Alibaba is exploring the development of a blockchain-based deposit token for international payments, a move that aligns with ongoing regulatory changes in China. Company president Kuo Zhang revealed this initiative, highlighting its potential as a compliant alternative to traditional stablecoins, particularly as Beijing intensifies scrutiny over privately issued digital currencies.
The plan is part of Alibaba’s cross-border commerce division, which prioritizes efficient settlement methods. Zhang indicated to CNBC that the goal is to leverage “stablecoin-like technology” for facilitating overseas transactions. Instead of opting for a privately issued token, Alibaba is considering a deposit token backed by commercial bank liabilities—an approach permissible under current Chinese regulations.
Deposit tokens operate similarly to stablecoins in functionality but are categorized by regulators as traditional bank obligations. This distinction grants them a legal standing that aligns with the regulatory framework in China. The recent introduction of a deposit token by JPMorgan for institutional clients underscores the growing interest in this model.
The backdrop for Alibaba’s initiative reflects a broader challenge facing Chinese tech firms due to heightened regulatory pressures regarding stablecoins. Earlier in the year, Ant Group and JD.com both suspended their intentions to engage in Hong Kong’s stablecoin pilot program, following explicit instructions from Beijing to steer clear of private stablecoin issuance.
The regulatory climate has become increasingly stringent, with reports suggesting that mainland companies may eventually be compelled to withdraw from any crypto-related engagements in Hong Kong. Authorities have also directed companies to halt research and seminars related to stablecoins, citing concerns about potential fraud.
Chinese regulators view privately issued stablecoins as a threat to state control over monetary systems and capital flows, pushing companies to look for alternatives that can meet international business demands while adhering to regulatory constraints.
Even amid this restrictive environment, China is not entirely shunning stablecoin activity; instead, it is largely occurring outside of the mainland. For instance, Conflux has introduced a stablecoin backed by offshore yuan, aimed at countries participating in the Belt and Road Initiative, rather than targeting domestic use. Another stablecoin tied to offshore yuan recently appeared at Hong Kong’s Belt and Road Summit, designed specifically for the foreign exchange market.
Industry experts are skeptical that this trend will change soon. Joshua Chu, co-chair of the Hong Kong Web3 Association, stated, “China is unlikely to issue stablecoins onshore,” reinforcing the challenges faced by local tech companies.
If Alibaba’s deposit token moves forward, it could serve as a legitimate on-chain settlement tool for global merchants, circumventing the complications associated with conventional stablecoins. This approach may become increasingly popular among businesses as regulatory frameworks continue to tighten.
For Chinese tech giants, the landscape for innovation is becoming more constricted. Although stablecoins are largely off the table, the demand for expedited cross-border payment solutions is on the rise, suggesting that deposit tokens might represent the acceptable compromise that Beijing is likely to endorse.
On the investment front, Alibaba’s stock, commonly referred to as BABA, holds a Strong Buy consensus rating on TipRanks, based on 19 Buys and two Holds. The average price target for Alibaba shares stands at $198.21, indicating a potential upside of approximately 24% from current levels.
