi's share of global reserve currencies falling to 2.2% by the end of 2024, up from 2.8% at the beginning of 2022. This is mainly due to concerns that China's "triple D challenges" (debt, deflation and demographics) have weakened capital flows, offsetting the growth in the use of the renminbi in trade. This means that the key to increasing the global use of the renminbi lies in global confidence in China's economic growth potential. To this end, we believe decisive structural measures are needed to rebalance the economy through consumption-pull and break the deflationary cycle, including social welfare reforms, debt restructuring, tax reform, and a pro-growth regulatory environment. All of these are difficult reforms that can only be carried out in a gradual manner (see Is China Rebalancing?, May 28, 2025), which means that the road to renminbi internationalization is likely to be long and full of twists and turns. Related reports The shock wave of the US dollar stablecoin is flying to the east, how will China respond? The Road to the Dollar Reformation: How Are Stablecoins Reshaping the Global God of Finance in the Digital Age? Stablecoin "Sino-US route dispute": Hong Kong's B-side breakthrough and the mainstream conspiracy of the United States [Morgan Stanley: Why has China recently begun to pay attention to stablecoins? This article was first published in BlockTempo's "Dynamic Trend - The Most Influential Blockchain News Media".