Article Google translated to English from original:
https://x.com/Infini_CN/status/1958429073493168608
The Age of Discovery: The Ambition of the RMB Stablecoin | Infini Big Shot EP01 with Conflux Yuanjie
【Highlights】
Yuanjie: It is a supplement to the global financial industry services, aiming to provide services to those who are not covered by the traditional financial system. Bank the unbanked, serve the unserved ,
The internationalization of the RMB requires the support of the entire financial system, economic system and commodity system of the offshore RMB. For example, the RMB can purchase special commodities that cannot be obtained with the US dollar, such as the J-10, J-20 and PL missiles.
True victory often comes from the enemy’s internal defeat . The explosive growth in demand for the RMB will inevitably be accompanied by the collapse of the US dollar system itself.
Program introduction: This is the first episode of INFINI Big Name Club. I am Ivy. We will focus on stablecoins, wealth management and corporate treasury solutions and discuss with guests.
Infini is a digital bank that provides stablecoin investment, interest generation, and payment capabilities. We offer secure and robust digital asset management services and compliant stablecoin payment solutions to global businesses. We enable stablecoin yield growth, instant digital currency payment settlement, and seamless crypto-fiat conversion.
【Table of contents】
- Guest Background
Yuanjie’s financial industry experience: CFA qualification, worked in asset allocation management in the United States, and participated in primary market investment after returning to China.
Conflux’s founding and development
- Global South and the Crypto Industry
Global South concept
l The formation and characteristics of the global Chinese business community.
l The crypto industry serves as an important financial tool for economic activities in Chinese society.
l Current status of the Chinese crypto market
Approximately two-thirds of Tether users are Chinese, and the Chinese population accounts for a significant portion of the stablecoin market.
l The global Chinese business community’s demand for financial infrastructure.
Conflux’s Mission
l Build the underlying blockchain infrastructure for Chinese people around the world.
l Promote the development of financial order and civilization in the Global South.
- Development of RMB Stablecoin
Early attempts and setbacks
l Current opportunities and layout
l Release strategy
IV. Application Scenarios of RMB Stablecoins
l Classification of main scenarios of stablecoins
Target market
Belt and Road countries: Central Asia, Russia, Iran and other entrepot trade centers.
Enterprise applications
- Challenges and Solutions
OTC liquidity
l Regulation and compliance
l Market education
VI. Future Outlook
l Market size forecast
DeFi and RWA Ecosystem
The possibility of putting RMB-denominated assets (such as municipal bonds) on the blockchain.
l The financial management needs of the Chinese community for RMB stablecoins.
l Changes in the international monetary system
VII. Conclusion
l Historical opportunity of RMB stablecoin
l The window of opportunity brought about by the collapse of the US dollar system.
l Financial infrastructure needs of the global Chinese business community.
Development Path
l Breakthrough from 0 to 1: pragmatic layout and scenario penetration.
l Long-term goal: to build an offshore RMB financial system.
【text】
Ivy: Hello everyone, welcome to the INFINI Big Talk . This episode features in-depth discussions with industry experts on topics like stablecoins , wealth management, and corporate treasury solutions. INFINI Idea, INFINI Wealth.
- Guest Background
For the first episode, we are honored to invite Mr. Yuan Jie, co-founder of Conflux , who is also an active Web3 investment director on Twitter.
Conflux continues to deepen its layout in the RWA field, focusing on the RMB stablecoin business this year and has in-depth thinking on the RMB stablecoin.
Mr. Yuanjie, what is the name of your company?
Our project is Conflux Network , comprised of the Panama-registered Conflux Foundation and entities in Hong Kong and Canada. We also have a research institute in Shanghai, the Shanghai TreeGraph Blockchain Research Institute. The community has given us the nickname " Chen Fengxia ," derived from the pinyin combination of our token’s abbreviation, symbolizing the simple, hardworking, and courageous image of a Chinese woman. The company was founded in 2018.
Regarding the origin of my Twitter ID " web3 Investment Director ": Our public chain is primarily positioned to serve the Asia-Pacific region, specifically the infrastructure of China and Hong Kong, and possesses the characteristics of a domestic public chain. To reflect the nature of my work in ecosystem development and business expansion, while also aligning with our domestic positioning, I adopted the title of “Investment Director” within the system, which I think is very appropriate.
Ivy: Now we are entering the official phase. Could you please briefly introduce yourself and Conflux’s current business focus?
Yuanjie: First of all, I want to make it clear that I am not a big shot in the industry, but just an ordinary practitioner.
I have a background in finance . Before founding CFA in 2018, I had been working in finance and held the CFA charter. I previously worked in the US for four years at a foundation, primarily responsible for asset allocation management and investment, covering hedge funds, mutual funds, and other broad asset class strategies in the secondary market. After returning to China, I focused on primary market investments at Huatai-China Merchants Fund , primarily investing in venture capital and private equity fund managers. Therefore, my primary experience in finance has been as a limited partner in private equity investments.
While working in Beijing, I connected with many VC/PE fund managers. After joining Conflux, I successfully leveraged these connections and expertise in project financing, successfully raising approximately $33 million for a project in 2018. I then transitioned to project operations management . In addition to technical and product roles, I participated in and managed the establishment and operations of all company departments, later handing over some of these departments to other colleagues.
It can be said that I am now a compound practitioner with experience in entrepreneurial operations , investment and financing, and corporate finance.
- Global South and the Crypto Industry
Ivy: You call yourself the Global South Crypto Advocate on Twitter. Could you explain to us what the Global South is and how it relates to your company’s vision?
Yuanjie: From an industry perspective, the concept of the Global South is often referred to as " global wanderers " or " digital nomads ," as depicted in the Book of Exodus. The crypto industry is simply a microcosm of China’s global expansion, a vertical branch within the sector. As China continues its development, numerous industries are pursuing internationalization strategies, from basic trade to more complex fields.
From short videos to e-commerce to gaming, these are part of our modern lifestyle. Looking back in history, from Southeast Asia to the Belt and Road Initiative, and on to Latin America and Africa, there has always been a large number of people engaged in cross-border trade.
In reality, this is the result of generations of accumulation, coupled with the joint efforts of diverse industries. Overseas Chinese have formed new regions and countries, such as Singapore , which can be considered a representative example of capitalist Chinese society. In many Southeast Asian countries, Chinese communities have achieved remarkable success in the business sector. Globally, Chinese have formed a new business community and organization.
It’s hard to say they have a single nation, but this Chinese community spans the globe, and most have ties to China. China has become the world’s manufacturing factory, not only providing high-quality, affordable goods and services worldwide but even leading the way in certain sectors. Simultaneously, China’s development has created a vast wealth pool, which is now integrating with the global Chinese community.
In the crypto industry , blockchain and stablecoins have become crucial financial tools and infrastructure for economic and commercial activities in Chinese society. Whether it’s cross-border payments or financing, the “stablecoin + blockchain” combination is likely to be utilized. This phenomenon is particularly prevalent within Chinese society.
BitMEX founder Arthur Hayes once reported that approximately two-thirds of Tether users are Chinese. If the total Tether supply is 180 billion, then based on this proportion, nearly 50% of the world’s stablecoins are held by Chinese. While this figure may be slightly exaggerated, a conservative estimate is that Chinese ownership accounts for at least 30%-40%.
Directly related to the Chinese community, we refer to the global Chinese business community as the Global South . Such a business community and civilization requires professional financial infrastructure and financial services as supporting tools.
On this basis, a convention may be formed, or even developed into a regulatory organization. If this role is not assumed by mainland China or the Chinese government, then other entities will need to play this role.
As a public chain, we rely on China and Hong Kong and have an unshirkable responsibility to build the underlying infrastructure for Chinese people around the world. This is our historical mission .
Therefore, I believe this task falls to us. Based on this role, I call myself an advocate for “crypto-debates.” Of course, “debates” here can be simply understood as the elites who participate in the discussion.
This is also a little trick I have. The Global South is a massive community , with a vast population, enormous business volume, and considerable financial reserves. Therefore, we need entrepreneurs and industry leaders who are committed to establishing order and civilization to jointly build this system.
Ivy: In addition to Conflux, companies like INFINI are also committed to providing financial infrastructure tools for merchant acquiring, payment, and settlement systems for Chinese people around the world—not limited to Chinese people, but likely to be mainly Chinese people in the initial stage—and assuming corresponding social responsibilities to help Chinese merchants go global.
- Development of RMB Stablecoin
Okay, next we will move on to the core topic of today’s discussion - the RMB stablecoin.
Ivy: Let’s first discuss the issuance of a RMB stablecoin. In early July, we announced a strategic partnership between AnchorX and Conflux to launch an offshore RMB stablecoin, AxCNH. Could you share the time, effort, and key milestones from the planning to the launch of this stablecoin?
Yuanjie: In fact, the preparations for the RMB stablecoin didn’t begin with the AnchorX project. Those familiar with our ecosystem may know that as early as early 2023, we promoted a project called Trust Reserve . The stablecoin issued by this project was codenamed CNHC, similar to USDC. This stems from the fact that Trust Reserve’s investors included Circle, IDG, KuCoin, and Conflux (a smaller investor who joined later). The project was primarily initiated by IDG.
Circle is the primary investor. IDG , as an investor in Circle, saw an opportunity to replicate this model in the Chinese market. Given the massive trade volume behind the RMB and the economic scale supported by the global Chinese population, it’s sufficient to support the existence of a RMB stablecoin market. Therefore, IDG partnered with Circle to invest in this project.
At the time, Circle also planned to establish a USDC-CNHC liquidity pool with CNHC on the Circle platform. Unfortunately, the project was shelved due to force majeure encountered by the team on the eve of the stablecoin launch.
At the time, we also partnered with Kucoin , which had a significant trading volume in the industry. Kucoin, Conflux , and Trust Reserve ( CNHC) formed a triangular ecosystem, planning to jointly promote the development of an offshore RMB stablecoin, originally scheduled for launch in April or May 2023.
Despite the failure of this project, we haven’t given up. We remain committed to exploring public blockchains leveraging China’s geographical location and within an inclusive market environment. To this end, we continue to invest in infrastructure development. During this process, we partnered with Hony Capital to incubate the AnchorX team. This project, which began two years ago after the conclusion of a previous one, has been in the works.
In the current global environment, with the passage of the US Stablecoin Act , the issue of stablecoins has regained public attention. In China, discussions on RMB stablecoins have been held by securities firms, government agencies such as the Shanghai State-owned Assets Supervision and Administration Commission , and the People’s Bank of China at forums like the Lujiazui Forum . Companies like JD.com and Ant have also publicly called on the central bank to approve the issuance of RMB stablecoins. All sectors of society are participating in the discussion on RMB stablecoins.
Because we have always adhered to this path and believe it has applicable scenarios, the RMB stablecoin has once again become a hot topic. This is an opportunity we are currently observing.
AnchorX has not fully followed Hong Kong’s compliance path, instead focusing on compliance in Belt and Road countries. The company has obtained a RMB stablecoin license from Kazakhstan . Relevant information can be found on the official website of Kazakhstan’s financial regulatory agency.
Regarding website promotion, the requirements for obtaining stablecoin licenses in Belt and Road countries are significantly looser than in Hong Kong, and the timeframe is shorter. This development model is more agile and can draw on industry experience, such as the development paths of USDT and USDC , to reference their tools and path selection.
Regarding Kazakhstan , the country’s newly established stablecoin regulatory framework directly granted AnchorX a license to issue fiat-pegged stablecoins for the first time.
Ivy: What are the considerations behind Kazakhstan’s willingness to issue a license for offshore RMB stablecoins?
Yuan Jie: First of all, there is a lot of trade between Kazakhstan and countries like China. In trade between Kazakhstan and Belt and Road countries like Russia, Kazakhstan mainly plays the role of a transit country.
China and other Belt and Road countries, including Russia, are forming a hub for entrepot trade . This trade has resulted in significant RMB transactions handled by local banks. Therefore, granting offshore RMB stablecoin licenses to these countries is a natural progression. Many local banks have already opened RMB stablecoin accounts for businesses, and many companies use offshore RMB for settlement. This initiative is a natural progression.
These countries are also seeking opportunities to transform from real economies to financial centers , particularly leveraging the power of Web3 . In contrast, Hong Kong has a well-developed and large-scale traditional financial sector, but it may face greater international pressure, especially in anti-money laundering regulations . Singapore recently faced challenges from the United States regarding anti-money laundering regulations, and Hong Kong may face similar challenges.
If the regulatory requirements or restrictions on stablecoins are relatively loose, then it is understandable that Hong Kong would adopt a more conservative approach to stablecoins, especially in terms of licensing, which tends to favor banks over emerging startups or traditional internet finance companies.
These companies may face challenges in capital flow, compliance, and identity verification , leading to less smooth communication with regulators. However, in Belt and Road countries, particularly in Central Asia, finance is not a core industry, so there is no historical baggage, allowing for bold innovation.
Therefore, I personally believe that if we adopt a strategy of openly building a plank road while secretly attacking Chencang, then the openly building a plank road should be implemented in Hong Kong. The secret attack strategy may be more suitable for starting with the countries along the Belt and Road Initiative. These countries have frequent trade exchanges with China and can serve as transit points for entrepot trade.
This arrangement is more realistic. Hong Kong has attracted attention and pressure from the global financial industry, especially from traditional finance. In contrast, we can take the lead in conducting business in other regions.
Looking back at USDC 's development, it initially survived and gradually grew within the cracks of financial institutions. Although Hong Kong recently passed stablecoin laws and regulations, the release of specific regulations and the issuance of licenses will not take place until early next year, which has disappointed the entire industry.
However, after in-depth analysis, I believe this may be a strategic move, a covert attempt to “build a front while secretly attacking Chencang.” This arrangement actually points the way forward for the future development of the RMB stablecoin —not by pursuing a fully compliant approach, but by choosing an approach closer to actual business and offering greater potential for development. Therefore, I believe the current situation has become even clearer.
Ivy: Here is a question: In actual implementation, what problems will “one license for the whole world” face?
Yuanjie: This is exactly the characteristic of our industry.
This is essentially a loophole or flaw. In the early days of the industry, when exchanges emerged, no country issued licenses for them, so they were all offshore. What options did these exchanges have to find a foothold?
To obtain a license, exchanges would apply in any licensing country, even relocating some staff. However, they gradually discovered that many smaller countries were also issuing licenses. For example, some claimed to have licenses from Bermuda or Japan . Binance once entered the Japanese market, and when Singapore began issuing licenses, many exchanges relocated there. However, regulations in these regions are often stricter.
In order to establish themselves as financial powerhouses, some small countries have adopted a relaxed licensing policy. Consequently, exchanges have evolved their strategy to acquire as many regional licenses as possible worldwide, piecing together a global license. In countries without existing legislation, exchanges will initially commence operations; in countries with existing legislation, they will apply for licenses. If their application is unsuccessful and regulatory oversight is stringent, they will temporarily withdraw from the country’s market.
Take the Kraken exchange , for example. Despite its impending US IPO and perceived compliance by European and American markets, it still accepts KYC verification from mainland Chinese users holding Chinese passports and ID cards. While mainland China has yet to legislate or issue licenses for digital currency trading, Kraken persists in serving Chinese users, while many exchanges founded by Chinese individuals have repeatedly terminated their Chinese user base.
In the absence of explicit prohibitions and a licensing mechanism, these businesses exist in a regulatory vacuum from a legal perspective , theoretically allowing them to operate. Unless regulators explicitly intervene, as in the case of Kraken, which was fined for violations, market participants may be inclined to continue operating. Currently, China’s regulatory system has not clearly defined jurisdiction for these businesses, and there is no specific department responsible for oversight.
This phenomenon is similar to the issue of territorial rights in the early days of maritime civilization . As piracy became rampant and naval power grew, countries gradually recognized the importance of territorial rights as a component of national sovereignty. The current issuance of exchange and stablecoin licenses by many countries reflects this recognition process. However, many countries have yet to assert their sovereignty in this area.
Without a clear claim to sovereignty, the sector can be considered a no-man’s land . From a pragmatic development perspective, market participants can begin operations. Once relevant legislation is complete and a licensing system is established, those who meet the requirements can continue operating; those who do not can exit the market. This model aligns with the developmental dynamics of the common law system, as exemplified by Hong Kong’s practice before the legal framework was finalized.
Any institution can open an exchange. If they hold a VASP license from an exchange , they will have a six-month transition period. If they do not obtain a license, they must exit the market.
Taking Hong Kong legislation as an example, its inclusive policy towards industry participants shows that stablecoin operators only need to apply for a license in countries such as Kazakhstan that do not have clear regulations on stablecoins to conduct business. Conversely, if regulatory approval is not obtained in a specific region, relevant business should not be conducted in that region.
Currently, many offshore exchanges remain unconstrained by the laws and regulations of specific countries. These exchanges can operate freely, and their corresponding stablecoins can circulate within their unregulated regions. This is a pragmatic approach.
We should adopt a strategy of " openly building a plank road while secretly advancing through Chencang ." First, establish legal entities in regions where we can obtain licenses and create a compliant legal environment. On this basis, we should expand our business globally as much as possible. As territorial rights become increasingly clear, our business model should shift from a " pirate-like " approach to a " naval-like " approach, achieving standardized development. This is the correct approach to the expansion of maritime civilization.
IV. Application Scenarios of RMB Stablecoins
Ivy: Regarding stablecoin issuance, this is just the first step. Driving mass adoption of stablecoins is the real challenge. Tether achieved its current market position by leveraging the right timing, location, and people, as well as its unique offshore RMB positioning. Circle, on the other hand, captured the US market at a high cost through heavy subsidies, distribution channels, and strict compliance.
So, in which industries, countries and regions might the main application scenarios of the RMB stablecoin be concentrated?
Yuanjie: First of all, the application scenarios of stablecoins can be summarized into three categories:
One is for trading and speculation in the cryptocurrency market;
Second, it is used for cross-border trade settlement;
The third is for local payments. These three scenarios show phased development characteristics.
USDT has already matured in the first two scenarios and has even made some headway in local payments, particularly in countries with high inflation and low regulation. For example , in war-torn countries like Turkey and Ukraine, as well as high-inflation countries like Argentina and Nigeria, the proportion of local users holding USDT is already considerable.
I believe that when the proportion of USDT holders in a country exceeds a certain threshold (such as 30%), the process of USDTization or dollarization of the country’s economy will become irreversible. At that time, the entire upstream and downstream industrial chains of the entire society will be affected.
Using USDT for payments across the supply chain has formed a closed-loop system. This allows for the construction of a networked, lightweight settlement payment system to enable local payment.
However, in many countries, due to low penetration rates , most industries struggle to establish a comprehensive payment system that covers the entire supply chain, ultimately requiring a return to the banking system, leading to a disruption in the payment chain. Therefore, it is currently primarily applicable to specific scenarios such as cross-border transactions or remittances .
In the development of stablecoins, USDC has already completed the first three phases of its development. Besides USDC, other stablecoins, such as FDUSD and PYUSD, are currently primarily used in cryptocurrency trading and speculation. Notably, PYUSD has begun exploring merchant payment support, skipping the first phase of its development in the cryptocurrency sector and moving directly to the second or third phases for small-scale trials. However, overall development remains relatively slow.
As for RMB stablecoins , the current cryptocurrency market has essentially established a digital currency pricing system based on USDC and USDT . These stablecoins provide market liquidity by forming trading pairs. All trading activities (including pending orders, buys and sells), however, consume the stablecoin’s liquidity. This consumption does not require interest rate hikes on the stablecoins themselves. The resulting savings in interest rate hikes are typically accrued to issuers (such as Tether), exchanges (such as Binance ), or market makers, rather than being passed on to stablecoin holders.
In the current market landscape, the US dollar stablecoin sector is firmly dominated by USDT and USDC, making it difficult for other emerging US dollar stablecoins to truly enter the digital currency pricing system. This phenomenon also applies to the RMB stablecoin sector, where new entrants face significant market barriers.
The speculative and investment trading landscape in the digital currency sector has become fragmented. Currently, the market is primarily priced in US dollars , with USDC and USDT dominating. Regarding the RMB, the speculative and trading potential of RMB stablecoins like NKX in the cryptocurrency market primarily stems from on-chain applications.
Centralized exchanges typically only offer trading pairs between USDT or USDC and RMB stablecoins. It’s almost impossible to offer trading pairs between other mainstream or altcoins and RMB stablecoins.
Private exchanges won’t offer such services because they can’t afford the liquidity subsidies, and the lack of trading volume makes such trading pairs meaningless overall. Therefore, speculative trading in the cryptocurrency market may rely solely on on-chain solutions, such as through the establishment of liquidity pools or lending pools.
Even so, it still depends on cryptocurrency subsidies , such as those from DeFi protocols or Complus platform tokens, to initially support trading volume and issuance. Only after initial trading volume and issuance are achieved can subsidies be used to rapidly promote the development of cryptocurrency speculation and trading.
For example, when the issuance and trading volume reach 100-200 million and the daily trading volume reaches tens of millions, we need to act quickly and penetrate the trade sector. Currently, the Chinese trade community has widely adopted USDT for settlement, including some state-owned enterprises.
From a pragmatic perspective, state-owned enterprises or medium-sized and large enterprises in certain sectors are much more likely to adopt RMB stablecoins for settlement than small and medium-sized enterprises. This is because private business owners may prefer to use US dollars if they are not involved in international competition.
However, when it comes to competition between countries, such as in regions like Iran and Russia, the situation is different.
Remitting profits earned in Africa or Latin America back to China often faces foreign exchange controls . Trade with countries like Iran and Russia is even more subject to international sanctions . Compared to traditional foreign exchange channels, the RMB is less sensitive in these scenarios.
Take USDT , for example. Nearly $3 billion in USDT has been frozen this year, primarily involving businesses or holders in North Korea, Russia, and Iran. China is likely to be the next potential target, leading many large companies, especially state-owned enterprises, to be cautious about using USDT, fearing the risk of fund freezes.
It’s worth noting that USDT (Tether) responds extremely quickly to regulatory requests, sometimes requiring only a single notice from the U.S. Department of Justice to execute a freeze. In contrast, the USDC freeze process is more drawn out, often requiring a judicial decision. This rapid response by USDT is, in part, due to its lack of regulatory compliance.
This regulatory environment creates considerable pressure for Chinese companies conducting trade with these countries. Another key issue is that companies face numerous challenges when attempting to transfer funds across borders using USDT.
When transferring profits back home or internationally, using the US dollar route may face greater pressure, while the RMB route is more discreet and more in line with business logic. For example, when purchasing from China, merchants usually require settlement in RMB.
Although the RMB is not yet considered a mainstream foreign exchange reserve in some countries, and some officials may lack awareness of it, it is more reasonable to use RMB for settlement directly. If USD is exchanged for USDT and then transferred, it may be considered a foreign exchange violation.
In the current field, on the one hand, it is affected by foreign exchange controls , and on the other hand, it faces financial sanctions . Under the influence of geopolitical factors, the RMB can be promoted and applied first, and then replace some usage scenarios of USDT.
It is estimated that the scale of replacement could reach 30-40%, equivalent to a market volume of approximately US$70-80 billion. Even if only 10% of this is replaced, it would be equivalent to RMB issuance equivalent to US$70-80 billion. Assuming that about half of this occurs on compliant public chains , it would bring an additional US$30-40 billion, which would significantly improve the fundamentals of the entire compliant public chain.
So I think it may take a period of time to achieve this.
If the scale can be increased to $3 billion to $4 billion , it will become a highly usable settlement network for the Chinese community. With a RMB stablecoin worth $3 to $4 billion, it will be sufficient to meet the needs of large multinational companies, including Huawei .
About five years ago, they considered using USDT , but at the time, the USDT liquidity pool was too small, only about $200 to $300 million. Such a small pool of funds could not accommodate large-scale capital flows, which could easily lead to liquidity depletion.
Today, the pool has grown to $250 billion, and an inflow of several hundred million dollars would have little impact. However, the current challenge is the potential for targeted blockades . Therefore, we need to gradually expand the pool, enabling smooth capital flows from small to medium-sized to large amounts, to avoid liquidity risks.
At present, we have a relatively clear understanding of the market capacity and development path , and can plan the development scale accordingly.
For example, if the RMB stablecoin’s scale approaches $5 billion after one cycle, we will consider this to mark the official start of our historic mission . At that point, we will have completed the two key phases of growth, from 0 to 1, and then from 1 to 10. The subsequent expansion from 10 to 100 will be a natural progression.
However, the core challenge now lies in achieving the 0 to 1 breakthrough —a goal that encountered setbacks two years ago and has now reached a critical juncture. As for whether the 1 to 10 stages can proceed smoothly as expected, considerable effort is still required.
Tether’s promptness in responding to regulatory action was indeed surprising. However, it’s important to clarify that the target of its response was politically sensitive—not Hong Kong, China, or North Korea. Furthermore, the application scenarios and industrial ecosystem of the RMB stablecoin require further exploration.
Ivy: It may involve some energy trade scenarios, such as oil, natural gas, and Chinese tariff-subject goods. These areas have a high degree of product-market fit.
The Belt and Road countries are the key markets for RMB stablecoins. They cover a wide range, starting from central or northern China, extending to the five Central Asian countries, Iran, Turkey, Russia, Ukraine and Eastern Europe. Crossing the Mediterranean, heading south to Kenya in Africa. If you start from the southern coastal areas of China,
The Southeast Asia initiative does indeed cover a vast area, stretching from Asia to Europe. What do you think of the role of the RMB stablecoin in the Belt and Road Initiative?
Yuanjie: The potential of the entire market lies in regions where Chinese businesses and Chinese businesses can take root. Within these regions, we should prioritize penetrating those with active crypto markets .
Active crypto markets serve as both entry and exit points for financial transactions. For example, cities like Istanbul, Turkey, Dubai, UAE, and Phnom Penh, Myanmar, have numerous OTC exchange points and local exchanges offering deposit and withdrawal services with local fiat currencies.
If the issue of deposits and withdrawals in local fiat currencies can be resolved, the impact of foreign exchange controls and bank sanctions will be significantly mitigated. Without these outlets, directly promoting the RMB stablecoin will not solve the issue of convertibility between the stablecoin and fiat currency.
Therefore, whether it is in the countries along the Belt and Road, gradually expanding to the African market, or advancing along the coastal route from the south, it is necessary to choose key countries that already have crypto communities and can be interoperable with fiat currencies as the development path.
Build hubs around these key nodes and expand to surrounding areas, while connecting them with China’s own trade system.
I believe that organizations like INFINI , which specializes in merchant acquiring, settlement, payment, and wealth management, will inevitably follow this path. Obviously, you won’t choose to conduct market education in countries without a crypto market. Instead, you will prioritize entering countries with established crypto markets, using these countries as hubs to promote payment solutions to local merchants.
They found that exchanging cryptocurrencies for local fiat currency and then converting it into the fiat currency of their trading partners was a more efficient process.
This process is smooth, low-cost, and highly efficient, significantly reducing market transaction costs. In the process of expanding merchants, we mainly follow two development paths: regional and industry, focusing on countries and regions with high penetration rates.
Ivy: Yes, we will consider which industries are naturally compatible with digital currency, and we will give priority to introducing these industries in the form of seed merchants.
Yuanjie: Ivy, I’d love to hear about your new strategies for country and industry selection. Since I’m not an expert in this area, I’d appreciate if you could share a brief overview.
Ivy: By continent , some countries and regions are relatively open, including Asia, Latin America, North Africa, South Africa, and some duty-free zones in Europe. In Asia, the main focus is still on foreign exchange controls.
In regions with unstable local currencies, such as Asian countries like Pakistan and the Philippines, which implement foreign exchange controls, stablecoins have a high penetration rate, especially in scenarios involving remittances from relatives. Similar situations exist in Latin American countries such as Argentina, Colombia, and Brazil.
While Brazil has some degree of foreign exchange controls, overseas brands and large-scale trade still face difficulties in receiving payments due to the Brazilian government’s strict control of its US dollar reserves. Egypt in North Africa faces similar foreign exchange control issues, with the government reluctant to allow US dollars to flow out. South Africa and Nigeria face similar situations. European duty-free zones present a slightly different situation.
Ivy: Regarding the broader discussion of RMB stablecoins, you retweeted an analysis report released by CICC. The report suggests that within the same currency zone, stablecoins may not necessarily offer advantages over existing payment systems in terms of payment convenience and security. So, in what ways do RMB stablecoins offer advantages over existing offshore RMB in international settlements?
Yuanjie: Frankly, I don’t think it will replace traditional banks. I think it’s a complementary relationship. Take USDT and USDC as examples. They haven’t replaced traditional banks’ payment channels yet.
I believe that cryptocurrencies complement the services of the global financial industry. Take USDT and USDC, for example. They not only serve trading and investment within the cryptocurrency community, but have also permeated the capillaries of the global financial system, providing solutions for those who are not covered by traditional financial services.
This phenomenon can be summarized as " banking the unbanked " and " serving the unserved ." The so-called “banking the unbank” refers to the fact that in some countries with weak financial infrastructure, the emergence of stablecoins has brought more than tenfold efficiency improvements compared to traditional cash payments. In contrast, in countries where credit cards and QR code payments are already common, this improvement is less significant.
“Serving the unserved” applies to countries excluded from international settlement systems due to sanctions, such as Russia, Iran, and North Korea. Cryptocurrency offers alternative financial services to these regions. Historically, as early as the Silk Road era, figures like Huang Zudu exemplify this practice.
The appeal of stablecoins lies in their role as a complement to the traditional financial system, not a replacement. I disagree with the unrealistic fantasy espoused by stablecoin issuers like Circle , who believe that giants like Walmart and Amazon will fully switch to stablecoin settlement to save 2-3% on credit card fees. This view overlooks the fact that traditional financial institutions not only cultivate commercial value but also encompass user habits, social responsibility, and compliance systems like Know Your Customer (KYC) and anti-money laundering. They serve the positive, positive, and compliant side of business and are the cornerstone of social order. The idea of completely replacing banks and card networks is unrealistic.
I think this is a very naive reasoning or logical extension. Take Instagram , for example. Facebook announced that it would support stablecoins, and Instagram provided an application scenario: when international fans tip influencers on Instagram, if they don’t have a bank card or US dollar credit card, they can use stablecoins to pay.
However, does this scenario seem too marginal? In addition, many crypto credit cards offer similar services to promote their use. For example, it is difficult for Chinese users to directly subscribe to ChatGPT’s monthly service, but they can complete the payment with a crypto credit card.
These cases are actually making up for the shortcomings of the global financial infrastructure, which is the inevitable mission of the crypto world.
I don’t think there’s any need to worry too much. The current global financial system is quite well developed. As the saying goes: everyone has their place.
Cryptocurrencies can complement the world rather than replace it.
Ivy: I’ve previously discussed with veterans in traditional finance the challenges stablecoins face before widespread adoption. Traditional banks and large investment banks rely on the SWIFT system for US dollar clearing and settlement, and all US dollar transactions are ultimately settled in New York.
Subsequently, large first-tier banks such as JPMorgan Chase may take the lead in carrying out settlement business.
This structure presents a hierarchical, network-like structure, demonstrating a high degree of centralization . The key to stablecoins ’ lightweight operation lies in their lack of compliance obligations, such as anti-money laundering (AML), know-your-customer (KYC), and know-your-transaction (KYT).
Traditional large banks assume these responsibilities, reserving funds and liquidity in each branch and payment institution to meet exchange demand. These become their funding and compliance costs , ultimately passed on to end consumers. Stablecoins , on the other hand , do not bear these burdens, making them more portable.
But when it needs to take on social responsibilities, can it still maintain this lightness? It’s hard to say, and I think it is indeed a difficult problem.
Yuanjie: Finance is essentially a state franchise , including the right to mint coins and operate banking businesses, which require a license in any country. This franchise exists to maintain social order.
Only when a state regime falters and loses control over its social and commercial systems can cryptocurrencies take advantage, as we have seen in Türkiye, Argentina, Brazil, and Ukraine.
However, the socioeconomic systems of the vast majority of countries in the world are operating stably, so stablecoins should not be expected to replace the existing banking system. This franchise is an important mechanism for maintaining social order.
Social order is ensured by the supreme state’s violent apparatus and the legitimacy of its law enforcement. In countries with strong sovereignty and strong financial systems , over-the-counter (OTC) transactions or cross-border exchange transactions may be completely official, with no private channels remaining.
For example, Circle , an onshore stablecoin, does not require OTC channels in the United States; users can trade directly through Coinbase. Of course, Coinbase needs to obtain the relevant license, which is essentially a franchise .
- Challenges and Solutions
Ivy: Returning to the business side, we were just discussing the issue of OTC liquidity. Currently, stablecoin adoption is increasing in countries with weaker financial systems. Establishing local OTC networks and securing liquidity is crucial. RMB stablecoins may face challenges with OTC networks in the future. Do they need to develop corresponding liquidity mechanisms?
Yuan Jie: The development of the RMB OTC network is a historical necessity , stemming from the diligence, wisdom, and innovative spirit of the Chinese nation. Of the major global exchanges, the so-called “Big Three” all originated in China.
After the September 4th Incident in 2017, these exchanges abandoned direct trading of RMB against digital currencies, instead developing a consumer-to-consumer market for digital currencies against USDT and USDT against RMB. This wasn’t due to political instability or severe RMB inflation in China, but rather to the Chinese people’s early embrace of digital currency innovation.
The digital currency was later decoupled from the RMB and pegged to USDT, which in turn was pegged to the RMB, thus forming this C2C model.
The current market is effectively a legacy one , shrinking rather than expanding. This is primarily due to regulatory loopholes and widespread application issues. While the C2C market is shrinking, its scale remains substantial. This shady network provides a gray channel for offshore RMB stablecoins and USDT to flow into the onshore RMB. From a regulatory perspective, this is a headache and a problem they are reluctant to address, but its existence cannot be denied.
Looking ahead, one possible scenario is to use Hong Kong as a springboard . Domestic companies seeking to settle in stablecoins could register in Hong Kong, thereby establishing funding channels with domestic businesses. Hong Kong may introduce policies allowing the settlement of Hong Kong stablecoins into offshore RMB held by banks, and then converting them into onshore RMB, if confirmed as trade transactions or regular transactions.
If the Hong Kong pilot program is successful, trade zones may be established in the Hainan Free Trade Zone (after its closure), Shanghai Lingang, Zhuhai Hengqin, and Belt and Road Initiative starting points (such as Chengdu). These zones will allow business registration, support local banks in accepting stablecoins for settlement, and improve trade procedures and taxation processes.
Under the constraints of customs clearance procedures, using stablecoins for normal transaction settlement, payment, or collection, and then remitting the funds to local banks for employee wages and procurement costs, is a feasible model and may become a future trend. Shanghai Lingang is rumored to be attempting to seize this opportunity, but given the current tightening of stablecoin regulations, Hong Kong may become a pilot zone.
Yiwu merchants widely use USDT for settlement, and the local government tacitly condones this practice. Faced with this objective business logic, rather than resisting it, it’s better to seek ways to regulate it. Professor Yun Zheng believes that RMB stablecoins are directly linked to banks and may not have over-the-counter (OTC) trading. However, at this stage, RMB stablecoins still rely on the USDT network. For example, the CNH stablecoin forms a trading pair with USDT, leveraging USDT’s consumer-to-consumer (C2C) liquidity.
In the future, cities such as the Shanghai Lingang Free Trade Zone and the Hainan Haikou Free Trade Zone are already exploring the establishment of specialized zones. Hong Kong , as a freely convertible city, could serve as a pioneer in these experiments. As development progresses, more cities across China may establish similar zones to centrally manage related trade activities.
Furthermore, some banks have begun to engage in the stablecoin business. For example, Chouzhou Bank, which specializes in stablecoin transactions, has attracted the attention of US regulators and even been added to the Swift sanctions list. This demonstrates the existence and substantial scale of the stablecoin business .
Some daring banks have even been secretly conducting such operations, and due to their large scale, they have attracted the attention of US regulators. So, how should we address this issue? Should we turn a blind eye, or hope for direct intervention by the authorities?