China could embrace yuan-based stablecoins, the European Union’s digital euro might choose public over permissioned rails, and Wyoming’s new stablecoin might or might not offer ‘yield’ to its users.
On August 21, Reuters reported that China was “considering allowing the usage of yuan-backed stablecoins for the first time to boost wider adoption of its currency globally.” China’s State Council will reportedly review a roadmap that establishes targets for the adoption of yuan-based stablecoins, while also sketching out domestic regulatory responsibilities, including risk prevention.
Senior leadership is expected to hold a study session as soon as this week to discuss ways of boosting “yuan internationalization.” The meeting will “set the tone” for stablecoin adoption, mapping out the technology’s boundaries and business development opportunities.
The People’s Bank of China (PBoC) will reportedly be assigned stablecoin implementation duties, while Hong Kong and Shanghai will be asked to “fast-track local implementation” of the stablecoin plans. Hong Kong’s new stablecoin ordinance took effect on August 1, although local regulators are still reviewing applications and the first licenses won’t be issued until early 2026.
The news follows recent reports that Beijing had issued ‘guidance’ to Chinese brokerages and thinktanks to lower the temperature surrounding yuan-based stablecoin talk. This guidance followed a wave of fraudulent stablecoin-linked fundraising efforts preying on individuals who assumed the recent public discussions of state-approved stables meant these illicit efforts were legit.
China’s apparent re-reversal of its stablecoin stance appears to be a response to America’s embrace of dollar-backed stablecoins under President Donald Trump. The U.S. administration has been talking up stablecoins’ ability to boost international demand for the dollar, which threatens to further reduce the yuan’s already minuscule (~3%) share of global transactions beyond China’s borders. The dollar remains by far the international currency of choice, featuring in over 47% of transactions.
The first countries to be targeted for adoption of China’s new yuan-based stablecoins will likely be those in which China has established an economic presence via its infrastructure-focused Belt & Road Initiative (BRI).
Domestic tech firms like JD.com (NASDAQ: JD) and Alibaba (NASDAQ: BABA) offshoot Ant Group have been urging Beijing to loosen its restrictions on stablecoin adoption in order to reduce cross-border transaction costs. Last month, Chinese blockchain firm Conflux was said to be prepping an offshore yuan stablecoin, although those reports subsequently disappeared from state-run media sites around the time the aforementioned ‘guidance’ was issued.
China’s challenge of dollar dominance will face significant hurdles given the general lack of faith in domestic economic data produced by Beijing. However, given Trump’s ongoing efforts to eliminate the independence of the Federal Reserve and his attacks on government-issued economic data that reflect poorly on his strategies, America’s advantage on the trust issue could erode quickly.
Yer up, Europe
Concerns over dollar-denominated stablecoins making inroads beyond America’s borders aren’t limited to China. For some time now, financial entities in the EU have been sounding the alarm on this front and urging a swift response. That includes accelerating the rollout of the digital euro before the European Central Bank (ECB) suffers additional erosion of its sovereignty.
On August 22, the Financial Times reported that EU officials were “rethinking plans for the digital euro,” including whether to launch the token on a public blockchain rather than a new permissioned network. Using a public network like Ethereum or Solana would not only speed up the digital euro’s arrival but also make the token more widely accessible.
While emphasizing that no decision had yet been made, the ECB told the FT it was mulling “different technologies—both centralized and decentralized—in the development of the digital euro, including distributed ledger technologies.”
The original plans for the digital euro have been negatively compared to those of China’s digital yuan, i.e., another central bank digital currency (CBDC) that critics describe as an instrument for state surveillance of financial transactions.
On August 25, Politico reported that the ECB hopes the digital euro will handle over 50 billion transactions per year out of the gate. From there, the ECB wants the technology to eventually absorb 40% of all transactions currently made via payment cards—most of which are controlled by U.S.-based companies.
These appear to be wildly optimistic expectations, given studies that show more than half of EU residents remain unsure as to whether they’re interested in ever using the digital euro.
Several privately-issued euro-denominated stablecoins already exist, but these represent only ~0.2% of the total $271 billion stablecoin market cap. The most prominent euro stablecoin is EURC, issued by U.S. firm Circle (NASDAQ: CRCL). EURC’s market cap currently stands at just under €194 million ($225 million), while Circle’s flagship dollar-denominated USDC boasts a cap of $67.3 billion.
Regardless, European banking associations are now voicing many of the same concerns being raised stateside by banks and credit unions. Specifically, that allowing digital asset operators to offer ‘yield’ or ‘rewards’ to stablecoin holders will result in significant bank deposit outflow. The fear is that this will reduce tradfi institutions’ capacity to offer loans for cars, mortgages and other big-ticket items.
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Dear Rachel… Do as we say, or face 1,000 years of eternal darkness
The U.K. ‘brexited’ the EU a while ago, but that doesn’t mean it wants to be left behind on the stablecoin front. Last week, CNBC reported that a group of primarily U.S. digital asset execs had written an open letter to U.K. Chancellor Rachel Reeves, urging her to follow the U.S. lead on stablecoins or face the consequences.
This ‘open’ letter, which oddly has yet to surface online, was reportedly signed by figures from digital asset exchanges including Coinbase (NASDAQ: COIN) and Kraken, digital asset custodians BitGo, Copper, and Fireblocks, and exchange-traded fund (ETF) managers VanEck. Channeling a ‘come with us if you want to live’ vibe, the execs urge Reeves to adopt a national stablecoin strategy “to avoid being a rule-taker rather than a rule-maker in the digital asset era.”
The letter goes on to say that “a proactive, coordinated national strategy is needed—one that positions stablecoins not as a risk to be contained, but as a financial infrastructure to be responsibly embraced.”
The letter takes exception to the U.K.’s proposed legal definition of stablecoins as “crypto-assets with reference to fiat currency.” The execs claim this “focuses on form rather than function,” likening it to “defining a cheque as paper with reference to currency.”
A U.K. Treasury spokesperson said the government was “bringing crypto assets into the regulatory framework” as part of its Plan for Change, and would issue its ‘final’ crypto legislation by the end of 2025. For what it’s worth, the market cap of sterling-denominated stablecoins is even smaller than the euro share, currently worth less than £500,000 ($672,527).
Reeves previously stated a goal of making the U.K. the “best place in the world to innovate,” but unless the U.K. promises the kind of regulatory free-for-all that is currently the rage stateside, the letter’s signatories are likely to be disappointed.
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Wyoming’s stablecoin is go
Turning stateside, Wyoming has made good on its plan to release the first U.S. state-issued dollar-backed stablecoin, although it’s not yet available to the public. The Frontier Stable Token (FRNT) has been deployed on seven networks (Arbitrum, Avalanche, Base, Ethereum, Optimism, Polygon, and Solana) ahead of its official debut in September.
Previously known as the Wyoming Stable Token (WYST), the rebranded FRNT will be made available to the public “through a network of authorized resellers that complete a robust ‘Know Your Business’ review” by the Wyoming Stable Token Commission (WSTC).
This includes the Wyoming-domiciled Kraken exchange and Rain’s Visa-integrated card platform on Avalanche. The Rain-issued FRNT card will be accepted within Visa’s merchant network, while FRNT also supports both Apple Pay and Google Pay.
Omnichain interoperability protocol LayerZero is FRNT’s ‘token issuance partner’ while Fireblocks is providing on-chain infrastructure and access controls. Franklin Advisers is managing FRNT’s reserves, and The Network Firm will conduct audits and monthly attestations.
Wyoming’s plans for the stablecoin include the ability to put tax refunds, social benefits, and other government payments on-chain. Remittances are another option, although that’s targeted for some unspecified point in the future.
The federal GENIUS Act bars stablecoin issuers from offering ‘yield’ on their tokens, and there will be no yield option when FRNT makes its formal debut. But Wyoming State Sen. Chris Rothfuss, who heads the state’s Select Committee on Blockchain, Financial Technology and Digital Innovation Technology, told Decrypt last month that the state is “confident that we can issue yield on our stable token” at some point down the road.
Wyoming’s stablecoin plans have been slammed by some federal lawmakers as a CBDC in all but name. But the state counters that central banks can issue CBDCs backed only by their reputation, while FRNT will be overcollateralized (102%) with cash and short-duration Treasury bills. Interest on the reserves backing FRNT has been allocated to a fund supporting the Wyoming School Foundation.
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MetaMask breaks new stable ground
Finishing on the corporate side, last week saw the MetaMask digital wallet announce plans to launch its own dollar-denominated stablecoin, MetaMask USD (mUSD). The token will be issued by Bridge, the stablecoin infrastructure platform that was recently acquired by payment processor Stripe, and powered by the decentralized stablecoin infrastructure and liquidity platform M0.
MetaMask, owned by Ethereum-focused software firm Consensys, claims the launch will mark the first time a self-custodial wallet has issued a stablecoin. mUSD will debut on both Ethereum and the Consensys-built layer-2 network Linea later this year, but no firm dates have been set for either launch.
MetaMask claims to have over 100 million users, who will now be able to use mUSD across a wide variety of decentralized finance (DeFi) protocols. There are also plans to incorporate mUSD into the MetaMask debit card, allowing users to make payments at all Mastercard-accepted merchants.
And by using Stripe/Bridge to issue the token, MetaMask will be free to offer yield/rewards to mUSD holders, as the GENIUS Act’s yield restrictions apply only to the stablecoin issuer. While MetaMask has yet to signal that yield/reward for mUSD holders will be an option, even a blind man could read these signals.
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Watch: Richard Baker on engineering a smarter financial world with blockchain
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Source: https://coingeek.com/china-eyes-stablecoins-to-boost-yuan-internationalization/