China plans to allow the launch of its first stablecoins in a bid to internationalise the renminbi and compete against the dollar, but concerns about capital flight are slowing the technology’s growth in the country.

Hong Kong — China’s test bed for cryptocurrency as the industry is banned on the mainland — recently passed a law allowing licensed businesses to issue tokens backed by any fiat currency. But the territory’s de facto central bank has adopted a cautious approach, saying only a “handful” of licences will be granted starting next year.

Policymakers in China have become increasingly focused on stablecoins, arguing that the success of dollar-backed tokens is cementing the US currency’s dominance in the global economy. But China’s desire to develop a technology that can widen the renminbi’s use is running up against its need to tightly control its financial system.