Key points
- China is considering allowing yuan-backed stablecoins to increase the global use of its currency.
- The State Council will review a roadmap for wider yuan usage. It’s a significant shift from China’s previous ban on cryptocurrency trading and mining.
- The plan aims to compete with the growing influence of US dollar-backed stablecoins.
- Hong Kong and Shanghai are expected to lead the implementation of the new policy.
China is poised to dramatically alter its stance on digital assets, with plans to approve the use of yuan-backed stablecoins potentially. This significant policy shift comes after a 2021 ban on cryptocurrency trading and mining, reflecting a strategic move to enhance the yuan’s global presence and compete with the dominance of the US dollar.
Sources familiar with the matter indicate that the State Council, China’s cabinet, will review and potentially approve a comprehensive roadmap later this month outlining the increased usage of the yuan globally, including the integration of stablecoins.
The roadmap will likely set targets for yuan usage in international markets and define the roles of domestic regulators. It will also address risk mitigation strategies. A high-level meeting is anticipated by the end of the month, further to discuss yuan internationalization and the role of stablecoins.
Senior leaders are expected to guide the boundaries of stablecoin application and development. This move underscores Beijing’s recognition of stablecoins as a tool to promote the yuan’s international standing, particularly given the rising influence of US dollar-linked cryptocurrencies.
If approved, the plan would represent a major reversal of China’s previous hardline approach to digital assets. The country has long sought to elevate the yuan to a global currency status comparable to the dollar or euro. Still, tight capital controls and significant trade surpluses have hampered these efforts. These controls are likely to remain a significant challenge for the development and implementation of yuan-backed stablecoins.
The implementation will likely focus initially on Hong Kong and Shanghai, with the possibility of discussions regarding expanded yuan and stablecoin usage for cross-border trade and payments at the upcoming Shanghai Cooperation Organisation (SCO) Summit.
While the current global stablecoin market is relatively small at approximately $247 billion, projections suggest significant growth potential, reaching $2 trillion by 2028. This proactive approach by China signals a competitive response to the growing global influence of dollar-backed stablecoins. It underscores the nation’s ambition to strengthen its economic standing on the world stage.
