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Weekly Global Stablecoin & CBDC Update
This Week’s Stories (So Far)
- mBridge Enters Next Phase
- BoK: Stablecoins Require Central Bank Backing
- Former PBoC Chief Warns Against Stablecoins
- “Stablecoins Offer China More for Cross-Border Payments than e-CNY”
- U.S. House Adds CBDC Ban to Defence Budget Bill
- Finastra & Circle Partner
- Are Tokenized Stocks ‘Mimics’?
- Bank-to-Wallet Payments with ISO 20022
Project mBridge, the multi-central bank digital currency (CBDC) platform for cross-border payments, has progressed to its next development phase with expanded activity in China. The project, involving the BIS Innovation Hub and central banks from China, Hong Kong, Thailand, UAE, and Saudi Arabia, reached minimum viable product (MVP) status in mid-2024. The platform uses distributed ledger technology to enable instant cross-border payments and foreign exchange transactions using wholesale CBDCs, bypassing traditional correspondent banking inefficiencies. With Saudi Arabia’s recent participation, the project gains strategic importance for commodity settlement potentially outside the US dollar system. Private sector involvement is expanding, with companies like Tencent participating since September 2023 to enhance cross-border clearing and settlement services. The next phase focuses on broader implementation and real-world use case validation.
Key Takeaways:
- mBridge achieved MVP status and is expanding with increased Chinese activity and Saudi participation.
- Platform enables instant cross-border payments via wholesale CBDCs on distributed ledger technology.
- Private sector engagement growing, including Tencent’s participation since September 2023.
- Project aims to bypass traditional correspondent banking inefficiencies and costs.
- Potential for commodity settlement outside US dollar system with Saudi involvement.
Why It Matters:
- Represents significant advancement in cross-border payment infrastructure modernization.
- Could reduce dependency on US dollar-dominated SWIFT system for international settlements.
- Demonstrates successful multi-jurisdictional CBDC cooperation among major economies.
- May accelerate adoption of wholesale CBDCs for institutional cross-border transactions.
- Positions participating countries at forefront of next-generation payment system development.
At a joint industry and academic stablecoin event, the Bank of Korea’s Digital Currency Research Lab head, Yun Sung-guan, argued that stablecoins require central bank backing to operate stably. This comes as Korean banks formed a consortium to explore stablecoins, which delayed the central bank’s tokenized deposit and wholesale CBDC trial. Following June elections, the new government plans stablecoin legislation. While early drafts limited central bank involvement in supervision, this framework has since evolved. The BOK has consistently expressed reservations about stablecoins, viewing them not as new currencies but as “existing currency tokenized on a distributed ledger” that ultimately requires central bank backstops for stable operation. The comments reflect ongoing tensions between Korea’s embrace of private stablecoins and traditional central banking concerns.
Key Takeaways:
- BOK’s Digital Currency Research Lab head advocates for central bank backstops for stablecoins.
- Korean bank consortium exploring stablecoins caused delays in BOK’s CBDC and tokenized deposit trials.
- New government plans stablecoin legislation following June elections.
- Central bank involvement in supervision has expanded from limited early draft frameworks.
- BOK views stablecoins as tokenized existing currencies rather than new monetary forms.
Why It Matters:
- Highlights growing central bank concern over stablecoin stability and systemic risk.
- Demonstrates tension between private sector stablecoin innovation and central bank oversight.
- May influence Korea’s upcoming stablecoin legislation and regulatory framework.
- Reflects global trend of central banks seeking greater control over digital currency ecosystems.
- Could impact Korea’s position as a digital asset hub if overly restrictive measures are implemented.
China’s former central bank chief Zhou Xiaochuan issued a warning about the potential dangers of stablecoins, putting him in opposition to growing calls by policy advisers and economists for China to consider their use. Zhou cited speculation risks that could undermine monetary stability and questioned whether stablecoins align with China’s financial system objectives. His pushback comes as the State Council reviews a roadmap for yuan-backed stablecoins later this month, representing internal debate within Chinese policymaking circles. Zhou’s concerns center on potential capital flight risks and loss of monetary policy control that stablecoins could facilitate. The former governor’s opposition highlights divisions among Chinese officials regarding digital asset policy, even as Beijing considers strategic yuan internationalization through stablecoin mechanisms.
Key Takeaways:
- Former PBOC chief Zhou Xiaochuan warns against stablecoin adoption despite growing policy support
- Cites speculation risks and potential undermining of monetary stability as key concerns
- Internal debate emerges within Chinese policymaking circles over stablecoin strategy
- Zhou questions alignment of stablecoins with China’s financial system control objectives
- Concerns focus on capital flight risks and loss of monetary policy effectiveness
- Opposition comes as State Council reviews yuan stablecoin roadmap for approval
Why It Matters:
- Reveals significant internal disagreement within Chinese policy establishment on digital asset strategy
- Could influence final State Council decision on yuan-backed stablecoin approval process
- Demonstrates complexity of balancing innovation with capital control and monetary sovereignty
- May reflect broader central banking community concerns about stablecoin systemic risks
- Shows how even authoritarian systems face internal policy debates on emerging technologies
- Could impact China’s timeline for yuan internationalization through digital currency mechanisms
Hong Kong University Business School economist Dr. Vera Yuen argues China’s growing focus on stablecoins represents a strategic response to U.S. dollar dominance rather than crypto enthusiasm, highlighting offshore opportunities while acknowledging domestic constraints. Beijing’s stablecoin strategy serves as a cautious complement to the e-CNY, aiming to extend yuan reach internationally without loosening domestic financial controls. The shift comes as Washington established regulatory frameworks for stablecoins through the GENIUS Act. China’s State Council is reviewing a yuan stablecoin roadmap with Hong Kong and Shanghai expected to fast-track adoption. Japan simultaneously prepares its first yen-pegged stablecoin, signaling broader Asian competition with U.S. dollar-denominated tokens and regional currency internationalization efforts.
Key Takeaways:
- China’s stablecoin focus driven by currency defense against dollar dominance, not crypto adoption
- Strategy complements e-CNY by extending yuan reach abroad while maintaining domestic controls
- Hong Kong and Shanghai designated as fast-track implementation centers for yuan stablecoins
- Japan preparing first yen-pegged stablecoin as part of broader Asian currency competition
- Beijing’s approach balances international expansion with domestic financial system control
- Regional stablecoin development responds to U.S. GENIUS Act regulatory leadership
Why It Matters:
- Demonstrates how stablecoins become tools for monetary sovereignty and currency competition
- Shows China’s strategic approach to digital assets balancing innovation with control
- Could accelerate regional stablecoin development and challenge dollar-denominated token dominance
- Reflects broader geopolitical competition extending into digital currency infrastructure
- May influence other major economies to develop domestic currency-backed stablecoin alternatives
- Highlights tension between international expansion and domestic capital control requirements
Republican lawmakers added anti-CBDC provisions to the National Defense Authorization Act, incorporating the CBDC Anti-Surveillance State Act into must-pass defense legislation. The amendment prohibits the Federal Reserve from testing, developing, or implementing any CBDC directly to individuals or through intermediaries without explicit Congressional authorization. The provision includes exceptions for “open, permissionless, and private” dollar-denominated currencies like U.S. stablecoins that preserve physical cash privacy protections. House Majority Whip Tom Emmer emphasized preventing “unelected bureaucrats” from trading Americans’ financial privacy for “CCP-style surveillance tools.” This legislative strategy embeds CBDC opposition into essential defense funding, making reversal more difficult for future administrations. The measure aligns with Trump’s executive order banning federal CBDC development and represents formal Congressional codification of anti-CBDC policy.
Key Takeaways:
- House Republicans embed CBDC ban in must-pass National Defense Authorization Act
- Amendment prohibits Fed from testing, developing, or implementing CBDCs without Congress approval
- Includes exceptions for “open, permissionless” dollar stablecoins preserving cash privacy protections
- Strategic legislative approach makes future policy reversal more difficult
- Aligns with Trump’s executive order formally banning federal CBDC development
- Frames CBDC opposition as protection against surveillance state and foreign influence
Why It Matters:
- Formalizes U.S. Congressional opposition to CBDCs through strategic legislative embedding
- Makes future CBDC development more difficult by requiring explicit legislative approval
- Reinforces U.S. preference for private stablecoins over government-issued digital currencies
- Could influence other democratic nations’ approaches to CBDC development and oversight
- Demonstrates how digital currency policy becomes embedded in broader political frameworks
- Shows strategic use of must-pass legislation to advance controversial digital asset policies
Global fintech leader Finastra partnered with Circle to integrate USDC stablecoin settlement into cross-border payment infrastructure, enabling financial institutions to offer 24/7 settlement capabilities with reduced costs and improved transparency. The collaboration leverages Finastra’s FusionFabric.cloud platform to provide banks and payment providers with APIs for seamless USDC integration. The partnership addresses growing institutional demand for blockchain-based payment rails offering instant settlement compared to traditional correspondent banking delays. Financial institutions gain access to programmable money features enabling automated compliance, real-time reconciliation, and enhanced payment tracking. The integration supports both wholesale and retail payment use cases across Finastra’s extensive client network of over 8,000 financial institutions globally.
Key Takeaways:
- Finastra integrates USDC stablecoin settlement into FusionFabric.cloud platform
- Partnership enables 24/7 settlement for 8,000+ financial institution clients globally
- APIs provide seamless USDC integration for banks and payment providers
- Offers programmable money features for automated compliance and real-time reconciliation
- Addresses institutional demand for blockchain-based payment rails with instant settlement
- Supports both wholesale and retail payment use cases across extensive client network
Why It Matters:
- Demonstrates mainstream fintech infrastructure adoption of stablecoin settlement capabilities
- Shows how established financial technology providers integrate blockchain-based payment rails
- Could accelerate institutional stablecoin adoption through familiar banking software platforms
- Validates stablecoins as practical infrastructure for improving cross-border payment efficiency
- May influence other financial technology providers to develop similar stablecoin integrations
- Reflects convergence of traditional fintech and cryptocurrency technology for business applications
The World Federation of Exchanges (WFE) has warned regulators about the risks of tokenized stocks in a letter to the US SEC’s Crypto Task Force, ESMA, and IOSCO’s Fintech Task Force. WFE CEO Nandini Sukumar criticized these blockchain-based tokens as “mimicked products” that fail to meet investor protection standards despite offerings by Robinhood, Kraken, ByBit, and Republic. The WFE’s primary concerns include liquidity fragmentation and regulatory arbitrage, as tokenized stocks pull trading away from regulated exchanges toward crypto platforms. With traditional exchanges’ market share already below 50% due to dark pools expansion, tokenized stock trading on crypto exchanges threatens to further erode their position. The WFE supports innovation only when conducted through regulated exchange-traded products on public lit markets.
Key Takeaways:
- WFE warns that tokenized stocks “mimic” traditional equities without providing equivalent protections.
- Major concerns include liquidity fragmentation and regulatory arbitrage affecting market structure.
- Traditional exchanges’ market share dropped below 50% in late 2024 due to dark pools and off-exchange trading.
- WFE sent warnings to key regulators: SEC Crypto Task Force, ESMA, and IOSCO Fintech Task Force.
- Organization supports innovation only through regulated exchange-traded products in public markets.
Why It Matters:
- Highlights growing tension between traditional financial infrastructure and crypto innovation.
- May influence regulatory approach to tokenized securities and market structure rules.
- Reflects exchanges’ concerns about losing market share to alternative trading venues.
- Could impact development of tokenized asset markets and investor protection standards.
- Demonstrates need for clear regulatory frameworks addressing tokenized financial products.
Ant International, Standard Chartered and Swift have launched live trials for a bank-to-wallet payment solution underpinned by ISO 20022 messaging standards. Standard Chartered Bank now facilitates real-time payments from bank accounts to e-wallets, leveraging Alipay+, Ant International’s global wallet gateway service, and Swift’s secure network. This connectivity links over 11,500 institutions to 1.7 billion digital wallets across 36 markets. The collaboration aims to broaden payment optionality, enhance interoperability and leverage Swift’s scale and compliance infrastructure. Executives from all three organizations highlighted the partnership’s role in delivering faster, frictionless cross-border experiences while maintaining regulatory safeguards. Future phases will explore expanding wallet connectivity and deepening integration across regional corridors.
Key Takeaways:
- Live ISO 20022-based trials connect Standard Chartered accounts to Alipay+ wallets via Swift.
- Instant bank-to-wallet transfers span 11,500+ institutions and 1.7 billion wallet users.
- Partnership enhances payment choice, interoperability and compliance across global networks.
- Executives emphasized security, regulatory alignment and operational efficiency.
- Next steps include scaling wallet integrations and broadening geographic coverage.
Why It Matters:
- Demonstrates practical use of ISO 20022 for seamless bank-to-wallet payments.
- Expands digital financial inclusion by linking traditional banking to e-wallet ecosystems.
- Leverages existing Swift infrastructure to accelerate innovation without new rails.
- Sets a precedent for collaborative multilateral fintech partnerships in cross-border payments.
- Aligns with industry trends toward open, interoperable, real-time payment solutions.
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