Alibaba Develops Deposit Token to Bypass China’s Strict Stablecoin Regulations: Report

Alibaba Shifts to Bank-Issued Tokenized Deposits as China Clamps Down on Private Digital Currency Initiatives

Alibaba’s deposit token strategy directly responds to China’s opposition to private digital currencies by restructuring cross-border e-commerce finance and embedding regulated bank liabilities on blockchain networks.

As Beijing tightens its stance against privately issued digital currencies, Alibaba is building a deposit token payment system designed to streamline global commerce while adhering to regulatory requirements. This initiative exemplifies a broader trend among Chinese firms aiming to modernize cross-border payments without drawing regulatory scrutiny, as authorities increase oversight of digital currencies.

This move originates from Alibaba’s fast-growing international e-commerce sector, which recently launched a new AI-powered subscription service to boost revenue.

Guo Chang, President of Alibaba.com, told CNBC the company is preparing to use tokenized euro and US dollar versions to settle international B2B payments more efficiently. These tokens—known as “deposit tokens”—are issued by regulated banks and backed directly by customer deposits. This approach distinguishes them from privately issued stable-value tokens, which Chinese regulators have repeatedly cautioned against.

Deposit tokens work by digitizing traditional bank deposits using blockchain technology. The key difference is that regulated financial institutions issue these tokens, and their value is fully backed by real fiat currency deposits. This structure fundamentally separates them from stable-value tokens issued by private enterprises, ensuring consistency with China’s financial policies.

Chang expects Alibaba’s tokenized payments will shorten settlement times and cut intermediary fees, enabling funds to move “simultaneously” across markets in the US, Europe, Hong Kong, Singapore, and mainland China. He added that Alibaba.com plans to partner with global banks—such as JPMorgan, which launched its proprietary tokenization system JPMD for institutional investors in 2024.

This timing is significant. Between July and August 2024, Chinese firms including JD.com and Alibaba-affiliated Ant Group lobbied in Hong Kong to issue yuan-based stable-value tokens, aiming to challenge the dominance of US dollar-backed stable tokens that comprise over 90% of the $304.9 billion market.

However, by October 2024, both companies abruptly paused these plans after the People’s Bank of China and other regulators informally directed major tech firms to halt any stable-value token initiatives—even in Hong Kong’s newly regulated environment. Authorities were concerned that privately issued, fiat-backed tokens could undermine China’s financial sovereignty.

Regulators subsequently warned companies not to publish research or host seminars on stable-value tokens, citing risks of fraud and illegal finance. In late 2024, Pan Gongsheng, Governor of the People’s Bank of China, called privately issued digital currencies a rising threat to global financial stability and reaffirmed China’s zero-tolerance policy toward private digital currencies, even as the digital yuan expands.

Understanding China’s regulatory landscape is vital: the government considers digital currency a matter of financial sovereignty. Private currency issuance is seen as eroding the central bank’s ability to conduct monetary policy and threatening capital outflows and overall financial stability. As a result, while China actively promotes the central bank digital currency (CBDC)—the digital yuan—it remains highly cautious about private digital currency initiatives.

Alibaba Integrates AI and Tokenized Finance in Its Global B2B Strategy Overhaul

In this context, Alibaba’s pivot to tokenized bank deposits reflects a calculated effort to adopt blockchain-based payments while navigating the sensitive politics around private digital currencies. Tokenized deposits allow settlements to occur on distributed networks but remain fully within the banking sector, backed by fiat currency on the balance sheet.

This model closely matches Beijing’s preference for state-linked digital finance over private token issuance. Technical benefits of tokenized deposits include much faster settlement than traditional cross-border transfers, reduced fees by eliminating intermediary banks, and improved transaction traceability and regulatory compliance through blockchain transparency.

Chang said Alibaba.com plans to launch “agent-based payments” in December. This AI-powered tool automatically creates commercial contracts by analyzing message histories between buyers and suppliers, and is part of the company’s broader strategy to upgrade the B2B ecosystem with artificial intelligence.

The new “AI Mode” search feature lets businesses compare suppliers by price, logistics, and production capacity. Alibaba expects to charge about $20 per month or $99 per year for the service, introducing a new subscription-based revenue stream. This shift to subscriptions marks a strategic move away from traditional transaction fees, targeting a more predictable revenue model.

Alibaba’s renewed tech push comes as Chinese AI models gain global attention. In late October 2024, Alibaba’s Qwen 3 Max achieved a 108% profit in a live crypto trading contest, outperforming several Western AI systems. Only DeepSeek, another Chinese model, delivered a higher return, while OpenAI’s GPT-5 and Google’s Gemini 2.5 Pro suffered substantial losses.

These AI advances are central to Alibaba’s financial innovation strategy. AI-driven contract creation and search tools lower barriers for small and medium-sized enterprises entering global trade, enabling more efficient business matching. With deposit token payment systems, Alibaba aims to digitize the entire cross-border e-commerce process and deliver seamless transactions.

This approach aligns with China’s digital economy development policies, providing a strong example of driving technology innovation while minimizing regulatory risk. Alibaba’s efforts may serve as a model for other Chinese firms seeking to innovate under regulatory constraints.

FAQ

How do Alibaba’s deposit tokens differ from traditional stablecoins?

Alibaba’s deposit tokens are asset-backed by bank deposits, offering superior regulatory compliance and stability compared to traditional stablecoins. Their centralized management ensures operation under strict oversight.

Why does China impose strict regulations on stablecoins?

China maintains tight control over stablecoin issuance and circulation to safeguard financial system stability and currency sovereignty. Regulators fear that unrestricted private stablecoin issuance could facilitate money laundering and create systemic risks.

Can deposit tokens truly bypass China’s stablecoin regulations?

Deposit tokens may operate outside existing regulatory frameworks but remain subject to Chinese authorities’ oversight. Full regulatory avoidance is unlikely—compliance risks persist, making lawful operations critical.

How will this innovation impact the crypto market and corporate compliance?

Deposit tokens help institutions meet regulatory requirements and lower entry barriers for investors. They improve market transparency and reliability, fueling long-term growth and strengthening corporate compliance systems.

Are other major tech companies pursuing similar compliance innovation solutions?

Yes, many global tech leaders are accelerating development of regulatory-compliant digital asset solutions. Industry-wide experiments with new token models that blend blockchain and legal compliance are underway.