China Considers Yuan-Backed Stablecoins for Global Trade

China explores yuan-backed stablecoins to boost global currency use, challenge dollar dominance, and reshape digital finance amid shifting crypto stance.

China is considering a bold move to introduce yuan-backed stablecoins. This plan aims to increase the global use of its currency. According to Reuters, a roadmap is set to be reviewed by the State Council, the cabinet of China, this month. This roadmap establishes goals of the utilization of the yuan in the international markets. It also places burdens on regulators and has guidelines to avert risks. In case it is accepted, this would be a significant change in the Chinese attitude toward digital assets.

China Signals Softening Stance on Crypto with Stablecoin Talks

In 2021, China prohibited cryptocurrency trading and mining because of the issue of financial stability. Now, the nation is changing its mind. The senior leaders are set to confer in the last week of August to discuss yuan internationalization and stablecoins. They will establish the tone of how stablecoins can be employed in business. This session is evidence of the increasing interest of China in the world of digital currencies. Stablecoins are growing in popularity across the world, and China does not want to be left behind.

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Stablecoins are a form of cryptocurrency that is stable. They are usually pegged to a fiat money such as the U.S. dollar. Traders make use of them to transfer funds between tokens without difficulty. However, it is the dollar-backed stablecoins that make the majority of the market, with more than 99% of the global stablecoin supply totaling 247 billion, as reported by the Bank for International Settlements. In the meantime, the yuan accountsfor  only 2.88% of payments, a two-year low, according to SWIFT data, compared to 47% by the U.S. dollar.

China had always desired that the yuan become a significant global currency of the high stature of the dollar or euro. Being the second-largest economy of the world, it desires greater financial say. However, there is a slow pace due to high capital controls and huge trade surpluses. Experts also believe that these restrictions may impede the creation of yuan-based stablecoins. Nonetheless, China views stablecoins as a means to increase the presence of the yuan in global transactions.

China to Use Yuan-Backed Stablecoins to Challenge Dollar Dominance

Hong Kong is already taking steps in this direction. On August 1, it became one of the first to introduce rules on fiat-backed stablecoins. The Chinese stablecoin plans will roll out in Hong Kong and Shanghai. At the Shanghai Cooperation Organization Summit in Tianjin on August 31-1, China can also talk about using yuan and stablecoins to transact cross-border trade. This would make the yuan compete with the dollar in the international markets.

Stablecoins are also being considered by other Asian countries. South Korea is going to permit won-backed tokens, and Japan is developing its frameworks. This regional tendency indicates the increased interest in digital currencies. The drive by China follows the initiatives of the U.S. to promote dollar-backed stablecoins, following the signing of the GENIUS Act by President Trump, who established the rules governing stablecoins. Beijing is trying to counter this U.S. hegemony in digital finance

This shift is significant as stablecoins may transform global trade. The market is currently valued at 247 billion and is expected to reach 2 trillion by 2028, according to Standard Chartered Bank. By using yuan-backed stablecoins, China may take on the dollar dominance in digital finance. But the key is to address the regulatory obstacles and earn trust in the Yuan in international markets.