The Development Path of Digital Renminbi Stablecoin

Recently, the topic of stablecoins has garnered significant attention. Central bank leaders pointed out at a financial forum that new technologies are driving the robust development of central bank digital currencies and stablecoins, while also presenting challenges for regulation. With the regulations for stablecoins in a certain region set to take effect, the industry has engaged in enthusiastic discussions about it.

Traditionally, offshore RMB business is divided into two categories: overseas and domestic. Overseas business is centered around a specific location and develops in multiple points; domestic business has both "onshore" and "offshore" characteristics. Some viewpoints suggest that offshore RMB stablecoin should first be piloted in a certain area before exploring it in domestic free trade zones.

However, the stablecoins in the Web3.0 era have transcended traditional concepts. To better achieve strategic coordination and proactive supervision, it is necessary to consider the linked development model of onshore and offshore RMB stablecoins. The reasons are as follows: First, in the face of the rapid development of USD stablecoins and regulatory changes in various regions, our country needs to proactively study and respond from the perspectives of financial security and monetary sovereignty. Second, the offshore RMB market in certain regions is limited in scale, which may make it difficult to independently support RMB stablecoins to achieve economies of scale. Finally, the regulation of stablecoins involves cutting-edge challenges such as identity verification and anti-money laundering, requiring central departments to take the lead and local regulatory cooperation.

In recent years, a certain free trade pilot zone has basically established a system that aligns with international rules. The central financial authorities are fully supporting the upgrade of the international financial center in the area, including measures such as carrying out pilot reforms for offshore trade finance services in the new area. Therefore, it is feasible to consider promoting the innovation and exploration of the Renminbi stablecoin in sync with a certain location within this free trade zone.

Onshore offshore RMB stablecoin (CNYC) can adopt two models: First, clearing organizations, large banks, payment institutions, investment institutions, etc. establish issuing institutions in the free trade zone to explore on-chain issuance and operation mechanisms, forming a wholesale market for authorized institutions, which then exchange with qualified entities to build a retail market. Second, relying on some digital RMB operating institutions with branches in the free trade zone, directly mint and operate stablecoins on-chain, and fulfill compliance responsibilities upon redemption.

Regardless of the model adopted, the following requirements must be met simultaneously: set up sufficient asset reserves, including cash, short-term government bonds, and a certain proportion of digital RMB; establish a complete mechanism for risk identification, asset isolation custody, internal control, etc.; draw on the characteristics of the FT account "electronic fence", and innovate through technical standards and smart contracts to limit the scope of holding and usage subjects.

Offshore Renminbi stablecoin (CNHC) can be jointly initiated by domestic and foreign institutions in a certain location, or allow authorized domestic institutions to issue through a registered legal entity in that location, in compliance with local regulations. This can form a dual Renminbi stablecoin system both domestically and internationally, and explore the exchange and intercommunication mechanism between CNYC and CNHC. CNYC is primarily used in the short term to enhance the efficiency of cross-border trade settlement, while CNHC aims to strengthen the position of a certain location in the internationalization of Renminbi, and can be used for on-chain finance and bulk commodity transaction settlement, exploring support for RWA based on Renminbi assets, and enhancing the global influence of Renminbi and its assets.

Regulatory authorities and issuing institutions should cooperate to promote technological innovation, effectively identify secondary market activities, monitor illegal holdings, and prevent illegal capital flows and usage. International institutions point out that stablecoins have deficiencies in singularity, elasticity, and integrity, therefore the exploration of the RMB stablecoin must strictly control risks, proceed gradually, and maintain appropriate scale, while accelerating the formulation of relevant regulations. In the future, the concept of "financial internet" can be referenced to promote the coordinated development of digital RMB, bank tokenized deposits, and stablecoins, achieving complementary win-win outcomes.