Crypto News: China Reportedly Weighs Yuan Stablecoin in Response to US Push

In recent crypto news, China is considering allowing yuan-backed stablecoins for the first time to boost currency internationalization, as reported by Reuters on Aug. 20.

Sources familiar with the matter said the State Council is expected to review and possibly approve a roadmap later this month for greater yuan usage globally.

The plan includes catching up with US stablecoin initiatives as geopolitical tensions intensified in digital finance.

Senior leadership plans to meet for a study session at the Shanghai Cooperation Organisation Summit scheduled for August 31-September 1 in Tianjin.

The officials are expected to deliver remarks setting the tone for stablecoin development and defining boundaries for application in business sectors.

The development marked a significant policy reversal from the country’s 2021 ban on cryptocurrency trading and mining.

US Stablecoin Push Drives Chinese Response

The shift followed the US Congress passing the GENIUS Act in July, which established the first regulatory framework for dollar-pegged stablecoins.

President Donald Trump backed stablecoins after his January inauguration, positioning America as the “crypto capital of the planet.”

In a Fortune report on July 31, Stanford professor Zhiguo He attributed Chinese interest to “fear of missing out” as dollar-backed stablecoins dominated 99% of the global market.

The US stablecoin growth could reinforce dollar hegemony in international payments and challenge China’s currency internationalization efforts.

People’s Bank of China Governor (PBOC) Pan Gongsheng noted rising stablecoin use for cross-border payments at June’s Lujiazui Forum in Shanghai.

Further, former Bank of China Vice President Wang Yongli warned it “would be a strategic risk if cross-border yuan payment is not as efficient as dollar stablecoins.”

The momentum built through recent months as Chinese officials expressed growing concerns about falling behind in digital currency innovation.

The global stablecoin market reached nearly $275 billion, with Standard Chartered Bank projecting growth to $2 trillion by 2028.

However, roughly 99.8% of the supply is represented by dollar-pegged stablecoins, according to Artemis data. Tether USD (USDT) dominates the market, with a 61% market share.

Hong Kong Emerges as Implementation Hub

Hong Kong’s Stablecoin Ordinance took effect on Aug. 1, creating Asia’s first comprehensive regulatory framework for fiat-backed digital currencies.

The territory’s framework positioned it as a testing ground for yuan-backed tokens. PBOC advisor Huang Yiping suggested using Hong Kong for China’s stablecoin launch, noting that over 70% of offshore renminbi payments are processed through the territory.

In addition, Chinese tech giant JD.com reportedly proposed offshore yuan stablecoin models in central bank discussions.

The company registered two stablecoin brands in Hong Kong, JCOIN and JOYCOIN, signaling corporate interest in the space.

Around 50 to 60 companies have expressed interest in applying for Hong Kong stablecoin licenses, with only three to four licenses expected in the initial phase.

State media outlet Securities Times urged swift yuan stablecoin development, writing that “the development of renminbi-pegged stablecoins should be sooner rather than later.”

Shanghai regulators held meetings in July to discuss strategic stablecoin responses.

Technical and Regulatory Challenges

China’s closed capital account prevented authorization of onshore yuan stablecoins due to capital flight concerns.

Officials could approve tokens pegged to offshore renminbi traded in international markets like Hong Kong.

The yuan’s global payment share fell to 2.89% in May, its lowest level in two years, according to SWIFT data.

The US dollar maintained a 48.46% market share despite Chinese efforts to promote currency internationalization through systems like the Cross-Border Interbank Payment System.

China has already developed technical infrastructure for yuan-based transactions through its digital yuan and CIPS network.

Shanghai established an international operation center for the digital yuan as part of broader currency promotion efforts.

The central bank was likely to treat private stablecoins as pilot projects while relying on official systems for broader implementation.

Chinese e-commerce platforms and payment providers could adopt yuan stablecoins to promote global usage.

The yuan stablecoin initiative represents China’s response to US digital currency leadership while maintaining regulatory control.

Implementation through Hong Kong would allow controlled experimentation without compromising mainland financial stability or capital controls.