China is reportedly considering a landmark policy shift that could see yuan stablecoin approval for the first time. This would mark a significant departure from the country’s cryptocurrency ban and challenge the overwhelming dominance of US dollar-backed digital currencies in global markets.
According to an exclusive report by Reuters, China’s State Council is expected to review and potentially approve a comprehensive roadmap later this month that would authorise yuan-backed stablecoins as part of broader currency internationalisation efforts. The move represents what sources familiar with the matter described as a “major reversal” of China’s stance toward digital assets following its comprehensive cryptocurrency ban in 2021.
A pivot amid dollar supremacy
The yuan stablecoin initiative emerges as China grapples with declining international use of its currency. The yuan’s share as a global payment currency fell to 2.88% in June, its lowest in two years, according to payment platform SWIFT. In contrast, the US dollar commanded a 47.19% market share.
PBOC advisor Huang Yiping told local media that an offshore yuan stablecoin in Hong Kong is “a possibility,” signalling official interest despite mainland China’s stringent digital asset restrictions. Wang Yongli, former vice president of Bank of China, wrote on WeChat in June that it “would be a strategic risk if cross-border yuan payment is not as efficient as dollar stablecoins.”
The strategic calculus reflects mounting concerns in Beijing about losing ground in digital finance innovation. Stablecoins backed by the US dollar currently dominate the market, accounting for over 99% of the global stablecoin supply, according to the Bank for International Settlements.
Implementation framework taking shape
Details suggest a carefully-orchestrated rollout using China’s financial centres. According to sources, Hong Kong and Shanghai will be the main cities to fast-track local implementation of the latest plan. The timing aligns strategically with existing regulatory infrastructure.
Hong Kong’s Stablecoin Ordinance took effect August 1, creating Asia’s first comprehensive regulatory framework for fiat-backed digital currencies. The ordinance establishes legal pathways for yuan-backed tokens while maintaining separation from mainland capital controls.
The ordinance mandates 100% high-quality reserves for stablecoins in matching currencies – be it the US or HK dollar, or the offshore renminbi. The framework provides the foundation for yuan stablecoin experimentation without violating mainland financial stability requirements.
Shanghai’s role centres on its developing digital yuan infrastructure. China’s commercial hub Shanghai is also establishing an international operations centre for the digital yuan. This positions the city as a hub for central bank digital currency operations and private stablecoin initiatives.
Market dynamics and global context
The yuan stablecoin push unfolds against a backdrop of explosive stablecoin market growth projections. The global stablecoin market is currently small at about US$247 billion, according to cryptocurrency data provider CoinGecko. However, Standard Chartered Bank estimates it could grow to $2 trillion by 2028.
Standard Chartered Bank estimates the size of the stablecoin market could surge by about 10-fold to US$2 trillion in the next three years after the expected passage of US legislation that seeks to provide a regulatory framework for cryptocurrencies.
The US has accelerated its stablecoin development through the GENIUS Act, which aims to formalise regulatory frameworks for dollar-backed tokens. In recent months, financial officials and academics in China have spoken up on the need to at least consider authorising stablecoins, voices which Zhiguo He, a professor of finance at Stanford University, says are motivated by the “fear of missing out.”
Geopolitical implications and challenges
China’s yuan stablecoin initiative carries broader geopolitical significance as Beijing seeks alternatives to dollar-dominated financial infrastructure. China is expected to discuss expanding the use of yuan and possibly stablecoins for cross-border trade and payments with some countries at the Shanghai Cooperation Organisation (SCO) Summit to be held August 31-September 1, 2025, in Tianjin, said sources.
The move aligns with China’s broader de-dollarisation efforts through initiatives like the Cross-Border Interbank Payment System (CIPS), designed to provide alternatives to SWIFT-based transactions. China understands that to challenge the dollar, it needs its payment infrastructure.
That’s where the Cross-Border Interbank Payment System (CIPS) comes in. CIPS is designed to facilitate yuan transactions, reducing reliance on SWIFT. However, significant obstacles remain. China places strong capital controls to manage flows in and out of the border, with a few connected schemes permitting capital to be deployed in some key offshore markets like Hong Kong.
The restrictions could limit the free circulation of yuan stablecoins globally. Huang Yiping acknowledged the challenges, telling financial news outlet Yicai.com, “As China’s capital account is not fully liberalised, it would be very difficult to roll out a stablecoin domestically.”
Corporate interest and technical infrastructure
Private sector engagement suggests a growing appetite for yuan-denominated digital assets. Chinese tech giant JD.com reportedly proposed offshore yuan stablecoin models in central bank discussions. The company registered two stablecoin brands in Hong Kong, JCOIN and JOYCOIN.
Between 50 and 60 companies have expressed interest in applying for Hong Kong stablecoin licences, with only three to four licences expected to be granted in the initial phase. The level of interest indicates substantial private sector readiness to participate in the yuan stablecoin infrastructure.
Unlike speculative cryptocurrencies, China’s approach emphasises state control and regulatory compliance. Its digital currency ambitions remain firmly aligned with state control, and any stablecoin infrastructure is expected to reflect a centralised approach.
Regulatory timeline and risk management
The proposed implementation timeline suggests urgency in Beijing’s approach. The country’s senior leadership is also expected to meet for a study session as early as the end of this month, focusing on yuan internationalisation and stablecoins’ gaining of momentum worldwide, said one of the sources.
Details of the plan are expected to be unveiled in the coming weeks, with Chinese regulators, including the People’s Bank of China (PBOC), being assigned implementation duties, said the sources.
Risk management appears central to the framework design. The plan is expected to include targets for use of the Chinese currency in the global markets and outline the responsibilities of domestic regulators, they said, adding that the roadmap will also include guidelines for risk prevention.
Market assessment and future outlook
The yuan stablecoin initiative represents China’s most significant digital asset policy shift since its 2021 cryptocurrency ban. However, success depends on overcoming structural challenges, including capital controls, international adoption, and competition with established dollar-backed alternatives.
Li Lihui, former president of the Bank of China, said Hong Kong’s step forward with stablecoin legislation reflects an encouraging regulatory attitude. The institutional support suggests a growing consensus in China’s financial establishment about the strategic necessity of stablecoin engagement.
China’s yuan stablecoin gambit faces a harsh reality check. Despite ambitious plans and regulatory frameworks, the initiative must overcome entrenched dollar infrastructure, limited yuan convertibility, and sceptical international markets. Previous attempts at yuan internationalisation have yielded modest results despite massive state investment.
Yet Beijing’s timing may prove shrewd. With US-China tensions escalating and emerging markets seeking dollar alternatives, even capturing a fraction of the US$2 trillion projected stablecoin market could meaningfully advance China’s financial sovereignty goals.
The August timeline suggests urgency – perhaps recognising that first-mover advantages in digital finance may prove more durable than traditional monetary dominance. Whether this marks the beginning of genuine monetary competition or another expensive policy experiment will depend less on regulatory announcements and more on whether global markets embrace yuan-denominated digital assets when viable alternatives exist.
(Photo by Eric Prouzet)
See also: China could test Yuan stablecoin Hong Kong route but faces headwinds – Morgan Stanley
Want to learn more about blockchain from industry leaders? Check out Blockchain Expo taking place in Amsterdam, California and London.
Explore other upcoming enterprise technology events and webinars powered by TechForge here.
