China’s largest government-backed research funder has begun accepting applications for studies on stablecoins and their cross-border monitoring systems, signalling Beijing’s growing interest, and caution, towards the emerging digital asset.

According to the South China Morning Post, the National Natural Science Foundation of China, an affiliate of the Ministry of Science and Technology that manages hundreds of billions of yuan in annual funding, posted a circular last week inviting proposals for the project, describing it as addressing “an issue critical to the country’s economic development.”

“The hidden circulation of private stablecoins can undermine the effectiveness of capital controls, and [presents] a latent challenge to the yuan with the expansion of US dollar-pegged stablecoins,”

the foundation said.

The grants, ranging from 200,000 yuan to 300,000 yuan (US$28,042 to US$42,063), will support research that “provide[s] policy suggestions on how China should handle challenges brought by global stablecoins and contribute to digital finance governance”.

Applications close on 9 October, with approved research expected to be completed within 10 to 12 months.

Beijing, whose central bank has actively promoted an official digital currency known as the e-CNY, has closely monitored the global development of stablecoins, a cryptocurrency whose value is pegged to another asset.

While a stablecoin can be linked to a range of currencies or commodities, most are tied to the US dollar, either directly or through a derivative asset.

China has taken a strict stance on decentralised cryptocurrencies such as bitcoin, banning their trading and mining in 2021 over concerns about financial stability.

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