The cross-border e-commerce arm of Chinese tech behemoth Alibaba is working on a deposit token amid mainland China’s crackdown on stablecoins, according to CNBC.
Alibaba president Kuo Zhang told CNBC in a Friday report that the tech giant plans to use stablecoin-like technology to streamline overseas transactions. The model under consideration is a deposit token, which is a blockchain-based instrument that represents a direct claim on commercial bank deposits and is treated as a regulated liability of the issuing bank.
Traditional stablecoins, which these tokens closely resemble, are issued by a private entity and backed by assets to maintain their value. The report follows JPMorgan Chase — the world’s biggest bank by market capitalization — reportedly rolling out its deposit token to institutional clients earlier this week.
The news also follows reports that Chinese technology giants, including Ant Group and JD.com, suspended plans to issue stablecoins in Hong Kong after regulators in Beijing expressed displeasure with the plans. The report is just the latest of many suggesting that mainland Chinese authorities appear dead set on preventing a stablecoin industry from arising in the country.
China says no to stablecoins
In July, both Ant Group and JD expressed interest in participating in Hong Kong’s pilot stablecoin program or launching tokenized financial products, such as digital bonds. Similarly, HSBC and the world’s largest bank by total assets — the Industrial and Commercial Bank of China — were reported to share these Hong Kong stablecoin ambitions in early September.
Related: Columbia Business professor casts doubt on tokenized bank deposits
Later in September, a now-removed report by Chinese financial outlet Caixin claimed that Chinese firms operating in Hong Kong may be forced to withdraw from cryptocurrency-related activities. According to the report, policymakers would also impose restrictions on mainland companies’ investments in crypto and cryptocurrency exchanges.
In early August, Chinese authorities reportedly instructed local firms to cease publishing research and holding seminars related to stablecoins, citing concerns that stablecoins could be exploited as a tool for fraudulent activities. Still, China is not entirely devoid of stablecoin ties.
Related: Custodia, Vantage Bank launch platform for tokenized deposits
Offshore yuan stablecoins, not mainland money
In late July, Chinese blockchain Conflux announced a third version of its public network and introduced a new stablecoin backed by offshore Chinese yuan. Still, the stablecoin aims to serve offshore Chinese entities and countries involved in China’s Belt and Road Initiative — not the mainland.
In late September, a regulated stablecoin tied to the international version of the Chinese yuan launched. Still, this product is also intended for foreign exchange markets and was launched at the Belt and Road Summit in Hong Kong, signalling a similar target market.
In fact, a recent analysis suggests that we should not expect Chinese stablecoins to be allowed to circulate in the mainland. Joshua Chu, co-chair of the Hong Kong Web3 Association, said that “China is unlikely to issue stablecoins onshore.”
Magazine: Hong Kong isn’t the loophole Chinese crypto firms think it is
