China is reportedly considering allowing the use of yuan-backed stablecoins for the first time in a major reversal of its stance on digital assets, with the goal of boosting its currency’s global adoption.
According to sources familiar with the matter, the State Council—China’s cabinet—will review a roadmap later this month to increase the yuan’s global usage, which includes catching up with the U.S. push on stablecoins.
The plan is expected to include targets for the yuan’s usage in global markets, outline responsibilities for domestic regulators, and provide guidelines for risk prevention.
Yuan internationalization and stablecoins
Senior leaders are also expected to meet by the end of the month for a study session focused on yuan internationalization and stablecoins, which are gaining momentum worldwide. The meeting will likely set the tone for stablecoins and define the boundaries of their application and development in business.
If approved, the plan would mark a significant shift in China’s approach to digital assets. The country banned cryptocurrency trading and mining in 2021 due to concerns about the stability of its financial system.
China has long aspired for the yuan to achieve a global currency status, similar to the dollar or euro, reflecting its weight as the world’s second-biggest economy. However, its tight capital controls and annual trade surpluses have hindered this goal.
Market participants say these restrictions are likely to be a key hurdle for the development of stablecoins as well.
Pegged to a fiat currency
Stablecoins are a type of cryptocurrency designed to maintain a constant value, typically pegged to a fiat currency like the U.S. dollar. They are commonly used by crypto traders to move funds between tokens.
According to the payment platform SWIFT, the yuan’s share as a global payment currency fell to 2.88% in June, its lowest in two years. In contrast, the U.S. dollar held a 47.19% market share.
China uses strong capital controls to manage flows in and out of the country, with a few programs permitting capital to be deployed in key offshore markets such as Hong Kong.
In the U.S., President Donald Trump has backed stablecoins and is establishing a regulatory framework to legitimize dollar-pegged cryptocurrencies.
Instant, borderless, and round-the-clock transfers of funds
The underlying blockchain technology allows for instant, borderless, and round-the-clock transfers of funds at a low cost. This gives stablecoins the potential to disrupt traditional daily money transfers and cross-border payment systems.
According to sources, Beijing views financial innovation, specifically stablecoins, as a promising tool for yuan internationalization amid the growing influence of U.S. dollar-linked cryptocurrencies in global finance.
Details to be announced next week
Details of the plan are expected to be unveiled in the coming weeks, with Chinese regulators, including the central bank, the People’s Bank of China (PBOC), being assigned implementation duties.
The sources declined to be named as they were not authorized to speak to the media. The State Council Information Office (SCIO) did not immediately respond to Reuters’ requests for comment. The PBOC could not be immediately reached for comment outside of normal business hours.
Major shift
U.S. dollar-backed stablecoins currently dominate the market, accounting for over 99% of the global supply, according to the Bank for International Settlements.
In Asia, South Korea has pledged to allow companies to introduce won-based stablecoins and develop the necessary infrastructure, while similar initiatives are underway in Japan.
The global stablecoin market is currently small at about $247 billion, according to crypto data provider CoinGecko. However, Standard Chartered Bank estimates it could grow to $2 trillion by 2028.
