Analysis of the Current Status of Stablecoin Usage in Yiwu and Compliance Applications by Foreign Trade Merchants

Recently, stablecoins have become a hot topic in the financial sector and the crypto assets field. Several countries and regions have successively introduced regulations supporting stablecoins, while internet giants and financial institutions are also getting involved, either hoarding or applying for issuance licenses. In contrast, the policy stance in mainland China remains cautious.

Recently, news about the large-scale use of stablecoins in Yiwu has been widely circulated online. This information mainly comes from two sources: a securities research report indicating that stablecoins have become an important tool for cross-border payments in Yiwu, and a blockchain analytics company estimating that the on-chain stablecoin flow in the Yiwu market will exceed 10 billion USD in 2023.

However, when reporters conducted on-site investigations, they found discrepancies between the situation and the reports. Most merchants stated that they were unaware of stablecoins, a few merchants had questions regarding their compliance and usage costs, and only a very small number of merchants confirmed that they had used stablecoins for payments. This contrast has sparked curiosity about the actual situation.

After a thorough study of the aforementioned information sources, it was found that a macro securities research report indeed mentioned the use of stablecoins in Yiwu, but this viewpoint lacks specific data support. The report also conducted a systematic analysis of the global development prospects and risks of stablecoins, pointing out that there may be differences in the demand and penetration rates of stablecoins in different types of countries.

The report also mentions that in response to the challenges posed by stablecoins, major economies typically adopt two approaches: issuing digital currencies or strengthening regulations. For China, the report suggests that it may be shifting towards a "dual-track parallel" development path and points out that the central bank's emphasis on stablecoins has significantly increased.

Regarding the legislation of stablecoins in Hong Kong, the report believes that this may accelerate the development of the Hong Kong dollar, offshore renminbi, and even renminbi stablecoins, and may promote further appreciation of the renminbi. At the same time, the report also points out that stablecoins pose challenges to cross-border financial regulation and face certain redemption risks.

Although the actual usage scale of stablecoins in Yiwu may not be as significant as reported, the combination of foreign trade and stablecoins indeed has inherent advantages. The characteristics of stablecoin payments such as instant settlement, stable value, and low fees can address many business pain points for small and medium-sized foreign trade merchants.

However, considering the regulatory policies on Crypto Assets in mainland China, there are compliance risks for foreign trade merchants in the mainland when using stablecoins directly. In addition, using stablecoins may affect merchants' eligibility for export tax rebate policies, participation in important exhibitions, and the loan review process by commercial banks.

For mainland foreign trade merchants, a relatively compliant approach is to link Hong Kong companies with mainland companies, utilizing Hong Kong's trade facilitation and open policies towards Crypto Assets to achieve a compliant connection between traditional foreign trade and crypto payments.

With the Hong Kong "Stablecoin Ordinance" about to take effect, the Hong Kong Dollar stablecoin will become a legal payment method. The ordinance requires stablecoin issuers to ensure 100% redemption and to meet compliance requirements such as anti-money laundering and counter-terrorism financing.

For mainland foreign trade merchants, the key to compliant use of Hong Kong dollar stablecoins lies in: receiving and paying stablecoins through overseas companies, completing compliant exchanges between stablecoins and fiat currency in Hong Kong, and conducting compliant foreign exchange settlement back to the mainland parent company. This method can mitigate compliance risks to a certain extent while enjoying the convenience brought by stablecoins.