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Stablecoins are perfect for anyone wanting to evade sanctions, launder money, or engage in all manner of crime. Back in 2024, in a Bank of Canada staff working paper, Jonathan Chiu and Cyril Monne argued that issuing an interest-bearing central bank digital currency that was properly anonymous would be the quickest way to kill them. Or as they put it:
When they pay a high interest rate and guarantee a high degree of anonymity, these tokenized currencies [CBDCs] crowd out stablecoins as payment methods in the crypto space. Conversely, with low anonymity and low interest rates, tokenized currencies become collateral, promoting the development of stablecoins. CBDCs dominate tokenized deposits because a central bank can better economize on scarce collateral assets and internalize the social costs of crypto activities.
You know who hates stablecoins and loves CBDCs? The Chinese government. They hate stablecoins so much that they’re currently banned — which is perhaps a more direct way to kill their popularity versus tweaking incentives along the lines outlined in the Bank of Canada report.
Sure, Chiu and Monne’s work might not really apply given the doubtful anonymity of digital yuan transactions. Moreover, the PBoC — like pretty much every major central bank we’ve looked at that’s developing a CBDC — has decided not to pay interest on its digital currency, perhaps making that the entire framework a red herring? Maybe. Until now.
Because Lu Lei, deputy governor of the People’s Bank of China, laid out in an article for Chinese state media just over a week ago what Daragh Maher, Head of Digital Assets Research for HSBC, calls a “seismic shift in the planned make-up and nature of the digital RMB”.
As a reminder, China’s CBDC has been around since 2020 in various pilot and expanded pilot forms. Analysts have generally sneered at the low volume of CBDC transaction volumes, but (if official numbers can be trusted) these appear to have picked up of late.
Since launching the e-CNY back in 2020 the PBoC reckons there were a cumulative seven trillion yuan of transactions ($1tn) through June last year. But through November, Lu Lei says this number has jumped to RMB 16.7tn ($2.35tn); small beer in an economy that saw RMB 1,503tn in non-cash transactions in Q3 2025 alone, but less small.
Read through Google Translate, Lei’s article is pretty turgid stuff. But tl;dr: China is ready to lean in to interest-bearing tokenised deposits, and lean in hard.
What even is a tokenised deposit, and how is it different to a stablecoin?
In simplest terms, stablecoins are cryptoassets designed to maintain a stable value not covered by deposit insurance issued by an entity that you kind of hope is good for the money. Whereas a tokenised deposit is a blockchain representation of an actual bank deposit held at a regulated financial institution subject to banking regulations and supervision — that you kind of hope is good for the money, but tends to have a government sitting behind it when things go south.
As HSBC’s Maher puts it, Chinese “tokenised deposits would operate within existing regulatory guardrails relating to anti-money laundering, countering terrorist financing, and preventing tax evasion.” And for the tech nerds:
digital RMB would remain account-based, with RMB balances held in wallets that are legally accounts. But the digital RMB can represent these balances as “coin string” serialised units (i.e. each element has its own serial number) and therefore be used in the execution of smart contracts and, for example, potentially interoperate with tokenised assets. China is saying blockchain is a tool for using digital money, not necessarily the foundation for digital money.
So sort of interest-bearing state-insured stablecoins, without the crime.
About that ‘crime’
Tech-bros tend to be quick to observe that crime existed before crypto came along, and on this point they’re obviously right. They’re also right that CBDCs offer surveillance potential, if such features are incorporated into the initial design, for any state hell-bent on tracking its enemies. And it’s not like China doesn’t have game in invasive electronic surveillance.
Moreover, according to the original digital renminbi white paper, the e-CNY was designed to operate only under what the PBoC called ‘managed anonymity’, supposedly following the principle of “anonymity for small value and traceable for high value” payments. And Fan Yifei, when he was PBoC deputy governor, did nothing to reassure privacy advocates when he boasted that the central bank would have:
. . . full information and can use big data, artificial intelligence and other technologies to analyze transaction data and capital flows, prevent and combat illegal and criminal activities such as money laundering, terrorist financing and tax evasion
Of course, this kind of tracking is entirely possible through the Chinese banking system today, and particularly via the mobile payment duopoly of Alipay and WeChat Pay.
So it doesn’t look to Alphaville like a seismic development for China’s rights-starved citizens, where the bar to being classed a criminal includes campaigning against the CCP or making art the Party doesn’t care for, and you can suffer harsh repression for being of the wrong ethnicity.
But the Chinese pivot looks like a potentially big deal in the world of global digital money. And it’s likely, reckons HSBC, that regulators around the world will be watching its development closely.
