China is weighing a limited test of stablecoin activity inside select free trade zones, according to a policy proposal published by Caijing. The plan does not come from a regulator. Instead, it reflects academic policy advice aimed at exploring cross border payments while keeping mainland capital controls intact. The proposal argues that stablecoin experiments could support trade settlement and financial innovation if they remain tightly ring fenced. It points to free trade zones as controlled environments where regulators already test reforms tied to foreign exchange and cross border finance. The authors stress that any pilot would exclude domestic retail users and avoid open circulation on the mainland. The idea emerges as Beijing continues to signal caution toward crypto assets. Regulators have repeatedly warned about risks tied to illicit finance and capital flight. As a result, the proposal frames stablecoins as infrastructure for trade, not speculative assets. Free Trade Zones Named as Test Beds The report identifies Qianhai Free Trade Zone and the Hainan Free Trade Port as initial candidates. These zones already host cross border finance pilots and links with offshore markets. The authors say their legal flexibility makes them suitable for sandbox style testing. They propose creating a closed regulatory sandbox overseen by local financial authorities and foreign exchange regulators. In addition, coordination with Hong Kong would allow alignment with its licensing regime for stablecoin issuers. This structure, they argue, could reduce regulatory blind spots. The proposal also outlines a whitelist approach. Only approved stablecoins would be allowed inside the sandbox. Early use cases would focus on business to business settlement linked to real trade flows rather than consumer payments. Offshore RMB Stablecoin and Risk Controls A central concept is an offshore renminbi stablecoin backed one to one by offshore RMB reserves. The authors argue this design could support trade settlement without opening the mainland capital account. They emphasize that reserves should remain outside the domestic banking system. Risk controls feature heavily. The proposal calls for third party audits of reserves, real time transaction monitoring, and strict AML checks. It also suggests contingency tools, including transaction freezes if abnormal activity appears. Finally, it places the idea against China’s broader policy stance. The People’s Bank of China reiterated concerns over stablecoin risks in late 2025 . As a result, the proposal remains advisory. Any move toward pilots would still require explicit regulatory approval.
