Morgan Stanley analysts suggest that yuan stablecoin initiatives in Hong Kong may act as a testing ground for Beijing’s digital currency, though significant economic challenges could hinder the yuan’s international potential. This perspective underscores Hong Kong’s strategy in positioning itself as a launch pad for yuan-pegged stablecoins, leveraging its pioneering regulatory framework to enable real-world cross-border transactions. According to analysts led by Robin Xing, this framework could expand the scope of the digital yuan globally. The implementation of Hong Kong’s Stablecoins Ordinance on August 1, 2025, introduces the world’s first comprehensive regulation for fiat-backed stablecoins.
Under this legislation, anyone issuing such stablecoins must obtain a license from the Hong Kong Monetary Authority (HKMA). This regulatory milestone places Hong Kong at the forefront of global digital asset governance and establishes a robust foundation supported by an estimated offshore yuan liquidity pool of around 1 trillion yuan ($139 billion). Notably, several institutions, including JINGDONG Coinlink Technology and a coalition involving Standard Chartered Bank, are already participating in the HKMA’s stablecoin sandbox program. While the potential of stablecoins in facilitating swift cross-border transactions appeals to multinational corporations, Morgan Stanley cautions that fundamental economic difficulties could obscure the yuan’s global aspirations.
Their research highlights a declining trend in the yuan’s share of global reserves, which dropped from 2.8% in 2022 to 2.2% in 2024. Challenges such as rising debt, deflation, and demographic pressures have complicated capital flows and diminished confidence in the yuan. Current global trends in stablecoin regulation, including the US’s GENIUS Act, illustrate the competitive landscape shaping the future of digital finance. Observers will closely monitor how Hong Kong’s Stablecoins Ordinance influences market dynamics and China’s ambition to internationalize the yuan.
For success, analysts advocate for structural reforms in China to restore confidence in its growth prospects and promote a favorable regulatory environment.