August 20 – Beijing is considering the launch of yuan-backed stablecoins, a step that could strengthen the currency’s role on the global stage and potentially transform the future of digital finance. According to individuals familiar with the discussions, Beijing’s top decision-making body, the State Council, is preparing to review and potentially approve a roadmap later this month that would signal a dramatic shift in its approach to digital assets.
The plan, if implemented, would outline how the yuan could gain more traction in global markets, setting specific goals for adoption while also tasking domestic regulators with ensuring proper oversight and risk prevention. The discussions reflect growing urgency within China to accelerate financial innovation and counterbalance the global dominance of the U.S. dollar, particularly as dollar-backed stablecoins have gained popularity worldwide.
Policy Direction and Strategic Focus
China’s top leadership is likely to convene a study session by the end of this month, concentrating on expanding the yuan’s global reach and examining how stablecoins could support that objective. At this meeting, officials are likely to lay down policy principles and boundaries for the development and usage of yuan-backed digital tokens in business and financial transactions.
If approved, the roadmap would represent a dramatic policy reversal. China banned cryptocurrency trading and mining in 2021 over concerns about financial instability, speculative risks, and potential capital flight. However, the growing role of stablecoins in global finance has prompted Beijing to reconsider its position.
Stablecoins are digital tokens pegged to traditional currencies, designed to maintain a stable value. Most of these tokens are pegged to the U.S. dollar and commonly utilized in international trade, cross-border payments, and as an alternative store of value. Their underlying blockchain technology allows for low-cost, instant, and borderless transfers of funds, giving them disruptive potential in areas where traditional banking systems can be slow or costly.
The yuan’s global presence remains relatively limited. In June, its share of international payments fell to just 2.88 percent, its lowest level in two years, while the U.S. dollar accounted for nearly half of all transactions. China’s longstanding capital controls, aimed at tightly managing flows of money in and out of the country, have limited the yuan’s ability to function as a fully global currency. These restrictions are also expected to present hurdles to the rollout of yuan-backed stablecoins, though policymakers see them as a tool worth exploring.
The push also comes at a time when other countries in Asia, including South Korea and Japan, are actively working on their own stablecoin initiatives. By moving forward, Beijing aims to avoid falling behind in what many see as the next major phase of financial innovation.
Fast-Track Cities and International Plans
Two of China’s most prominent financial hubs, Hong Kong and Shanghai, are set to lead the local implementation of the plan. Both cities have already been exploring frameworks for digital assets. Earlier this month, Hong Kong rolled out its stablecoin ordinance, positioning itself among the earliest regions worldwide to set formal rules for issuers of fiat-backed tokens. At the same time, Shanghai is advancing efforts to build an international hub dedicated to the digital yuan.
Officials are also preparing to bring yuan-backed stablecoins into discussions at the Shanghai Cooperation Organisation (SCO) Summit in Tianjin, scheduled for late August. The summit will likely include talks on how the yuan and related digital assets could be used for cross-border trade and payment systems with partner countries. Expanding the use of the yuan in such arrangements has long been a strategic goal for Beijing, particularly as it seeks alternatives to dollar-based systems amid rising geopolitical and economic tensions with Washington.
Globally, the stablecoin market remains relatively modest in size, estimated at about $247 billion. Yet major financial institutions project significant growth, with some forecasts suggesting the market could expand to as much as $2 trillion by 2028. For Beijing, establishing a yuan-backed option early could secure a meaningful role in this rapidly developing sector.
Financial regulators, including the People’s Bank of China (PBOC), are expected to play a central role in implementing the plan, though final details are still being worked out. The framework is also likely to include safeguards to address potential risks, including financial stability concerns and issues related to illicit flows of capital.
For now, officials are weighing both the opportunities and challenges. While stablecoins could help broaden the yuan’s reach, the government’s cautious approach to financial liberalization means adoption is likely to be gradual. Even so, the very fact that yuan-backed stablecoins are under consideration highlights a major shift in Beijing’s outlook on digital finance.