Hong Kong's stablecoin law holds promise for e-CNY, cross-border flows: Morgan Stanley
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Local currency-backed stablecoins could provide a pathway for mainland China's e-CNY – the country's only legal digital currency backed by the government – to gain a foothold globally while advancing Beijing's drive to internationalise its currency and counter US dollar dominance, Laura Wang, the bank's chief China equity strategist, said in a written interview last week.
Hong Kong's
stablecoin ordinance , which took effect at the beginning of the month, allows for real-time, low-cost transactions and is designed to support cross-border use. The e-CNY is backed by the People's Bank of China and is undergoing a pilot scheme
for cross-border payments in Hong Kong.
'In theory, HKD stablecoins could act as a bridge between e-CNY and global digital assets,' said Wang. International investors could convert the world's largest stablecoins, USDT and USDC, into Hong Kong dollar stablecoins and then into e-CNY, and invest in Hong Kong-listed assets or tokenised securities, she added.
Laura Wang, chief China equity strategist at Morgan Stanley. Photo: Handout
'This creates a pathway for [yuan]-linked capital flows without violating mainland capital controls,' she said. 'It also supports [the yuan] internationalisation through offshore channels.'
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