TLDR
- China plans to approve yuan-backed stablecoins to promote global use of the yuan.
-
Stablecoins are seen as a way to counter US dollar dominance in global payments.
-
Hong Kong and Shanghai will fast-track the implementation of China’s stablecoin plan.
-
China’s push for stablecoins comes amid growing geopolitical tensions and US stablecoin growth.
China is reportedly considering a major policy shift, exploring the possibility of introducing yuan-backed stablecoins to promote the global use of its currency. This move marks a significant departure from its previous stance on cryptocurrencies, as China has historically been one of the most restrictive jurisdictions for digital assets.
According to sources familiar with the matter, the State Council of China will review and possibly approve a roadmap later this month aimed at increasing the internationalization of the yuan. The plan reportedly includes introducing yuan-pegged stablecoins, which would allow China to compete with the growing use of US dollar-backed stablecoins.
China Shift Toward Digital Assets and Global Currency Power
If approved, this proposal would represent a dramatic reversal in China’s approach to digital assets. Since 2021, the country has banned cryptocurrency trading and mining, citing concerns about financial stability. However, with the global rise in the adoption of stablecoins and increasing competition from the US, China is now considering embracing stablecoins as a tool for expanding the reach of the yuan.
Stablecoins are digital currencies typically pegged to a stable asset like the US dollar. They are often used in cryptocurrency markets to facilitate transactions between digital tokens. China’s potential move to introduce yuan-backed stablecoins comes as part of a broader push to bolster the yuan’s role in international payments, which currently lags behind the US dollar.
Countering US Dollar Dominance in Global Finance
The growing influence of US dollar-backed stablecoins in global finance has been a source of concern for China. According to Reuters sources, one of the primary goals behind the introduction of yuan-backed stablecoins would be to reduce the dominance of the US dollar in international trade and finance.
The US dollar currently accounts for over 47% of global payments, while the yuan’s share remains much lower, at 2.88%.
The proposed stablecoin initiative would position China as a major competitor to the US dollar-backed digital currencies and offer a new avenue for cross-border transactions using the yuan. This move would also potentially enhance the appeal of China’s digital currency, the digital yuan, which has been under development for several years.
Implementation of the Stablecoin Plan
Sources suggest that China’s plan for the introduction of yuan-backed stablecoins will include specific guidelines for implementation and risk prevention. Key cities like Hong Kong and Shanghai are expected to be at the forefront of local implementation efforts.
Hong Kong’s regulatory environment for digital assets, which recently passed legislation governing stablecoin issuers, will play a key role in facilitating the use of yuan-pegged stablecoins.
At the same time, Shanghai is setting up an international operation center for China’s digital yuan. These two cities are expected to lead efforts to integrate stablecoin usage with the broader global financial system, particularly in cross-border trade and payments.
Stablecoin Market Growth and China’s Strategy
As global interest in stablecoins continues to rise, the market size is expected to grow significantly in the coming years. According to industry estimates, the global stablecoin market is valued at about $247 billion, and it is projected to reach $2 trillion by 2028. This rapid growth presents an opportunity for China to capture a portion of the market by introducing a stablecoin tied to its currency.
China’s push for yuan-backed stablecoins comes amid increasing geopolitical tensions with the US, further driving its desire to enhance the yuan’s influence in global trade and finance. As China explores these options, it is also looking to collaborate with countries and financial institutions that may be interested in using a stablecoin-based payment system backed by the yuan.
