China's foreign trade entities are facing deep-seated pain points such as high costs, low efficiency, and stringent compliance risks (especially the "frozen card" incident in Yiwu). Recently, rumors have circulated about Yiwu business owners using stablecoins to resolve the "frozen card" dilemma. However, this article aims to analyze the potential value and real challenges of stablecoins in China's cross-border trade, revealing that the actual application of stablecoins in mainland China remains at an extremely low level, with a significant gap between online rumors and reality. Stablecoins have significant theoretical advantages in reducing costs and increasing efficiency, improving capital turnover, and providing geopolitical resilience, but their promotion in mainland China faces insurmountable policy red lines, operational risks, and business model obstacles.
- Structural Challenges in Cross-Border Trade Payment Settlement in China: The Yiwu "Frozen Card" Dilemma
China has become the world's largest B2C cross-border e-commerce trading market, and in this thriving trend, Yiwu in Zhejiang and Shenzhen in Guangdong are undoubtedly two of the most representative microcosms. However, the trade entities in these two cities face common, deep-seated challenges in financial infrastructure.
The "three highs and three difficulties" pain points of the traditional payment system:
High costs and low efficiency: Traditional bank wire transfers (such as SWIFT) have an average arrival time of 2 to 5 working days, and in some emerging markets, it can exceed 7 days, with expensive fees. This puts significant pressure on the capital turnover of small and micro enterprises.
High risk: The traditional cross-border payment system heavily relies on the dollar-centric SWIFT system, which has become a "sanction weapon" in geopolitical conflicts, posing a potential threat to China's financial security.
The "frozen card" dilemma: For small and medium-sized traders in Yiwu and Shenzhen, the most lethal and daily risk lies in account compliance and freezing issues. In recent years, with the tightening of national anti-money laundering and "card-breaking actions" regulations, the freezing of bank accounts of foreign trade merchants in Yiwu has become frequent. The main reason is that some illegal telecom fraud gangs collude with underground banks to launder fraud proceeds into trade payments, transferring them to traders through informal channels, leading to the freezing of these innocent merchants' domestic bank cards by public security agencies across the country. The freezing does not only target the involved funds but also freezes the entire balance in the account, lasting up to six months or even more than a year, which directly cuts off the capital chain of enterprises, causing many merchants to face bankruptcy.
- Stablecoins: An Emerging Cross-Border Payment Solution
Stablecoins are cryptocurrencies designed to maintain stable value, typically pegged to fiat currencies (such as the US dollar or Hong Kong dollar) at a 1:1 ratio to maintain their stability. They combine the decentralization and transparency of blockchain technology with the stability of fiat currencies, with their core value lying in the ability to achieve "payment equals settlement," enhancing the efficiency of capital flow to approach that of information transmission.
Global Regulatory Trends: In 2025, the US "GENIUS Act" and Hong Kong's "Stablecoin Regulation" will be introduced, marking the transition of stablecoins from the early "Wild West" to compliance.
Core Value Empowering Cross-Border Trade:
Significant cost reduction and efficiency improvement: Stablecoins, based on distributed ledger technology (DLT), can achieve direct peer-to-peer settlement, thereby bypassing the high costs associated with multi-tiered agency banks and oligopolistic clearing institutions in traditional cross-border payments. Research indicates that stablecoin settlements can reduce transaction costs from 3% to 0.1% and shorten transaction times from several days to a few minutes.
Enhanced financial resilience: The stablecoin system is independent of the traditional SWIFT channel, providing enterprises with alternative payment options in times of geopolitical tension.
Business innovation empowerment: Stablecoins are not just a payment tool but also the cornerstone of the digital financial ecosystem. They can serve as the payment and settlement foundation for the tokenization of real-world assets (RWA), achieving revolutionary breakthroughs in areas such as supply chain finance.
- Current Status and Prospects of Stablecoin Applications in China
Despite the numerous advantages of stablecoins in theory, their actual application in mainland China differs significantly from some online rumors.
Real Adoption Survey in Yiwu and Shenzhen: Regarding the online claim of "Yiwu stablecoin payments reaching 10 billion USD," authoritative media investigations show that this data originated from a blockchain data analysis company, but its report is untraceable, and the data source cannot be verified. Journalists from Chinese media interviewed several foreign trade merchants in Yiwu and Shenzhen, and they generally expressed that they were "unclear" about stablecoins or "had not used them."
Core Obstacles: For any legally operating foreign trade enterprise, using stablecoins for settlement would result in the loss of 6%-13% of export tax rebate eligibility, a significant business loss that could offset all advantages of stablecoins in transaction fees. Additionally, stablecoin transactions cannot provide formal bank statements, directly affecting the enterprise's qualifications when applying for bank loans and credit ratings.
Offshore RMB Stablecoin Experiment in Hong Kong: Although stablecoins face policy red lines in mainland China, their compliance exploration is steadily advancing in China's offshore market, especially in Hong Kong. Hong Kong is leveraging its unique position as an international financial center and the largest offshore RMB center to become a "sandbox" for exploring compliant stablecoin applications in China.
The Competitive and Cooperative Relationship Between Digital RMB (e-CNY) and Stablecoins: Digital RMB and stablecoins are not merely in competition but may complement each other in different scenarios. Digital RMB, backed by national credit, features traceability and centralized control, making it more suitable for government-led bulk trade and "Belt and Road" projects. In contrast, compliant offshore stablecoins represent "bottom-up" market innovation, with stronger technical interoperability and privatized design, potentially focusing more on addressing the pain points of small and micro enterprises in daily small-scale, high-frequency cross-border trade.
- Risks and Compliance Challenges of Stablecoin Settlements
China's Legal and Policy Red Lines: In September 2021, the People's Bank of China and ten other ministries jointly issued a notice stating that all activities related to virtual currencies are classified as illegal financial activities.
Intrinsic Risks of Stablecoins: These include credit risk (quality and transparency of reserve assets), liquidity risk (mass redemptions), and technical and security risks (smart contract vulnerabilities, cyberattacks).
Commercial and Operational Risks: For foreign trade enterprises in China, using stablecoins also faces risks such as export tax rebate losses, financing and credit obstacles, and gray channel risks.
Conclusion:
Although stablecoins theoretically provide a revolutionary solution that can empower foreign trade enterprises by reducing costs and increasing efficiency, enhancing capital turnover, and improving financial resilience, their actual application in China remains at an extremely low level. The fundamental reason lies in the Chinese government's comprehensive ban on virtual currencies and the fundamental mismatch of stablecoins in business models (such as export tax rebates, corporate credit, etc.). Looking ahead, the compliance exploration of stablecoins will mainly rely on offshore markets (such as Hong Kong) and may complement digital RMB, jointly serving the diversification and modernization of China's cross-border payment system.
Related Reading: The Emergence of RMB Stablecoins and Their Impact on the US Dollar.
Original Article: “The Yiwu 'Frozen Card' Dilemma: Analysis of Stablecoin Adoption and Challenges in China”
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