Despite China’s longstanding opposition to cryptocurrency activities, Hong Kong’s central bank is moving ahead with plans to issue its first batch of stablecoin licenses in March. However, experts believe Hong Kong’s stablecoin plan is more of a hedge than a reversal of Beijing’s stance.

“We hope to have a decision by March,” said Eddie Yue, chief executive of the Hong Kong Monetary Authority. Tell The Legislative Council added during its meeting on February 2 that the Authority is reviewing applications from the first batch of 36 stablecoin issuers, according to an official translator.

Yue’s update comes on the heels of plans to allow the issuance of stablecoins in Hong Kong. Reportedly stalled from Beijing.

A stablecoin is a cryptocurrency that aims to maintain a relatively stable value by being pegged to an asset such as fiat currency or gold, reducing price volatility compared to other digital tokens.

Hong Kong passed Stablecoin Regulations In May, entities issuing stablecoins onshore or pegged to the Hong Kong dollar were required to obtain a license. The law came into effect in August, and the HKMA began accepting applications shortly thereafter.

Jordan Wain, director of policy consulting at Chainaanalysis, said stablecoins now account for more than half of the value of transactions recorded directly on the blockchain, making them “the core of the crypto ecosystem.”

in a memorandumThe HKMA pointed to cross-border payments by international banks or tokenized deposit systems as potential use cases for stablecoins in Hong Kong. Tokenized deposit systems refer to digital representations of customer deposits on a blockchain network, regulated within the traditional banking system.

Potential issuers include payments technology company Payment Cards Group claim The Hong Kong dollar-backed stablecoin will enable “faster refunds, faster cross-border payments, and more transparent exchange rates.”

Wain said that more and more regulators and financial institutions are exploring the growth opportunities of stablecoins, and Japan and Europe have established regulatory frameworks for the adoption of stablecoins.

Interest in Hong Kong’s licensing system It is said These include tech giants such as Alibaba-backed Ant Group and Chinese e-commerce companies Jingdong.

However, in October, Chinese regulators including the People’s Bank of China objected to the plan, effectively blocking all progress, the Financial Times reported. Reportciting sources familiar with the matter.

Although Hong Kong formally maintains a degree of autonomy from Beijing under the “one country, two systems” principle, Beijing retains significant influence over major policy decisions.

However, unlike Hong Kong, Beijing has taken a conservative stance on cryptocurrencies. Although China was once at the forefront of cryptocurrency trading and mining activity, regulators began to tighten controls in 2013.

The restrictions eventually led to a complete ban on cryptocurrency trading in 2021 due to concerns about volatility and illegal activity.

the latest one Report Research has found that stablecoins are the main tool used by Chinese organized crime to move illegal funds, with up to $44 million in funds being transferred through complex networks every day.

Monique Taylor, an academic at the University of Helsinki, said that in addition to criminal risks, Beijing’s concerns also centered on currency controls.

Mr Taylor said Beijing was likely concerned about the prospect of yuan-linked financial instruments circulating offshore and unregulated.

“Stablecoins challenge (Beijing’s) state control over currency, payments and capital flows and are therefore incompatible with China’s state-centric monetary governance model, which prioritizes oversight and domestic financial stability,” Taylor told CNBC.

Beijing’s concerns also extend to the “dollarization of the digital asset economy,” such as stablecoins backed by fiat currencies Tether and U.S. Department of Agriculture Pegged to the US dollar.

“China’s monetary institutions have recognized that dollar-backed stablecoins have the potential to reinforce the dollar’s ​​dominance,” Taylor said.

Similar sensitivities arise in Washington. U.S. Treasury Secretary Scott Bessent tells the Senate Banking Committee Thursday He “wouldn’t be surprised” if Hong Kong’s foray into digital assets is seen as an attempt to establish “an alternative to U.S. financial leadership.”

Taylor said Hong Kong’s planned licensing system appeared to be a limited experiment — allowing Beijing to keep its options open — rather than a direct response to U.S. influence in the crypto space.

“There is little evidence that China is taking action to reverse its ban on cryptocurrencies,” Taylor said. He described Hong Kong’s approach as a “limited and cautious rollout,” a sign that Beijing remains sceptical.

China reinforced that stance on Friday, with eight national regulators issuing joint statement Reiterating China’s ban on cryptocurrency activities, including the unauthorized issuance of yuan-backed stablecoins.

Wynne said Hong Kong’s initial license was also to “use its autonomy to demonstrate that stablecoins can be properly regulated while still playing a central role in payments, tokenization and the city’s broader Web3 ambitions.”

Taylor said this regulatory clarity could attract overseas investors hoping to profit from Hong Kong’s eventual stablecoin plans, while noting that Hong Kong is unlikely to allow a “liberalized cryptocurrency environment” to flourish.