China’s State Council may for the first time allow the use of yuan-backed stablecoins, marking a significant departure from the country’s previously strict stance on cryptocurrencies, Reuters reported citing government sources.
If approved, the plan’s main objective will be to weaken the dominance of the U.S. dollar and promote the yuan’s role on the global stage. The document, expected to be reviewed later this month, may outline targets for expanding the yuan’s international use, regulatory agency functions, and risk-control measures.
China’s top leadership is expected to hold a strategic session to determine the regulatory tone and legal boundaries for the use of stablecoins. The rollout will be gradual, starting with key financial hubs such as Hong Kong and Shanghai. Hong Kong has already enacted a law regulating stablecoins, while Shanghai is developing a center for digital yuan operations.
Back in 2021, China completely banned cryptocurrency trading and mining, citing risks to financial stability. Analysts now view the potential launch of a yuan stablecoin as a major reversal in the country’s digital asset policy.
On the global stablecoin market, dollar-pegged assets dominate with a share of more than 99%, according to the Bank for International Settlements. Meanwhile, the yuan’s share in international payments has dropped to 2.88%, the lowest in two years.
POSSIBLE EFFECTS:
- A stablecoin could facilitate yuan-based transactions and reduce reliance on the dollar.
- However, capital controls and limited yuan convertibility remain barriers to international adoption.
- This move may help China strengthen the yuan’s role in trade settlements under the Belt and Road Initiative and in bilateral agreements.
