• China explores stablecoin options with Hong Kong as a testing ground, eyeing blockchain infrastructure like Conflux and Chainmaker.
• Conflux, as a regulated public blockchain, is seen as the leading candidate for powering China’s stablecoin ambitions.
• Beijing’s concerns over capital outflows and dollar dominance are central to China’s cautious stablecoin strategy.

China is closely monitoring stablecoin developments while using Hong Kong as a testing ground for digital currency innovation.

Financial regulators have intensified discussions on stablecoin strategies, emphasizing compatibility with national conditions and capital control concerns.

China’s Cautious Stablecoin Strategy

Chinese financial regulators recently summoned cryptocurrency experts to discuss stablecoin trends and implementation strategies, the Financial Times reported. A key message was that stablecoin projects must be compatible with China’s specific national conditions, one participant revealed. Moreover, Central bankers repeatedly and openly warned of potential capital outflow risks from stablecoin projects.

Hong Kong serves as China’s cryptocurrency laboratory following mainland trading bans. The territory passed legislation allowing licensed businesses to issue fiat-backed stablecoins. However, the HKMA plans to grant only a handful of licenses starting next year, including only one of China’s four major state banks initially.

While the Central Bank governor Pan Gongsheng acknowledged that stablecoins have reshaped the traditional payment landscape, China’s policymakers worry that dollar-backed tokens strengthen US currency dominance globally. Oh the other hand, Chinese state-owned enterprises show increasing interest in stablecoin applications for payments and settlements.

Multiple state-owned companies with Hong Kong operations seek stablecoin licenses, and the authority hasn’t ruled out approving offshore renminbi-backed stablecoins.

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Hypothetically, Coinfulx and Chainmaker

Beyond regulatory frameworks, China’s stablecoin, if realized, depends heavily on underlying blockchain infrastructure capabilities.

An analyst named “Frank” from China’s local crypto media, PANews, theoretically identifies Conflux as China’s leading stablecoin infrastructure candidate. The platform uniquely operates as China’s only regulated public blockchain with native CFX tokens. This exceptional status could provide crucial advantages for stablecoin development.

On the other hand, Frank also highlights that ChainMaker has an enterprise-grade infrastructure and strong policy support from Beijing. The platform attracts major state-owned enterprises and appears in government planning documents. However, its consortium chain structure might limit international stablecoin applications.

BSN and Xinghuo represent China’s permissioned blockchain approach without native tokens. Frank theoretically notes that their industrial focus serves domestic needs effectively. Yet their tokenless architecture could constrain stablecoin compatibility compared to Conflux’s public chain characteristics.

The analyst hypothetically concludes that Conflux’s international standards alignment positions it best for China’s stablecoin ambitions.