The Crossroads of Digital RMB: Examining the Dilemmas and Future of RMB Stablecoin from a Withdrawal and Reinvestment Perspective

Author: BlockWeeks

Recently, the narrative surrounding the digitalization of the renminbi has presented two starkly contrasting yet intrinsically linked scenarios. On one side, multiple media outlets have revealed the mainland regulatory authorities' cautious attitude towards enterprises applying for stablecoin licenses and related offshore digital asset businesses in Hong Kong, akin to lighting a cautious "signal light"; on the other side, an offshore renminbi stablecoin named AxCNH has quietly emerged under the regulatory framework of Kazakhstan, targeting trade settlement along the "Belt and Road" initiative, carving out a shrewd "flank" route.

The "one withdraw, one deposit" is not a contradiction, but precisely outlines the core dilemma faced by the digital RMB stablecoin in the past, present, and future: How to respond to the global market's immense demand for a programmable and highly efficient digital RMB under the "absolute red line" of national financial sovereignty and capital controls?

Primal Wilderness and Prelude - The "Prehistoric Era" of the RMB Stablecoin

Before the official regular army entered the scene, the landscape of the Renminbi stablecoin had already been cultivated by the spontaneous forces of the market. This "prehistoric era" was mainly composed of two forces:

1. Transaction Medium in the Gray Area: Represented by CNHt
   • Product Form: Some issuers, including Tether, have launched stablecoins pegged to the offshore Chinese Yuan (CNH), such as CNH₮ (CNHT). These tokens are visible on multiple crypto data platforms and exchanges and are used for fiat channels and transaction settlements. Issuers typically claim to have reserve support, but the transparency and auditing of these reserves have always been a focus of market attention.
   • Core Functionality: Its birth was not for the internationalization of the Renminbi, but rather as a "fiat currency deposit and withdrawal channel" within cryptocurrency exchanges. It provides users in Chinese-speaking regions with a tool to bypass regulations and conveniently enter and exit the cryptocurrency market, while also becoming a covert channel for capital flow to a certain extent. The existence of tokens like CNHt itself is a strong market signal. It proves that there is a huge, unmet demand for digital Renminbi on the market side. However, its unregulated nature, along with its natural association with sensitive terms like "capital outflow", makes it difficult to achieve sovereign recognition and widespread retail adoption, thus becoming a focus of concern for regulatory agencies. Its historical mission is to verify the feasibility and risks of the track before official entry.
2. The Official Legitimate Successor: The Grand Narrative of Digital Renminbi (e-CNY)
   • Product Form: The central bank digital currency issued by the People's Bank of China (CBDC) is a digital form of legal currency and belongs to the central bank's liabilities (M0), carrying national credit. Its design leans towards centralization and a permissioned system, emphasizing controllability over currency circulation and identity verification.
   • Core Functionality: Its primary goal is internal, that is, to optimize the domestic retail payment system, break the existing mobile payment pattern, improve the transmission efficiency of monetary policy, and achieve "controllable anonymity". However, commercialization and large-scale promotion need to overcome the complexities of technology, compliance, and inter-organizational integration. Its cross-border payment function, such as the exploration through mBridge ( Multilateral Central Bank Digital Currency Bridge ), remains in a cautious experimental stage. Fundamentally, e-CNY is not a "stablecoin" in the cryptocurrency sense. It is a centralized, permissioned system, and its design philosophy is "control" rather than "openness". The development path of e-CNY clearly indicates that the highest priority of the Chinese authorities regarding the digitization of currency is **to maintain national financial sovereignty and the independence of monetary policy. All technological applications must serve this highest goal.

These two paths, one is the market's bottom-up barbaric growth, and the other is the state's top-down design. The two have essential differences in goals, governance, and regulatory attributes: the former represents innovation and flexibility, while the latter represents market sovereignty and controllability. They have had almost no intersection in the past few years, developing in parallel, and together they constitute the prelude to the RMB stablecoin.

Hong Kong Experiment - Ideals, Reality, and the Invisible Hand

As Hong Kong vigorously promotes itself to become a global virtual asset center, a new possibility has emerged: Can an offshore RMB stablecoin that is compliant, controllable, and interconnected with the global crypto ecosystem be created in this unique "one country, two systems" window of Hong Kong?

This was the most optimistic expectation of the market. The Hong Kong Monetary Authority's regulatory sandbox for stablecoins is seen as an incubator tailored for the "Hong Kong Dollar stablecoin" and even the "offshore Renminbi stablecoin". The market widely speculated that financial giants with state-owned backgrounds would be the first to enter, issuing CNH stablecoins tacitly approved by the authorities, which would be an excellent springboard for the internationalization of the Renminbi.

However, recent media reports have poured cold water on the situation. The mainland regulation's "window guidance" has clearly conveyed several core concerns:

• Firewall against Financial Risks: How can a freely circulating CNH stablecoin on the public blockchain ensure it does not become a new tool for circumventing mainland capital controls? Will issues such as price volatility and reserve security adversely impact financial stability in the mainland?
• Extension of Monetary Sovereignty: In the offshore market, issuing a digital currency pegged to the renminbi raises the question of who holds the issuance rights, governance rights, and clearing rights? This directly touches upon the core issue of monetary sovereignty.
• Conflict with the Positioning of e-CNY: If a CNH stablecoin issued by a commercial institution circulates widely around the world, will it weaken e-CNY's strategic layout in the cross-border payment field?

Behind this is the classic "Mundell's Impossible Trinity" theory projected into the digital age. This theory states that a country cannot simultaneously achieve free capital movement, fixed exchange rates, and an independent monetary policy. An ideal, public chain-based CNH stablecoin inherently possesses the attribute of "free capital movement." Our country's core demand is to maintain a relatively stable exchange rate and an absolute independent monetary policy. This means that the free movement of capital is precisely a link that must be strictly restricted.

Therefore, the prudent attitude of the mainland regulators does not negate Hong Kong's innovation, but is an inevitable choice made in the face of this fundamental structural contradiction. Before the controllability is absolutely guaranteed, any gates that may threaten the effectiveness of capital controls will not be opened easily.

Inspiration from a New Model - Exploration in Specific Scenarios

As the "Main Street" of Hong Kong seems to be obstructed, the emergence of AxCNH provides a case of a "side path". The characteristics of this model offer us a new perspective to observe the industry:

• Choose Regulatory Path: It did not apply positively in mainstream but strict regulatory areas like Hong Kong or Singapore, but instead chose a region that is relatively friendly to cryptocurrencies and geopolitically closely related to China as its registration and licensing location.
• Focus on Specific Narratives: It strives to avoid portraying itself as a cryptocurrency aimed at retail investors for speculative trading. Instead, it positions itself as a B-end fintech tool serving specific strategies (such as the "Belt and Road Initiative"). Its announced partners are large corporate entities, and the application scenario is cross-border trade settlement.
• Limited Risk Scope: By focusing on specific scenarios and particular partners, this model confines its business scope and potential risks to a relatively narrow and controllable range. This significantly reduces the likelihood of risk spillover compared to a stablecoin that is open to everyone on a public chain.

This model can be seen as an adaptive strategy to the current environment. It does not attempt to challenge the red lines of capital controls, but instead seeks survival space in a sensitive regulatory environment by positioning itself as an "industrial tool" rather than a "general financial product."

Although this model may face challenges in liquidity, universality, and market credibility, it represents a potential path for the private sector to explore RMB stablecoins in a strongly regulated environment: that is, to abandon the grand goal of becoming a general currency and instead become a specialized settlement tool within specific industry chains or ecosystems.

However, it is important to emphasize that such practices still face challenges in compliance and business sustainability: cross-border clearing connectivity, sources of reserve funds (especially involving foreign exchange controls), and the implementation of redemption mechanisms are key variables that determine whether they can be scaled and sustained long-term. In other words, the ability of the side path to go further depends on whether a clear and regulatory-acceptable compliance chain can be built in terms of law, foreign exchange, and business connectivity.

Outlook Ahead —— The Triptych of Digital Renminbi

Based on the above analysis, the future of the renminbi stablecoin is unlikely to be a single path, but is more likely to evolve into three parallel paths that occasionally intersect:

1. Path One: Official Sovereign Layer — e-CNY's "Walled Garden"
   • Core: e-CNY will continue to be the officially recognized sole digital legal currency, accelerating its domestic adoption. Its cross-border application will mainly be facilitated through mBridge and other central bank-led, multilateral, and permissioned clearing networks, achieving point-to-point "wholesale" cross-border payments.
   • Features: Safe, controllable, and compliant. However, efficiency and openness will be limited by the complexity of multilateral negotiations and system integration. This is a "strong control" path centered on sovereign credit.
2. Path Two: Offshore Compliance Layer - Hong Kong's "Limited Open" Sandbox
   • Core: The mainland's cautious attitude is not a permanent ban. In the future, as regulatory technology and frameworks mature, it is likely that a few well-established institutions with strong risk control capabilities will be approved to issue highly restricted CNH stablecoins in Hong Kong.
   • Features: This stablecoin may be based on permissioned chains or public chains with a whitelist mechanism, and transactions will be subject to strict KYC/AML reviews and monitoring. Its main function will be to serve institutional-level financial market operations such as commodity trade and bond connect, rather than retail and crypto trading. This represents a "semi-open" path that is stress-tested within sovereign boundaries.
3. Path Three: Market Application Layer —— "Deep Cultivation" in Specific Scenarios
   • Core: There may be more projects that draw on the ideas of the above-mentioned sideline path, abandoning illusions about the mainstream market and instead delving into a specific industrial scenario, such as trade settlement in specific countries, supply chain finance, cross-border e-commerce, etc.
   • Features: These projects will present high levels of scenario-based, vertical, and fragmented elements. Their success or failure does not depend on the bull or bear market of cryptocurrency, but rather on whether they can truly reduce costs and increase efficiency for specific industries. This is a "pragmatic" path to avoid direct regulation and serve the real economy.

Conclusion

The development of the Renminbi stablecoin is essentially a microcosm of the eternal game between global liquidity in the digital age and the financial sovereignty of a single country. From the early chaotic days of CNHt to the national will of e-CNY, and then to Hong Kong's institutional ambitions and the market participants' innovative paths, what we see is not a linear evolution, but a complex ecology of multiple forces testing, compromising, and coexisting with each other.

The prudent guardianship of mainland regulation is the bottom line for national financial security, while market innovation demonstrates its strong resilience. In the future, the landscape of the digital renminbi will not be singular; it will be a "trio" composed of the solemn main melody of e-CNY, the prudent concerto of compliant stablecoins from Hong Kong, and the flexible variations of numerous scenario-based stablecoins. And the conductor of this musical piece will always be that invisible yet powerful hand pursuing "stability" and "controllability."