Alibaba’s Deposit Token Initiative Amid China’s Stablecoin Crackdown
Alibaba’s global e-commerce division is developing a bank-backed deposit token for cross-border payments, a move that comes as Chinese authorities intensify restrictions on stablecoins. Anyway, Alibaba president Kuo Zhang revealed plans to use stablecoin-like technology to streamline overseas transactions. This deposit token model represents a direct claim on commercial bank deposits and is treated as a regulated liability of the issuing bank, distinguishing it from traditional stablecoins issued by private entities. Following JPMorgan Chase’s recent rollout of its own deposit token to institutional clients, this indicates a broader trend where financial institutions are exploring blockchain-based payment solutions.
Supporting evidence comes from China’s regulatory environment, where authorities have shown strong opposition to stablecoin development within the mainland. Reports indicate that firms like Ant Group and JD.com suspended stablecoin plans in Hong Kong after Beijing expressed disapproval, highlighting the tension between innovation and regulatory control. On that note, authorities have instructed companies to stop stablecoin-related research and seminars, citing fraud concerns, which contrasts with Alibaba’s approach of working within banking frameworks.
Comparative analysis shows that while China seems determined to prevent a domestic stablecoin industry, offshore yuan stablecoins continue to emerge for international use, particularly targeting Belt and Road Initiative participants. Joshua Chu of the Hong Kong Web3 Association noted that China is unlikely to permit stablecoin circulation onshore, reinforcing the regulatory divide between mainland restrictions and Hong Kong’s more permissive environment. This divergence opens up opportunities for deposit tokens as compliant alternatives.
The synthesis of these developments suggests that Alibaba’s deposit token initiative is a strategic adaptation to regulatory constraints, employing blockchain technology while staying aligned with banking regulations. It’s arguably true that this approach could influence how other tech giants handle similar challenges, potentially shaping the future of digital payments in restrictive jurisdictions.
China is unlikely to issue stablecoins onshore.
Joshua Chu
Global Regulatory Divergence in Stablecoin Frameworks
The global regulatory landscape for stablecoins is evolving quickly, with major differences across economies affecting how companies like Alibaba approach digital payment innovations. In the United States, the GENIUS Act focuses on competition among issuers under Treasury and Federal Reserve oversight, allowing non-banks to issue payment stablecoins for a diverse ecosystem. This contrasts sharply with China’s restrictive stance, where authorities have clamped down on stablecoin development to maintain financial control and prevent systemic risks.
Evidence from regulatory frameworks shows that the European Union’s Markets in Crypto-Assets Regulation emphasizes consumer protection with strict reserve requirements and transparency standards, enabling firms licensed in one member state to operate across the EU for simplified compliance. Canada’s emerging framework, outlined in its 2025 budget, blends elements from both U.S. and EU approaches, requiring solid reserves and risk management protocols. Meanwhile, Japan maintains a conservative position, limiting stablecoin issuance to licensed trust banks with stringent asset rules to prioritize stability over innovation.
Supporting data indicates that regions with clearer regulatory frameworks experience more predictable market conditions and smoother institutional integration. For instance, the stablecoin market grew from $205 billion to nearly $268 billion between January and August 2025, demonstrating robust growth despite regulatory uncertainties. Federal Reserve Governor Christopher Waller stressed the importance of gradual, policy-driven adoption, noting that sustainable growth depends on incremental implementation rather than sudden shifts.
Comparative analysis reveals that China’s regulatory approach stands in stark contrast to other major economies, creating compliance challenges for global institutions operating across jurisdictions. While the U.S. and EU foster innovation through structured frameworks, China’s crackdown on stablecoins reflects broader concerns about financial stability and control, influencing how companies like Alibaba develop alternatives like deposit tokens.
The synthesis of global regulatory trends suggests that balanced approaches yield the best outcomes, supporting innovation while keeping safeguards in place. As digital assets integrate more with traditional finance, regulatory frameworks are moving toward sophisticated, coordinated models, though divergence remains significant.
We think the forecast doesn’t require unrealistically large or permanent rate dislocations to materialize; instead, it relies on incremental, policy-enabled adoption compounding over time.
Federal Reserve Governor Christopher Waller
Technological Infrastructure for Digital Payment Solutions
Advanced technological infrastructure supports the development of secure digital payment solutions like Alibaba’s deposit token and stablecoins, with features such as blockchain scalability, interoperability, and security protocols enabling efficient cross-border transactions. Blockchain networks now handle over 3,400 transactions per second, showing major scalability improvements that aid quick payments and settlements, essential for global e-commerce.
Evidence from infrastructure development indicates that cross-chain interoperability platforms like LayerZero facilitate smooth transfers between different blockchain networks, improving liquidity and user experience for payment solutions. Multi-signature wallets, cold storage, and regular audits form key security measures for institutional use, building trust in crypto systems by protecting digital assets from hacking and unauthorized access. These safeguards address critical concerns for traditional financial institutions eyeing crypto adoption.
Supporting examples include the use of smart contracts for automated compliance and complex financial operations, which deposit tokens and stablecoins can utilize in their frameworks. Innovations like zero-knowledge proofs allow oversight without sacrificing anonymity, balancing privacy and regulatory needs. However, tokenized deposits often include built-in safeguards and compliance through permissioned systems, offering better security but less functionality than stablecoins’ open nature.
Comparative analysis shows that stablecoins’ composability allows seamless integration across crypto applications, while tokenized deposits stay within traditional banking limits. Omid Malekan, an adjunct professor at Columbia Business School, argues that tokenized deposits lack the flexibility and features of stablecoins, making them less useful broadly. This technical difference gives stablecoins clear advantages in decentralized finance, though deposit tokens like Alibaba’s might fit better with regulations.
The synthesis of technological factors implies that infrastructure development will be crucial for the long-term success of digital payment solutions. As rules become clearer, tech advances must match these standards to enable programmable money and better cross-border payments, with stablecoins’ edge in composability and interoperability positioning them well against tokenized deposits for future innovation.
Tokenized bank deposits lack the flexibility and technical features of stablecoins, making them an inferior product.
Omid Malekan
Institutional Adoption and Market Integration Trends
Institutional engagement with digital assets has sped up significantly, driven by regulatory clarity and operational efficiencies, with major players like Alibaba exploring blockchain-based solutions for cross-border payments. Data from 2025 shows strong growth in corporate use of digital assets: over 150 public companies hold Bitcoin, and corporate use of stablecoins for payroll and treasury management tripled recently, pointing to a shift from speculation to practical, compliance-focused strategies.
Evidence from institutional activity includes partnerships like Circle with Deutsche Börse, showing how regulated stablecoins integrate into European market infrastructure to cut settlement risks and boost efficiency for banks and asset managers. Similarly, traditional financial players are using crypto assets more, with big banks testing stablecoins for payments and liquidity, while investment firms launch crypto products, signaling a maturing market where compliance is key. This trend reflects a broader move toward digital asset integration, with efforts like Santander’s Openbank crypto trading under MiCA expanding access.
Supporting data shows that institutions in regions with clear regulatory frameworks engage more confidently with digital assets. For example, the tokenized Treasury market hit $8 billion, and China Merchants Bank International tokenized a $3.8 billion money market fund on BNB Chain, widening on-chain distribution and linking with DeFi apps. These developments highlight how companies like Alibaba adapt to regulations by creating compliant solutions like deposit tokens.
Comparative analysis uncovers different institutional approaches—traditional banks probe tokenized deposits, while crypto-native institutions focus on stablecoin infrastructure. Alibaba’s deposit token initiative is a hybrid, using blockchain tech while aligning with banking sectors. This differs from purely decentralized models that seek more freedom but face regulatory hurdles in places like China.
The synthesis of institutional trends points to a fundamental shift toward strategic, compliance-driven crypto engagement. As regulations evolve, institutional participation should deepen, bringing more stability and professionalism to digital assets. This maturation marks a key step in crypto’s blend with traditional finance, emphasizing the competition between tokenized deposits and stablecoins.
We’re planning to advance the use of regulated stablecoins across Europe’s market infrastructure—reducing settlement risk, lowering costs, and improving efficiency for banks, asset managers and the wider market.
Jeremy Allaire
Economic Implications and Future Outlook for Digital Payments
Regulatory changes and tech innovations in digital payments, including Alibaba’s deposit token and stablecoins, have deep economic impacts, affecting capital flows, financial stability, and global trade efficiency. Stablecoins, with total supply hitting $300 billion by October 2025 per Standard Chartered data, are shifting from crypto tools to mainstream financial instruments, potentially transforming cross-border payments and remittances by lowering costs and speeding up settlements.
Evidence from market projections indicates the tokenized real-world asset sector could grow to $2 trillion by 2028, covering fiat currencies, real estate, and other assets, fueled by better liquidity and DeFi connections. Efforts like China’s stablecoin crackdown and Alibaba’s deposit token development aim to capture these economic gains while managing risks like fraud and systemic instability. The GENIUS Act’s reserve and redemption rules in the U.S. ensure stability, tackling system-wide concerns similar to those behind China’s regulatory moves.
Supporting analysis from experts like Omid Malekan contends that stablecoins outperform tokenized deposits in flexibility and utility, as deposits’ limited reach hinders serving unbanked groups or enabling composability with other assets. Bank vulnerabilities, such as potential deposit outflows over $6.6 trillion if stablecoins see mass adoption based on US Treasury Department estimates, reveal how transformative digital assets could be, especially in unstable economies seeking financial inclusion.
Comparative views on economic impact highlight debates over adoption speed: some regulators worry quick changes might harm consumers, while others say it spurs innovation. Federal Reserve Governor Christopher Waller favors gradual adoption to maintain market health, a balance essential for benefits without upsetting traditional finance. In China, this cautious approach is clear in strict stablecoin oversight, prompting options like deposit tokens.
The synthesis of economic trends suggests digital payment solutions will keep evolving with tech advances, institutional interest, and regulatory tweaks. Strategies need adaptive risk control and international policy coordination for cooperative frameworks. By sticking to evidence-based methods, stakeholders can handle uncertainties and seize opportunities, ensuring digital assets like deposit tokens and stablecoins integrate sustainably into the global economy, with Alibaba’s project as an example of adaptive innovation.
Stablecoins could weaken the euro and could lead to an uncoordinated multiplication of private settlement solutions.
François Villeroy de Galhau
