According to Reuters, China is considering allowing the use of yuan-backed stablecoins for the first time, marking a significant reversal in its stance on digital assets, aiming to foster broader global adoption of its currency. Sources familiar with the matter indicate that China is preparing to approve a new yuan internationalization plan later this month, which sees yuan-backed stablecoins as a key tool against the dominance of the US dollar.
The State Council, China's cabinet, will review and likely approve a roadmap later this month to increase the currency's global use. This roadmap includes catching up with US progress on stablecoins.
The plan is expected to include goals for the use of the Chinese currency in global markets and outline the responsibilities of local regulators. The sources added that the roadmap will also include risk mitigation guidelines. The country's top leadership is also expected to convene later this month for a working session focused on the global momentum of yuan internationalization and stablecoins. At this meeting, senior leaders are likely to set the tone for stablecoins and define the boundaries of their application and development in the business world.
China's plan for the use of stablecoins, if approved, would represent a major shift in its 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 desired the yuan to attain global currency status similar to the dollar or euro, reflecting its weight as the world's second-largest economy. However, strict capital controls and trillion-dollar annual trade surpluses have worked against this goal. Market participants note that these restrictions will also pose a significant obstacle to the development of stablecoins.
Stablecoins are a type of cryptocurrency designed to maintain a stable value. They are typically pegged to a fiat currency, such as the US dollar, and are widely used by crypto traders to move funds between tokens. According to payments platform SWIFT, the yuan's share as a global payment currency fell to 2.88% in June, its lowest level in two years. In comparison, the US dollar held a 47.19% market share.
China maintains strict capital controls to manage inbound and outbound flows, and several interconnection schemes allow capital to be deployed in key offshore markets like Hong Kong. In the US, President Donald Trump championed stablecoins days after his inauguration in January, establishing a regulatory framework that helped legitimize dollar-backed cryptocurrencies. Their underlying blockchain technology allows for the instant, borderless, and low-cost transfer of funds around the clock, giving them the potential to disrupt traditional daily money movements and cross-border payment systems.
China Bans Crypto Mining
If approved, China's reported plan to use stablecoins would mark a major shift in the country's approach to crypto after it banned crypto trading and mining in September 2021. This news comes after multiple reports indicating that mainland China is warming to stablecoins in the face of a US stablecoin push in 2025. In June, a central bank of China (PBOC) official acknowledged the transformative potential of emerging technologies like stablecoins in global payments systems and intensified calls for regulatory approval of yuan-backed stablecoins.
