Alibaba Explores Deposit Tokens Amid China's Stablecoin Scrutiny

Alibaba Eyes Deposit Tokens as Stablecoin Alternative in China

Alibaba's cross-border e-commerce division is exploring the use of deposit tokens as a potential alternative to stablecoins, given the regulatory landscape in mainland China, according to a report by CNBC. Kuo Zhang, President of Alibaba, indicated that the company aims to utilize stablecoin-inspired technology to simplify overseas transactions. The proposed model involves deposit tokens, which are blockchain-based instruments representing a direct claim on commercial bank deposits and are treated as regulated liabilities of the issuing bank.

Unlike traditional stablecoins, which are typically issued by private entities and backed by assets to maintain their value, deposit tokens offer a direct link to regulated financial institutions. This development follows JPMorgan Chase's recent rollout of its own deposit token for institutional clients.

China's Stance on Stablecoins

The news also comes on the heels of reports that Ant Group and JD.com, prominent Chinese technology companies, have put their stablecoin issuance plans in Hong Kong on hold due to regulatory concerns from Beijing. These actions reinforce the notion that mainland Chinese authorities are actively working to prevent the emergence of a domestic stablecoin industry.

Earlier this year, both Ant Group and JD.com expressed interest in participating in Hong Kong's pilot stablecoin program or launching tokenized financial products, such as digital bonds. HSBC and the Industrial and Commercial Bank of China (ICBC), two of the world's largest banks, also reportedly shared similar ambitions in the Hong Kong stablecoin space.

Regulatory Pressures in Hong Kong

A report by Chinese financial outlet Caixin, which has since been removed, suggested that Chinese firms operating in Hong Kong might face pressure to withdraw from cryptocurrency-related activities. The report also indicated that policymakers could impose restrictions on mainland companies' investments in crypto assets and cryptocurrency exchanges.

In August, Chinese authorities reportedly instructed local companies to cease publishing research or hosting seminars on stablecoins, citing concerns about their potential use in fraudulent activities. Despite these restrictions, China does maintain some connections to the stablecoin space.

Offshore Yuan-Pegged Stablecoins

Conflux, a Chinese blockchain company, recently announced a new version of its public network and the introduction of a stablecoin backed by the offshore Chinese yuan. This stablecoin is primarily intended for use by offshore Chinese entities and countries involved in China's Belt and Road Initiative, rather than domestic use within mainland China.

Furthermore, a regulated stablecoin tied to the international version of the Chinese yuan has also been launched, targeting foreign exchange markets and unveiled at the Belt and Road Summit in Hong Kong. These developments suggest that widespread adoption of stablecoins within mainland China is unlikely, as Joshua Chu, co-chair of the Hong Kong Web3 Association, noted: "China is unlikely to issue stablecoins onshore."