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China has been warming up to stablecoins and tokenization this year as its best solution to the rapid rise of U.S. dollar-pegged tokens. In the latest move, one of the country’s largest fund managers is set to launch the world’s first tokenized money market fund denominated in the renminbi.
China Asset Management Hong Kong (ChinaAMC HK) recently announced a new fund, which is said to target stablecoin holders in the city-state and beyond.
“Our tokenised financial products are designed to welcome the arrival of stablecoins. If the policy can truly be implemented, I believe we will be the first financial instrument capable of carrying interest-bearing assets linked to stablecoins,” commented CEO Tian Gan, as reported by local outlets.
Stablecoins are payment instruments and don’t generate any yield for their holders. Gan says that the new tokenized fund would allow these holders to earn interest on their holdings without sacrificing the instant liquidity that stablecoins offer.
The tokenized funds will be available to investors via banks, qualified brokers, and digital asset exchanges in Hong Kong; they will not have a minimum investment requirement. Standard Chartered (NASDAQ: SCBFF) is the custodian, administrator, and tokenization agent through its subsidiary, Libeara.
Gan believes that in the future, “all financial market products will be tokenised on the blockchain,” and his company wants to be among the pioneers in China.
“The ultimate goal is to enable seamless trading 24 hours a day, seven days a week, to meet the needs of institutional and high-net-worth clients,” he said during a media briefing.
ChinaAMC HK is the Hong Kong subsidiary of China Asset Management Co., the country’s second-largest mutual fund manager with over $400 billion in assets under management. It has also been China’s largest ETF issuer for over two decades.
The company is the latest giant seeking to be a trailblazer in the stablecoin industry in Hong Kong, specifically targeting offshore yuan. The city is the dominant offshore yuan hub, managing over 75% of all transactions last year. It also holds over 60% of all offshore yuan deposits.
Gan estimates that offshore yuan liquidity in Hong Kong will spike fivefold in the next five years to hit 5 trillion yuan (US$696 billion). This increase in liquidity will complement the growth of stablecoins pegged to the offshore renminbi, resulting in a spike in the demand for yuan-denominated tokenized funds.
ChinaAMC HK’s tokenized yuan fund may be the first of its kind, but one expert believes that many more will spring up as Chinese companies rapidly innovate in the digital assets sector.“We believe that such products, when combined with stablecoins and the digital yuan, will promote financial innovation and support the internationalisation of the yuan,” said Matthew Chan, the head of investment solutions at Citic Securities HK. The company is one of the main distributors of ChinaAMC’s tokenized funds. Its Beijing-based parent company is China’s largest securities brokerage and a leading proponent of stablecoins and tokenization.
US Bancorp explores blockchain, AI
In the U.S., one of the country’s largest banks is ramping up investment in digital payment infrastructure, focusing on technologies such as blockchain and artificial intelligence.
US Bancorp, the fifth-largest American lender by assets, revealed on its earnings call that in Q2, it completed the first trade finance transaction executed fully digitally. It also became the first bank to utilize WaveBL, a blockchain platform that digitizes Bills of Lading, reducing the processing time from days to minutes.
The first transaction, executed on July 10, involved an unnamed U.S. publicly traded firm and the Mediterranean Shipping Company, with US Bancorp serving as the presenting bank. Previously, this transaction would have involved physically transporting documents across continents, which could take weeks. The blockchain platform reduced the process to minutes.
Beyond blockchain, US Bancorp has been investing in digital asset solutions for years. One of its prime products is a digital currency custody solution launched in 2021, which, according to CEO Gunjan Kedia, had struggled under the Biden administration. However, this solution “is back, and we are very able to provide it,” she stated last month.
Kedia also revealed that the bank is “studying and watching” stablecoins, even as its rivals such as Citi (NYSE: C), Bank of America (NASDAQ: BAC), and JPMorgan (NASDAQ: JPM) advance their stablecoin projects.
Watch: New age of payment solutions