Shanghai takes root, Hong Kong blossoms: the "dual-track acceleration" of digital RMB and offshore RMB stablecoin.

Written by: Ye Kai, Huaxia Digital Capital

Introduction

Today, some rumors emerged: "JD Ant was rejected by the central bank for withdrawing from the stablecoin license," and then many influencers quickly deleted it, which shows a lack of intelligence. Although the Hong Kong stablecoin regulations combined with the new guidelines seem to impose many restrictions that may seem to invalidate them, what is the underlying logic? It is more about restricting US dollar stablecoins to leave space for offshore RMB stablecoins; restricting retail stablecoins to first develop a larger institutional market for stablecoins.

JD Ant was rejected by the central bank, not because it was withdrawn from the stablecoin license, but likely due to the rejection of the offshore RMB stablecoin. Joycoin's goal is to be a Hong Kong dollar stablecoin. The offshore RMB stablecoin is expected to first come from Chinese-funded institutions involved in banking operations (in Hong Kong, Chinese-funded institutions refer to central state-owned enterprise financial institutions based in Hong Kong), rather than JD Ant.

From this topic, let's talk about the possibility of Hong Kong stablecoins, offshore RMB stablecoins, and digital RMB. Here, in order not to add to the regulatory burden, I would like to clarify: the story is purely fictional and should not be taken literally.

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Two days before the official implementation of the "Stablecoin Regulation" in Hong Kong, Phoenix News Network's Digital Economy Channel interviewed Huaxia Digital Capital for their interpretation of the stablecoin regulation, during which they asked a question: Can you compare and describe the relationship between the digital RMB and stablecoins in a more vivid way? I use a large tree as a metaphor: the digital RMB and offshore RMB stablecoins are like a new financial tree, taking root in the "black soil" of the Shanghai Lingang Free Trade Zone, with the trunk composed of the data pulse of the digital RMB backed by the central bank, and the branches and leaves stretching in the sea breeze of Hong Kong, bearing offshore fruits of "CNHC". The growth of this plant is planned, not mechanized, but organically symbiotic. The digital RMB and offshore RMB stablecoins do not replace each other; rather, they promote the circulation of the RMB globally together through a "dual-track" model.

Roots, stems, and leaves: How to understand the "dual-track" model

1. Shanghai's Root System: Deeply Anchored in the Real Economy

As the largest onshore RMB center, the Shanghai Lingang Free Trade Zone is seen as the root system of this plant, supporting the core ecosystem of the RMB. Cross-border e-commerce, automobile exports, and green energy equipment "large B2B settlement" transactions within the electronic fence utilize digital RMB as the entry point, which is then converted into the CNHC stablecoin in the Hong Kong sandbox through the central bank interface, allowing enterprises to make payments on the blockchain. This model ensures that funds remain within the trade closed loop, unaffected by external capital flows. Through this method, enterprises can complete payments in minutes, far exceeding the 2-3 days settlement time required by traditional SWIFT.

The goal of the root system is to inject sufficient liquidity into the RMB stablecoin through these bulk transactions, with an optimistic expectation that by 2030, the scale of cross-border payments could reach 1 trillion yuan, on-chain RWA financing could reach 500 billion yuan, gradually expanding the international influence of the RMB.

2. Digital Renminbi: The Resilient Stem Standing at the Center

The digital renminbi is like a sturdy pipeline, carrying the payment network of the renminbi. It connects the roots in Shanghai and the branches in Hong Kong, playing a crucial connecting role. In Shanghai, the digital renminbi mainly handles domestic renminbi fund borrowing and foreign exchange settlement; once the funds cross borders, they are converted in bulk into CNHC through the central bank interface before entering the overseas market.

This design of central control ensures the effectiveness of regulation while providing flexible channels for the flow of funds. Through this "cold and warm exchange valve", the central bank can effectively supervise the flow of funds both domestically and internationally, while allowing sufficient freedom to support cross-border payments.

3. Hong Kong CNHC: Green branches facing the world

As the largest offshore Renminbi center, Hong Kong, the international financial center, acts like the branches and green leaves of this plant, facing the global market. CNHC, in addition to serving as a blockchain consensus "note" for Renminbi-denominated assets, is also designed as a small payment tool suitable for cross-border payments, enabling rapid circulation on a global scale. The requirements of the Hong Kong Monetary Authority are very strict, ensuring that each CNHC can be anchored 1:1 to Renminbi cash or highly liquid notes, and allowing multi-chain issuance.

The CNHC in Hong Kong can not only serve international trade and capital flows but also play an important role in the fields of green electricity computing assets, energy mineral resources, and the tokenization of Hong Kong stocks for RMB-denominated assets. Market research indicates that if the CNHC can achieve a 4-fold leverage, it would be sufficient to support an annual trade clearing volume of 40 trillion RMB. This positions the RMB to gradually compete with USD stablecoins in East Asia, Central Asia, the Middle East corridor, and global trade.

How to make the root system provide nutrients for CNHC leaves

The entire flow of funds resembles a sophisticated ecosystem, ensuring the liquidity and operability of offshore RMB stablecoins in the international market. Below is a hypothetical process of RMB fund circulation (purely fictional, please do not take it literally):

(1) FT accounts and electronic fence chain: In the Shanghai Free Trade Zone, the Renminbi is first converted through FT accounts into digital Renminbi that can be used overseas, and is subject to regulation.

(2) Central Bank Cross-Border Four-Way Valve: The central bank conducts identity and trade authenticity verification through the "Cold and Warm Exchange Valve" to ensure compliance.

(3) Hong Kong-Shanghai Dual Domain Bridge: Funds flow from Shanghai’s digital RMB into the reserve pool of custodial banks in Hong Kong in bulk, converting into Hong Kong's CNHC.

(4) Multi-chain synchronous minting: CNHC is issued synchronously by licensed Hong Kong stablecoin issuers on multiple blockchain platforms based on reserve balances, covering Ethereum, Solana, BNB Chain, and more.

(Reverse redemption: Users can exchange CNHC for digital yuan and return to the domestic market through the Hong Kong clearing settlement bank (Bank of China Hong Kong) or market makers via the Four-Way Valve.

This entire process is like a "three-prevention tunnel" in the financial market, which not only prevents capital outflow but also ensures trade compliance. For eligible enterprises and individuals, this process is almost a "fast pass".

Dual-track regulatory technology system

To ensure the safety and compliance of cross-border fund flows in renminbi under the "dual-track model", regulatory agencies in Shanghai and Hong Kong can respectively build a tight and efficient regulatory technology system:

In Shanghai, the core of the "FT Account" and "Electronic Fence" technology is established through the creation of dedicated Free Trade Accounts (FT Accounts), allowing for closed-loop flow of funds within the accounts and precise monitoring. This is complemented by the collaborative management of fund inflow and outflow by the central bank and commercial banks, ensuring that every cross-border fund movement is based on real trade backgrounds. At the same time, the electronic fence technology is utilized for precise control and tracking of fund usage, ensuring that funds are only used for compliant cross-border trade payments. The central bank in Shanghai sets up a cross-border four-way valve with an "Identity Verification and Authenticity Review" interface for cross-border mass conversion of digital RMB to CNHC, conducting authenticity and compliance reviews on a case-by-case basis before the conversion. Using on-chain and off-chain data fusion technology, dynamic real-time risk monitoring is performed through AI and big data analysis to prevent money laundering and capital flight risks.

In Hong Kong, based on the "Stablecoin Regulation", the Hong Kong Monetary Authority requires stablecoin issuers to establish a strict "Reserve Asset Custody and Transparency Mechanism", by appointing local custodian banks (such as Bank of China Hong Kong) to conduct isolated custody and regular audits of CNHC reserve assets. This utilizes the "Proof of Reserve" technology on the blockchain to achieve real-time reconciliation and synchronization of on-chain reserve balances with off-chain custodial funds. Moreover, the multi-chain issuance process of CNHC relies on the immutability of distributed ledgers and on-chain tracking technology. It utilizes on-chain smart contracts to achieve real-time registration, tracking, and permanent traceability of transaction histories for each cross-chain asset, ensuring that the flow of funds is completely transparent and regulatory-compliant.

Through the comprehensive set of regulatory technological means mentioned above, Shanghai and Hong Kong can establish a stringent cross-border fund supervision system. Every movement of funds on the blockchain can be precisely monitored and traced back to its original source, preventing illegal outflow of funds while ensuring the efficient operation and security of cross-border payments. This innovative regulatory technology that links both regions provides a solid regulatory foundation and technical support for the future internationalization of the Renminbi and the global circulation of offshore Renminbi stablecoins.

The significance, risks, and challenges of a dual-track system.

The dual-track model of "Digital Renminbi + Renminbi Stablecoin" is not simply a division into two parts, but rather a balanced design that takes into account efficiency and security, central bank regulation and market vitality. From the perspective of payment efficiency, relying solely on the central bank-led digital renminbi system, while stable and compliant, has limited cross-chain capabilities due to its operation on a permissioned blockchain, making it difficult to cover the global 7×24 hours real-time cross-border transaction needs. On the other hand, if we completely rely on the market-oriented offshore renminbi stablecoin CNHC, it may easily face systemic risks such as fluctuations in reserve assets and failures in risk control. Once it becomes unpegged, it could trigger a confidence crisis.

The dual-track system is precisely designed to solve this "dilemma": the digital renminbi acts as the main road, responsible for ensuring sovereignty, identity compliance, and the legitimate flow of funds; CNHC serves as the auxiliary roads and branches, extending rapidly and flexibly, and at low cost to every corner of the world where there is a demand for renminbi.

As emphasized by the Bank for International Settlements (BIS): "Central banks are the main roots, while private institutions are branches." The key to the dual-track system lies in the central banks holding fundamental control while allowing market forces to extend the boundaries.

Of course, this architecture is not without challenges. For example, if interest rates in Hong Kong fluctuate significantly and the returns on reserve assets do not keep pace, CNHC may be subject to concentrated sell-offs, leading to decoupling risks; moreover, in regions where policies are still unclear, the extension of the chain may be interrupted, affecting the trade loop; additionally, if the central bank-led cross-border system experiences technical failures, the bridge between the dual tracks may also fail. Therefore, the future of the dual-track system is both full of imaginative possibilities and requires multiple safeguards from institutions, technology, and global coordination.

In summary, the "dual-track model of digital renminbi and offshore renminbi stablecoins" reflects a delicate balance between financial technology and policy regulation. Shanghai, as the root ecosystem for onshore renminbi, and Hong Kong, as a global offshore renminbi financial hub, are forming a powerful synergy that is gradually pushing offshore renminbi stablecoins (CNHC) onto the global stage. Although this process comes with technological, policy, and market risks, under the collaborative effects of clear regulation, effective risk control, and technological innovation, the dual-track model of renminbi is expected to become a highly competitive innovative paradigm in the internationalization process of the renminbi. Looking ahead, with more policy coordination and technological improvements in various global regions, more global assets are likely to be priced in offshore renminbi stablecoins, giving renminbi a more proactive and critical position in the global digital economy wave.