China Considers Yuan-Backed Stablecoins to Boost Currency Globalization

China is considering the introduction of yuan-backed stablecoins to enhance the global adoption of its currency, marking a significant shift from its previous stance on digital assets. The State Council is expected to review a comprehensive roadmap later this month, outlining objectives for the yuan's international use, assigning regulatory responsibilities, and establishing risk management guidelines.

This initiative represents a departure from China's 2021 ban on cryptocurrency transactions and mining activities, which was implemented due to concerns over financial stability and environmental impact. The proposed plan involves the People's Bank of China overseeing the implementation, with initial deployment in cities like Hong Kong and Shanghai.

Hong Kong has recently enacted regulations for fiat-backed stablecoin issuers, aligning with China's broader digital currency strategy. The move comes amid the dominance of U.S. dollar-backed stablecoins, which currently represent over 99% of the global supply, and reflects China's desire to challenge U.S. financial leadership.

The State Council's upcoming review of the roadmap for yuan internationalization is a key component of this strategy. The People's Bank of China is expected to oversee the implementation, with initial deployment plans targeting cities like Hong Kong and Shanghai.

Hong Kong's regulatory framework has been updated to support this initiative. The enactment of the Stablecoins Bill in December 2024 and its passage in May 2025 positions the city as a regulated environment for fiat-backed stablecoin issuers. The Hong Kong Monetary Authority's guidelines for stablecoin issuers emphasize anti-money laundering, risk management, and corporate governance.

The dominance of U.S. dollar-backed stablecoins in the global market underscores the challenge China faces in promoting the yuan as an international currency. China's strategic move to challenge U.S. financial leadership through digital currency initiatives is evident in this context.

Balancing innovation in digital currencies with maintaining financial stability is a potential challenge for China. Addressing concerns related to capital controls and the potential for capital flight will be crucial in this endeavor.

In summary, China's consideration of yuan-backed stablecoins marks a significant shift in its digital currency strategy. The potential impact of this initiative on the global financial system will depend on its implementation and the international response.