Who would have thought? "Rooted and pure" Liu Qiangdong and Lei Jun are also venturing into stablecoins.

On July 18, 2024, the Hong Kong Monetary Authority announced the list of the first participants in the "Stablecoin Issuer Sandbox." The initial list includes three issuers: JD Coin Chain Technology (Hong Kong), Yuan Coin Innovation Technology, and the joint application from Standard Chartered Bank, Animoca Brands Limited, and Hong Kong Telecommunications (HKT).

At the same time, Hong Kong licensed virtual bank Airstar Bank announced on its official website that it has collaborated with JD Coin Chain Technology (Hong Kong), a subsidiary of JD Group, under the Monetary Authority's stablecoin policy sandbox. Airstar Bank will assist JD Coin Chain Technology (Hong Kong) in exploring a new cross-border payment solution based on stablecoins.

This Tianxing Bank has quite a background itself. It officially became a licensed bank under the Hong Kong Monetary Authority on May 9, 2019, and officially started operations on June 11, 2020. Its largest shareholder is Xiaomi Group.

Star Bank collaborates with JD Coin Chain Technology (Hong Kong), and this event holds milestone significance, meaning that JD Group founded by Liu Qiangdong and Xiaomi Group founded by Lei Jun are gathering in Hong Kong to jointly attack the stablecoin market.

Bitcoin continues to plummet; can stablecoins seize the opportunity to rise?

Let's first understand what stablecoins are.

In simple terms, stablecoins are key tools that connect Crypto Assets and fiat. Their existence is much like that of a "matchmaker" between fiat and Virtual Money, bridging the two sides and making transactions smoother. Nowadays, stablecoins have a wide market demand and significant profit potential.

Recently, the market for Virtual Money has been extremely unstable. Even the highly authoritative Bitcoin has not escaped this intense period of turbulence. On August 4, Bitcoin fell below the $60,000 mark; on August 5, Bitcoin again fell below $50,000. As for Ether, it directly dropped below $2,100. Such erratic trends in Virtual Money have inevitably caused concern among many investors.

However, it is precisely because of this that the importance of stablecoins is even more pronounced. According to the bank for international settlements' definition of stablecoins—cryptocurrency that is pegged to the value of fiat or other assets. This means that stablecoins aim for exchange rate parity relative to fiat, and "stability" is its greatest feature, as well as its most attractive aspect.

Stablecoins are currently thriving, with a scale exceeding one hundred billion dollars.

In terms of maintaining "stability", stablecoins can be divided into: fiat-backed stablecoins, such as USDT and USDC; crypto-backed stablecoins, such as DAI and USDe; and algorithmic stablecoins, such as FRAX. Among them, fiat stablecoins are currently the mainstream stablecoins.

In terms of the underlying assets, apart from PAXG and other stablecoins pegged to gold prices, 99% of stablecoins are pegged to the US dollar at a 1:1 ratio. In terms of market capitalization, the total market capitalization of all stablecoins currently exceeds 160 billion USD. Among them, the US dollar stablecoin USDT issued by Tether in the US dominates, accounting for over 70%, forming an undeniable monopoly.

Currently, Hong Kong is striving to develop the virtual asset market, and stablecoins have become an indispensable part of it.

Is Liu Qiangdong and Lei Jun's layout of stablecoins sending positive signals?

Although stablecoins are known for their "stability" and differ from alts and scamcoins that simply play people for suckers, the policies in mainland China have always prioritized "stability," and even stablecoins are subject to strict regulation.

But now, as a well-known domestic company, JD.com is actually taking the initiative to issue stablecoins in Hong Kong, which is bound to spark a wave of discussions in the industry. Everyone seems quite willing to view "JD.com’s layout of stablecoins in Hong Kong" as a positive signal.

Of course, JD's statement is still relatively cautious. JD Coin Chain Technology stated on its official website, "Although we have been included as one of the participants in the 'sandbox' list by the Hong Kong Monetary Authority, this does not mean that we have received any recognition or authorization from the Hong Kong Monetary Authority, nor should it be viewed as having obtained a stablecoin issuance license." It can be seen that in this "statement," JD did not definitively state that it has been authorized to issue stablecoins, likely to leave some room for maneuver.

However, according to the information released from various parties, JD.com has definitely obtained authorization from the Hong Kong government.

Once JD obtains the final authorization for the issuance of stablecoins, a series of subsequent issues are worth following and thinking about.

For example, what role will JD.com play? Will it be merely an issuer, an infrastructure provider, or will it help other companies issue brand stablecoins? Moreover, the development of stablecoins is likely to provide new opportunities for reforming the financial system. In this context, will JD.com deeply engage in this wave, or will it focus solely on expanding its own e-commerce cross-border payment business? Since stablecoins must have 100% reserves, how much reserve can JD.com's stablecoin have today, and how should the price of the stablecoin be maintained? Currently, the stablecoin market is dominated by USDT. In this situation, can JD.com's stablecoin stand out, effectively respond to bank run risks, and handle the strong regulatory pressures from policymakers?

It can be seen that even if JD successfully obtains the issuance of stablecoins, it will still need to face a series of challenges. However, as long as JD can issue stablecoins pegged to the Hong Kong dollar as planned, it will instill more confidence in the market.

According to reports, the upcoming JD-HKD stablecoin will be backed by sufficient Hong Kong dollar reserves held by JD Coin Chain Technology, maintaining a 1:1 exchange rate with the Hong Kong dollar. Holders can exchange Hong Kong dollars online or offline at this exchange rate at any time without paying any fees. For ordinary users, holding the JD-HKD stablecoin means its price will remain in sync with the Hong Kong dollar price, thereby avoiding the common issue of severe price fluctuations seen in crypto assets like Bitcoin.

For JD itself, exploring new business models and profit points may be an important reason for its entry into the stablecoin market. Historically, JD's core e-commerce business has faced growth bottlenecks, and logistics is currently in an optimization phase, making the exploration of new growth points in digital finance particularly crucial. Cryptocurrency payments can provide companies with new profit opportunities; for example, the parent company Tether achieved a net profit of $6.2 billion in 2023, while the total number of employees at the company is only around 100. Therefore, for JD, whose profits are significantly lower than its competitors, targeting the most profitable and easily accessible stablecoin business seems only reasonable. Once it seizes this opportunity and trend in stablecoins, JD can complete a new transformation and metamorphosis.

With the issuance of stablecoins pegged to the Hong Kong dollar, how far off can the future of the renminbi stablecoin be?

As mentioned earlier, if JD successfully issues a stablecoin, the stablecoin will be pegged to the Hong Kong dollar. However, both JD's blockchain technology and Tianxing Bank have their "roots" in the mainland, and their backers, Liu Qiangdong and Lei Jun, also have "strong roots". One can't help but wonder, how far can the future of the RMB stablecoin be?

As the fiat currency of the world's second-largest economy, the importance of the Renminbi in the international economic system goes without saying. It can be said that the Renminbi already has the capital to serve as collateral for stablecoins. There have also been several attempts in this regard: for example, TRON launched the Renminbi stablecoin TCHN; Tether, which issues the USDT stablecoin, launched the Renminbi stablecoin CNHT, among others.

However, given the current forex policies and Virtual Money policies in China, the issuance of a RMB stablecoin still requires ongoing groundwork and promotion. Using offshore RMB (or RMB assets) as collateral is one of the more feasible options. Offshore RMB stablecoins not only benefit the ecological prosperity of the Hong Kong and even international Crypto Assets market, but also contribute to the internationalization of the RMB.

Stablecoins connect the entire virtual asset market, and the renminbi stablecoin will expand the usage space and innovative business models for offshore renminbi, facilitating its circulation. As the integration between the virtual asset market and traditional markets increases, offshore renminbi through stablecoins may create an ever-richer array of use cases and trading ecosystems. Hong Kong, as the world's largest offshore renminbi trading market, indeed has unique conditions for the development of renminbi stablecoins.