Chinese tech powerhouses Ant Group and JD.com have decided to temporarily halt their stablecoin projects in Hong Kong following concerns raised by Beijing regulators regarding the issuance of digital currencies by private entities.

The pause was imposed by the People’s Bank of China (PBoC) and the Cyberspace Administration of China (CAC), according to a report by the Financial Times published on Sunday.

“The real regulatory concern is, who has the ultimate right of coinage — the central bank or any private companies on the market?”
Translation: The main worry from regulators is about the authority over currency issuance, whether it lies with the central bank or private firms.

Earlier this year, both companies had shown significant interest in participating in Hong Kong’s stablecoin pilot program or developing tokenized financial products like digital bonds.

Hong Kong’s Stablecoin Aspirations Meet Challenges

Hong Kong began accepting applications for stablecoin issuers in August, viewing it as a chance to enhance the international stature of renminbi-pegged stablecoins. Yet, progress has been stymied, as Ye Zhiheng from the Hong Kong Securities and Futures Commission has indicated the introduction of a new regulatory framework raises fraud risks.

People’s Bank of China Headquarters, Beijing. Source: Wikimedia

Ye’s warnings were noted following a report on stablecoin firms in Hong Kong experiencing double-digit losses after the new regulatory measures took effect.

In the previous month, Caixin, a Chinese financial outlet, made headlines stating that Beijing had curtailed stablecoin activities in Hong Kong, but the article was swiftly retracted, leading to skepticism surrounding those claims.

Last month’s actions by China’s securities watchdog also led to local brokerages being requested to halt their tokenization endeavors concerning real-world assets in Hong Kong, reflecting Beijing’s increasing discomfort with the offshore digital asset expansion.

The Trend of Tokenization in China

Tokenization has been gaining traction within the country. Last week, CMB International Asset Management, a Hong Kong branch of China Merchants Bank, announced it had successfully tokenized its $3.8 billion money market fund on BNB Chain.

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