Alibaba is considering a deposit token as part of its strategy amid China’s crackdown on stablecoins.
Chinese tech giant Alibaba is exploring the development of a deposit token as the mainland government continues its efforts to curtail the use of stablecoins within the country. This initiative, detailed in a recent report by CNBC, reflects a broader strategic shift by Chinese technology firms and aligns with a tightening regulatory environment surrounding digital assets. Alibaba’s president, Kuo Zhang, disclosed the company’s plans to leverage blockchain technology to streamline its cross-border e-commerce operations, a key area of growth for the company. The proposed deposit token operates on a similar principle to traditional stablecoins, representing a direct claim on commercial bank deposits and treated as a regulated liability by the issuing bank. This approach distinguishes it from privately issued stablecoins, which are secured by assets to maintain their value.
The move by Alibaba follows closely on the heels of JPMorgan Chase’s own rollout of a deposit token targeted at its institutional clients. This signals a growing acceptance of blockchain-based financial instruments among major global financial institutions. However, the development is unfolding against a backdrop of significant regulatory pushback from Chinese authorities, who have repeatedly voiced concerns about the potential for stablecoins to facilitate illicit activities and undermine the nation’s financial stability. This has led to the suspension of several stablecoin projects within mainland China, including those proposed by Ant Group and JD.com, following expressions of disapproval from policymakers in Beijing.
The Chinese government’s stance has been particularly firm, with reports emerging that the country’s technology giants may be compelled to withdraw from cryptocurrency-related activities altogether. Regulatory actions have extended beyond just stablecoins, encompassing restrictions on mainland companies’ investments in cryptocurrency and limitations on cryptocurrency exchanges. In August, authorities instructed local firms to cease publishing research and holding seminars focused on stablecoins, emphasizing the perceived risk of fraudulent exploitation. Despite these obstacles, Alibaba isn’t abandoning entirely digital assets. The company is pursuing a distinct strategy through offshore yuan stablecoins.
Notably, blockchain firm Conflux recently announced its third public network version, introducing a stablecoin secured by offshore Chinese yuan. This stablecoin is specifically designed to serve offshore Chinese entities and countries participating in China’s Belt and Road Initiative, indicating a targeted approach aimed at facilitating international trade and investment while remaining outside the direct control of mainland regulators. This strategy reflects a desire to capitalize on global trade opportunities without directly confronting China’s restrictive policies regarding domestic stablecoin issuance.
Furthermore, a regulated stablecoin tied to the international version of the Chinese yuan was launched at the Belt and Road Summit in Hong Kong, highlighting the government’s intent to position the currency within international financial markets. Several experts, including Joshua Chu, co-chair of the Hong Kong Web3 Association, have expressed a cautious outlook on the prospect of Chinese stablecoins circulating onshore. Chu’s assessment—that China is “unlikely to issue stablecoins onshore”—underscores the substantial regulatory headwinds currently facing the development of this technology within the country. The ongoing situation underscores a delicate balancing act for Chinese authorities, attempting to harness the potential benefits of blockchain technology while maintaining control over its financial system and addressing concerns related to illicit activities.
