China eyes Yuan-backed stablecoin to rival U.S dominance in crypto

Key Takeaway

China is considering launching a yuan-backed stablecoin to strengthen the currency’s global influence. The timing aligns with U.S. progress on regulated stablecoins, intensifying competition for leadership in global digital payments.

China may be on the verge of a major shift in its digital asset policy.

According to a Reuters report, Beijing is exploring the launch of yuan-backed stablecoins. This initiative is part of a wider effort to boost the yuan’s role in global finance.

China’s crypto bet

A new proposal will be reviewed by the State Council later this month to promote offshore yuan adoption. 

Additionally, it outlines regulatory responsibilities and introduces risk-control measures.

If approved, the proposal would mark a major policy shift and would be China’s first formal step toward permitting stablecoins.

This comes despite China’s sweeping ban on crypto trading and mining since 2021. Until now, the country has relied solely on its central bank digital currency.

However, regulators appear more open to innovation. They recognize stablecoins offer faster settlements, lower costs, and round-the-clock functionality.

Therefore, the main question for Beijing remains: Can a compliant yuan-based token compete with dominant dollar-linked stablecoins like USDT and USDC?

Will China’s stablecoin beat U.S. stablecoin dominance?

The timing is significant as SWIFT data shows that the yuan’s share in global payments fell to 2.88% in June, its lowest in two years, versus the dollar’s 47%.

Meanwhile, dollar-pegged stablecoins make up nearly 98% of the $288 billion market as per CoinMarketCap, highlighting U.S. dominance.

For China, a yuan-based stablecoin could help boost cross-border trade and reduce dependence on dollar-backed tokens.

At the same time, U.S. policy momentum is adding urgency.

Under President Donald Trump, Washington advanced the GENIUS Act. This legislation supports regulated stablecoins and promotes the dollar’s global influence.

As a result, geopolitical pressure on China has intensified. Therefore, despite past restrictions, signs of policy easing are emerging.

In June, a senior official from the People’s Bank of China publicly acknowledged the disruptive potential of stablecoins in reshaping global payment systems.

Soon after, July saw blockchain network Conflux roll out a stablecoin tied to the offshore Chinese yuan, a development that suggests domestic players are preparing for a regulated framework.

What’s more?

Together, these developments reveal a shifting narrative in Beijing. China is no longer dismissing stablecoins outright.

Instead, it is exploring how stablecoins could support the yuan’s global reach, also trying to maintain strict control over capital flows.

Meanwhile, neighboring regions are moving swiftly. On the 1st of August, Hong Kong introduced a regulatory framework for stablecoins.

This move signals its ambition to become a hub for compliant digital asset innovation.

Additionally, the U.S. Treasury has opened a public comment window under the GENIUS Act to evaluate how best to curb illicit activities linked to stablecoins, while Wyoming has made history by launching the first state-backed digital dollar.

These parallel developments suggest that the stablecoin race is accelerating on multiple fronts. Therefor, Beijing’s next move could determine whether the yuan carves out a meaningful role in this global transformation.