The Chinese government has decided to slow down plans by several tech giants to issue stablecoins in Hong Kong, the Financial Times reports.
Among the first to suffer were Ant Group, a subsidiary of e-commerce giant Alibaba, and JD.com, one of China‘s largest retailers. Both companies urged the People’s Bank of China (PBOC) to allow the launch of stablecoins shortly before Hong Kong’s new stablecoin licensing regime came into effect.
Both companies are currently postponing their plans to issue stablecoins, as the regulator and the Cyberspace Administration of China have prohibited them from doing so. The People’s Bank of China is concerned about the issuance of any currencies by private companies, as they are viewed as potential competitors to China’s central bank digital currency, the e-CNY.
Currently, central banks face at least two problems. First, they over-issuance money, that is, issuing stablecoins without 100% reserve requirements. This phenomenon is known as over-issuance.
Secondly, high leverage, or the multiplier effect of monetary derivatives generated by post-issuance transactions. Both the US GENIUS Act and the Hong Kong Stablecoin Act address this issue, but oversight remains woefully inadequate, noted Zhou Xiaochuan, Governor of the People’s Bank of China.
Chinese regulators also recently suspended efforts to tokenize real assets in Hong Kong, advising some leading brokerages to stop publishing research supporting stablecoins.