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China’s decision to suspend the rollout of stablecoins in Hong Kong has exposed the limits of its financial experimentation under the ‘one country two systems’ framework. The intervention illustrates a core principle of China’s political economy that monetary and payments innovation must remain under the close supervision of central authorities.
Stablecoins are privately issued digital tokens designed to maintain a fixed value by holding highly liquid assets, most commonly US Treasury bills. Since the late 2010s they have expanded rapidly and now function as widely used dollar substitutes in digital markets. The 2025 GENIUS Act in the United States strengthened this role by placing major issuers under a clearer regulatory framework and tying their reserve assets more closely to the stability of the US financial system.
When Hong Kong’s Stablecoin Ordinance passed in mid-2025 it established a licensing regime for fiat referenced stablecoins, including those linked to the renminbi (RMB). The framework was designed to attract reputable issuers and signal that Hong Kong could develop digital asset markets in a regulated environment. Major Chinese technology firms such as Ant Group and JD.com reportedly prepared to issue yuan backed stablecoins. But before any were launched, Chinese regulators including the People’s Bank of China reportedly advised against proceeding, prompting a pause.
Stablecoins issued in Hong Kong can circulate well beyond the territory, raising concern in Beijing about instruments linked to the RMB moving outside its regulatory authority. The decision to halt issuance reminded observers that Hong Kong’s financial autonomy operates within political limits. Recent events show that initiatives involving currency issuance and payment infrastructure remain closely coordinated with mainland regulators despite the formal preservation of ‘one country two systems’, reflecting Beijing’s view that monetary sovereignty is indivisible.
From the perspective of the People’s Bank of China, privately issued stablecoins pose several risks. They can circulate beyond regulatory oversight, interfere with capital account management and complicate the central bank’s control over money supply and settlement. Stablecoins also risk re-dollarising the digital economy as most tokens are anchored to the US dollar and traded on offshore platforms. For Chinese policymakers, the prospect of parallel and privately issued currency is incompatible with the party state’s responsibility for issuing and regulating national money.
Beijing’s intervention in Hong Kong is not a reactionary clampdown but a continuation of a consistent logic. China supports technological modernisation in financial services, but only within arrangements that preserve administrative control and monetary stability. The same rationale underpins the design of the e-CNY, China’s central bank digital currency, and the mBridge cross border central bank digital currency initiative, which employs distributed ledger technology while maintaining central bank authority over issuance, settlement and data access.
At present, the risks of not developing RMB backed stablecoins appear limited. Beijing’s objectives of payments modernisation, transaction oversight and state control over digital money are realised through the design and operation of the e-CNY. These objectives outweigh the potential benefits of privately issued RMB stablecoins.
The limitations of this approach are evident in market uptake. Despite extensive pilots and large transaction volumes, the e-CNY’s use remains modest compared with private payment platforms such as Alipay and WeChat Pay. For users, the difference between scanning a QR code with a private wallet or the e-CNY app is minimal, and the latter offers few additional incentives or integrations.
Stablecoins, by contrast, have expanded rapidly in cross border trade and digital asset markets because they are easily transferable across jurisdictions and platforms. The e-CNY’s design limits its ability to match the agility of stablecoins, particularly in areas driven by private innovation and decentralised infrastructure.
Still, authorities appear to view this constraint as acceptable. Maintaining regulatory coherence and monetary control outweighs extending the RMB’s reach through instruments that operate beyond the state’s direct oversight. Beijing is willing to trade global adoption potential for institutional control.
The incompatibility runs deeper than technology. Decentralised finance depends on open participation, private issuance and the absence of central authority. China’s financial system is organised around central party state supervision, policy coordination and capital account management. This design reflects a broader political logic in which oversight and systemic stability are paramount.
Since 2021, authorities have imposed strict prohibitions on cryptocurrency trading and mining while strengthening laws on data, cybersecurity and financial stability. These measures were not only regulatory responses to risk but expressions of a governing ideology that links financial order directly to political control. In this framework, activities that remove the state from the centre of money creation or settlement are treated as inconsistent with China’s institutional model.
China can adopt many of the technological advantages of blockchain based finance, such as programmability, transparency and efficiency, but only within closed and permissioned systems. The e-CNY and mBridge exemplify this selective adoption as they borrow tools from decentralised finance while rejecting its underlying principle of autonomy from state authority.
China can adapt the technologies of decentralised finance, but it will not adopt its governance philosophy. The structure of party state governance precludes a move toward decentralised monetary arrangements. The result is a digital finance architecture that is advanced in design but constrained in reach — an innovation bounded by ideology.
Dr Monique Taylor is Lecturer in World Politics at the University of Helsinki, Finland.
Source: Beijing blocks stablecoins to keep money under state control | East Asia Forum
