What’s Happening:

• Alibaba’s cross-border e-commerce unit is developing a deposit token, a blockchain-based instrument resembling a stablecoin.
• This token represents a direct claim on commercial bank deposits and is considered a regulated liability of the issuing bank, unlike traditional private stablecoins.
• The goal is to streamline overseas transactions, bypassing some of the frictions in cross-border payment systems.

Context in China:

• Mainland China has cracked down on stablecoins, discouraging issuance by private companies.
• Tech giants like Ant Group and JD.com reportedly paused stablecoin plans in Hong Kong due to regulatory concerns from Beijing.
• Chinese authorities have restricted research, seminars, and investments related to crypto and stablecoins onshore, citing fraud and systemic risk concerns.

Offshore vs. Mainland:

• Stablecoins backed by offshore Chinese yuan exist, targeting foreign exchange and Belt and Road Initiative participants.
• Mainland China is not expected to allow stablecoins to circulate domestically, per experts like Joshua Chu of the Hong Kong Web3 Association.

Other Developments:

• JPMorgan Chase recently rolled out a deposit token for institutional clients, suggesting Alibaba is following a similar regulated model.
• These deposit tokens differ from traditional stablecoins because they are fully regulated, bank-backed, and on-chain, reducing regulatory risk while enabling digital payments.

Implications:

• Alibaba’s deposit token is a workaround to China’s domestic restrictions on stablecoins, focusing on international trade.
• The move reflects a broader trend of regulated, bank-backed digital assets emerging globally, rather than fully private stablecoins.