China – August 22, 2025
In a major policy reversal, China is reportedly considering a plan to allow the use of yuan-backed stablecoins for the first time, in a strategic move aimed at boosting the global adoption of its currency. This marks a significant shift from the nation’s previous hardline stance against private cryptocurrencies and signals a renewed push to challenge the dominance of the U.S. dollar in international finance. The proposal is set to be reviewed by the State Council, China’s cabinet, later this month. If approved, the plan would outline a clear roadmap for expanding the yuan’s role in global markets, including using stablecoins for cross-border trade and payments. The move is a recognition that these digital assets, with their potential for instant, low-cost transfers, could be a powerful tool in Beijing’s long-term goal of internationalizing the yuan.
Headline Points
* A Strategic Policy Shift: The consideration of yuan-backed stablecoins is a direct response to the growing influence of U.S. dollar-linked cryptocurrencies in global finance. Beijing sees this as a chance to not only expand the yuan’s use but also to define the rules of a new digital financial era.
* Review by Top Leadership: The State Council is expected to review and potentially approve a comprehensive roadmap outlining the responsibilities of domestic regulators and guidelines for risk prevention. Senior leaders are also set to convene for a study session to set the tone and define the boundaries for stablecoins’ application and development.
* Hong Kong and Shanghai as Pilot Hubs: The plan would likely fast-track local rollouts in Hong Kong and Shanghai. Hong Kong’s new stablecoin ordinance, which became effective on August 1, already positions the territory as a pioneer in regulating fiat-backed issuers. Shanghai is also developing an international operations hub for the digital yuan, which could be expanded to include stablecoins.
* Potential for Cross-Border Payments: The topic of using yuan and stablecoins for cross-border trade is expected to be a key discussion point at the upcoming Shanghai Cooperation Organization (SCO) Summit in Tianjin, signaling China’s intent to use stablecoins to facilitate trade with its partners.
* Challenges and Opportunities: Despite the potential, the success of a yuan-backed stablecoin hinges on overcoming significant structural challenges, including China’s tight capital controls. For a stablecoin to be a truly effective global payment tool, it would need to offer users the assurance that it can be easily converted into other major currencies without significant restrictions, which could be a hurdle to competing with established dollar-pegged stablecoins.
