China weighs yuan-backed stablecoins in major policy shift
China is considering permitting the use of stablecoins backed by the yuan for the first time, in what would mark a dramatic policy reversal and a fresh step to elevate the currency’s global role, according to people with knowledge of the matter.
The State Council, China’s cabinet, is expected to review a roadmap later this month that sets targets for expanding the yuan’s use in international markets and details responsibilities for domestic regulators. The plan will also include safeguards to mitigate financial risks, the sources said.
Senior leaders are due to hold a study session by the end of August focused on yuan internationalisation and stablecoins, which are gaining traction worldwide. At that meeting, top officials are likely to outline the scope for stablecoin use in commerce and set boundaries for its development, one source noted.
If approved, the proposal would represent a sharp departure from Beijing’s long-standing hostility towards digital assets. China banned cryptocurrency trading and mining in 2021 amid fears of financial instability. However, the rapid rise of dollar-backed stablecoins and Washington’s efforts to establish a regulatory framework have prompted Beijing to reconsider.
The yuan currently accounts for just 2.88% of global payments, its lowest level in two years, compared with the US dollar’s 47.19% share, according to SWIFT data. Despite China’s economic weight, tight capital controls and persistent trade surpluses have curbed the currency’s international reach, hurdles that may also complicate the rollout of a yuan stablecoin.
Stablecoins, typically tied to a fiat currency such as the dollar, are used to facilitate instant, low-cost transfers across borders. While US dollar-backed tokens dominate the $247 billion market, Beijing sees yuan-linked stablecoins as a potential tool to counter US financial influence and promote wider adoption of its currency.
Regulators, including the People’s Bank of China, will be tasked with implementation once the plan is approved, the sources added. Details are expected to be unveiled in the coming weeks. The State Council Information Office did not immediately respond to requests for comment.
Regional initiatives are already underway. Hong Kong introduced its long-awaited stablecoin law on 1 August, making it one of the first jurisdictions to regulate fiat-backed issuers, while Shanghai is building an international operations centre for the digital yuan. Both cities are expected to spearhead the pilot rollout.
China is also set to discuss the broader use of the yuan and potential stablecoin applications in trade and cross-border payments with partner countries at the Shanghai Cooperation Organisation (SCO) summit in Tianjin on August 31 – September 1, the sources said.
Although still relatively small, the stablecoin market is expanding rapidly. Standard Chartered projects it could grow from about $247 billion today to $2 trillion by 2028.
Reuters
