China is reportedly considering a significant policy reversal by allowing yuan-backed stablecoins for the first time, marking a major shift from its 2021 ban on cryptocurrency trading and mining. According to sources familiar with the matter, China’s State Council is expected to review and potentially approve a comprehensive roadmap later this month that would facilitate greater global usage of the Chinese currency through digital asset mechanisms. This strategic initiative represents Beijing’s response to the growing dominance of U.S. dollar-backed stablecoins, which currently account for over 99% of the global stablecoin supply, and reflects China’s broader ambitions to internationalize the yuan as a rival to the dollar and euro.
The proposed plan emerges as China seeks to address the yuan’s declining share in global payments, which fell to 2.88% in June according to SWIFT data, while the U.S. dollar maintains a commanding 47.19% market share. Senior Chinese leadership is expected to convene study sessions focusing on yuan internationalization and stablecoin development, with officials likely to establish operational boundaries and application guidelines for digital currency usage in business contexts. The initiative coincides with mounting geopolitical tensions with Washington and represents Beijing’s recognition of financial technology innovation as a crucial tool for currency internationalization amid the growing influence of dollar-linked cryptocurrencies in global finance.
Hong Kong and Shanghai are positioned to spearhead the local implementation of China’s stablecoin strategy, leveraging existing regulatory frameworks and financial infrastructure. Hong Kong’s stablecoin ordinance, which took effect on August 1, establishes the territory as among the first globally to regulate fiat-backed stablecoin issuers, while Shanghai is developing an international operation center for China’s digital yuan. The timing aligns with similar initiatives across Asia, including South Korea’s commitment to won-based stablecoins and Japan’s parallel development efforts, suggesting a regional response to dollar-dominated digital payment systems.
China plans to discuss expanding yuan usage and potential stablecoin applications for cross-border trade and payments at the upcoming Shanghai Cooperation Organisation Summit in Tianjin from August 31 to September 1. However, the success of any yuan-backed stablecoin initiative faces significant challenges from China’s strict capital controls, which historically have hindered yuan internationalization efforts despite the country’s status as the world’s second-largest economy. With the global stablecoin market valued at approximately $247 billion and Standard Chartered projecting growth to $2 trillion by 2028, China’s entry could fundamentally reshape the digital currency landscape and provide an alternative to dollar-centric cryptocurrency infrastructure that enables instant, low-cost, borderless financial transfers.
