The intersection of digital RMB: Looking at the dilemma and future of RMB stablecoin from one retreat and one advance

# The Dual Narratives of RMB Digitalization: Prudence and Innovation in Offshore Stablecoin Development  

By: BlockWeeks  

Recently, the narrative surrounding the digitalization of the RMB has unfolded two contrasting yet inherently interconnected scenarios. On one side, multiple media outlets have revealed that mainland regulators are taking a cautious stance toward enterprises applying for stablecoin licenses in Hong Kong and engaging in related offshore digital asset businesses—acting like a prudent "signal light." On the other side, AxCNH, an offshore RMB stablecoin, has quietly launched under Kazakhstan’s regulatory framework, targeting trade settlements along the "Belt and Road" and carving out a strategic "flanking" path.  

This "one step back, one step forward" dynamic is not contradictory; instead, it accurately outlines the core dilemma facing RMB stablecoins past, present, and future: How can the global market’s immense demand for a programmable, high-efficiency digital RMB be addressed while upholding the "absolute red lines" of national financial sovereignty and capital controls?  

## The "Prehistoric Era" of RMB Stablecoins: Wild Growth and Preliminary Groundwork  

Before the official entry of state-backed entities, the landscape of RMB stablecoins had already been shaped by spontaneous market forces. This "prehistoric era" was defined primarily by two key players:  

### 1. Transaction Mediums in the Gray Zone: Represented by CNH₮ (CNHT)  

- **Product Form**: Some issuers, including Tether, have launched stablecoins pegged to offshore RMB (CNH)—such as CNH₮ (CNHT). These tokens are available on multiple crypto data platforms and exchanges, and are used for fiat currency channels and transaction settlements. Issuers typically claim to have reserve backing, but the transparency and auditing of these reserves have long been focal points of market concern.  

- **Core Function**: Their creation was not aimed at RMB internationalization, but rather to serve as a "fiat currency on/off-ramp" for cryptocurrency exchanges. They provided users in Chinese-speaking regions with a tool to bypass regulations, enabling convenient access to and exit from the crypto market, while also functioning to some extent as a hidden channel for capital flows.  

The existence of tokens like CNH₮ itself sends a strong market signal: it proves there is massive, unmet demand for digital RMB on the market side. However, their unregulated nature and inherent association with sensitive issues like "capital outflows"注定 them to be denied sovereign recognition and large-scale retail adoption, making them a key focus of regulatory scrutiny. Their historical role was to validate the viability and risks of the sector before the official entry of state-backed players.  

### 2. The Official Legitimate Successor: The Grand Narrative of the Digital RMB (e-CNY)  

- **Product Form**: As a Central Bank Digital Currency (CBDC) issued by the People’s Bank of China, it is the digital form of legal tender and a liability of the central bank (M0), backed by national credit. Its design leans toward centralization and a permissioned system, emphasizing controllability over currency circulation and identity verification.  

- **Core Function**: Its primary goal is domestic: optimizing the domestic retail payment system, breaking the dominance of existing mobile payment platforms, improving the transmission efficiency of monetary policy, and achieving "controllable anonymity." However, commercialization and large-scale promotion require overcoming complexities in technology, compliance, and organizational integration. Its cross-border payment capabilities—such as exploration via mBridge (the Multiple Central Bank Digital Currency Bridge)—remain in a cautious pilot phase.  

Fundamentally, e-CNY is not a "stablecoin" in the crypto sense. It is a centralized, permissioned system, with a design philosophy centered on "control" rather than "openness." The development path of e-CNY clearly demonstrates that China’s official top priority for currency digitalization is safeguarding national financial sovereignty and the independence of monetary policy. All technological applications must serve this overarching goal.  

These two paths—one driven by bottom-up market growth, the other by top-down state design—differ fundamentally in their objectives, governance, and regulatory attributes: the former represents innovation and flexibility, while the latter stands for market sovereignty and controllability. For years, they have developed in parallel with little overlap, collectively laying the groundwork for RMB stablecoins.  

## Hong Kong as a Testing Ground: Aspirations, Realities, and the Invisible Hand  

As Hong Kong pushes aggressively to become a global virtual asset hub, a new possibility has emerged: Can the city—with its unique "One Country, Two Systems" status—create a compliant, controllable offshore RMB stablecoin connected to the global crypto ecosystem?  

This was once the market’s most optimistic expectation. Hong Kong Monetary Authority’s (HKMA) stablecoin regulatory sandbox was seen as a tailor-made incubator for "HKD stablecoins" and even "offshore RMB stablecoins." The market widely speculated that state-owned financial giants would take the lead in launching HKMA-approved CNH stablecoins, which would serve as an excellent springboard for RMB internationalization.  

However, recent media reports have poured cold water on these hopes. The "window guidance" from mainland regulators has clearly conveyed several core concerns:  

1. **Firewall Against Financial Risks**: How can a CNH stablecoin freely circulating on a public blockchain be prevented from becoming a new tool to bypass mainland capital controls? Could issues like price volatility and reserve security trigger spillover effects that disrupt mainland financial stability?  

2. **Extension of Monetary Sovereignty**: Who should hold the authority to issue, govern, and clear a digital currency pegged to the RMB in offshore markets? This directly touches on the core of monetary sovereignty.  

3. **Conflict with e-CNY’s Positioning**: If a CNH stablecoin issued by a commercial entity circulates widely globally, would it undermine e-CNY’s strategic layout in cross-border payments?  

Beneath these concerns lies the projection of the classic "Mundell Impossible Trinity" in the digital age. The theory states that a country cannot simultaneously achieve free capital flow, a fixed exchange rate, and independent monetary policy. An ideal public blockchain-based CNH stablecoin inherently possesses the attribute of "free capital flow." However, China’s core priorities are maintaining a relatively stable exchange rate and absolute independence in monetary policy—meaning free capital flow is precisely the link that must be strictly restricted.  

Thus, the cautious stance of mainland regulators is not a rejection of Hong Kong’s innovation, but an inevitable choice in the face of this fundamental structural contradiction. Until absolute controllability is guaranteed, no channel that could threaten the effectiveness of capital controls will be easily opened.  

## Insights from a New Model: Exploration in Specific Scenarios  

Just as Hong Kong’s "main path" seems blocked, the emergence of AxCNH has provided a case study of a "flanking path." The characteristics of this model offer a new perspective on the industry:  

1. **Strategic Regulatory Choice**: Instead of applying directly in mainstream but strict regulatory jurisdictions like Hong Kong or Singapore, it chose to register and obtain a license in a region that is relatively crypto-friendly and has close geopolitical ties with China.  

2. **Focus on a Specific Narrative**: It has strenuously avoided positioning itself as a crypto asset for retail investors (C-end users) or speculative trading. Instead, it presents itself as a B-end fintech tool serving specific strategies—such as "Belt and Road" trade settlements. Its publicly announced partners are large physical enterprises, and its application scenario is cross-border trade settlement.  

3. **Risk Scope Limitation**: By focusing on specific scenarios and partners, this model confines its business scope and potential risks to a relatively narrow, controllable range. Compared to a stablecoin open to all on a public blockchain, the risk of spillover is significantly reduced.  

This model can be seen as an adaptive strategy for the current environment. It does not attempt to challenge the red line of capital controls; instead, by positioning itself as an "industrial tool" rather than a "general financial product," it seeks room to operate within a sensitive regulatory landscape.  

While this model may face challenges in liquidity, versatility, and market credibility, it represents a potential path for the private sector to explore RMB stablecoins under strict regulation: abandoning the grand goal of becoming a universal currency and instead serving as a specialized settlement tool within specific industrial chains or ecosystems.  

It is important to emphasize, however, that such practices still face challenges in compliance and business sustainability. The implementation of cross-border clearing integration, reserve fund sources (especially those involving foreign exchange controls), and redemption mechanisms are key variables determining whether they can achieve scale and long-term viability. In other words, the success of the flanking path depends on establishing a clear, regulator-acceptable compliance framework covering legal, foreign exchange, and commercial integration aspects.  

## Future Outlook: The "Trio" of Digital RMB  

Based on the above analysis, the future of RMB stablecoins is unlikely to follow a single path. Instead, it will more likely evolve into three parallel yet occasionally intersecting paths:  

### Path 1: Official Sovereign Layer — e-CNY’s "Walled Garden"  

- **Core**: e-CNY will continue to serve as the only officially recognized digital legal tender, accelerating its adoption domestically. Its cross-border applications will primarily be conducted through central bank-led, multilateral, permissioned clearing networks like mBridge, enabling peer-to-peer "wholesale" cross-border payments.  

- **Features**: Secure, controllable, and compliant. However, efficiency and openness will be limited by the complexity of multilateral negotiations and system integration. This is a "strong control" path centered on sovereign credit.  

### Path 2: Offshore Compliance Layer — Hong Kong’s "Limited Opening" Sandbox  

- **Core**: The cautious stance of mainland regulators is not permanent. In the future, when regulatory technologies and frameworks mature, a small number of institutions with strong backgrounds and robust risk control capabilities will likely be approved to issue highly restricted CNH stablecoins in Hong Kong.  

- **Features**: Such stablecoins may be based on permissioned blockchains or public blockchains with whitelisting mechanisms, and transactions will be subject to strict KYC/AML checks and monitoring. Their main function will be to serve institutional financial market businesses (e.g., bulk commodity trade, Bond Connect) rather than retail or crypto trading. This is a "semi-open" path for stress-testing at the boundaries of sovereignty.  

### Path 3: Market Application Layer — "Deep Cultivation" in Specific Scenarios  

- **Core**: More projects may draw inspiration from the aforementioned flanking path, abandoning illusions about mainstream markets and instead focusing on specific industrial scenarios—such as trade settlements with specific countries, supply chain finance, and cross-border e-commerce.  

- **Features**: These projects will be highly scenario-specific, vertical, and fragmented. Their success will not depend on crypto market cycles, but on their ability to truly reduce costs and improve efficiency for specific industries. This is a "pragmatic" path that avoids direct regulatory scrutiny and serves the real economy.  

## Conclusion  

The development of RMB stablecoins is essentially a microcosm of the eternal tension between global liquidity and the financial sovereignty of individual nations in the digital age. From the early "wild west" of CNH₮, to the national will embodied by e-CNY, and to Hong Kong’s institutional aspirations and market players’ search for alternative paths, what we see is not a linear evolution, but a complex ecosystem where multiple forces test, compromise, and coexist with one another.  

Mainland regulators’ prudence safeguards the bottom line of national financial security, while market innovation demonstrates its resilience. In the future, the landscape of digital RMB will not be monolithic; it will be a "trio" composed of the solemn main theme of e-CNY, the cautious concerto of Hong Kong’s compliant stablecoins, and the flexible variations of numerous scenario-specific stablecoins. And the conductor of this ensemble will always be that invisible yet powerful hand pursuing "stability" and "controllability."  

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