China is poised to dramatically shift its stance on digital assets, potentially authorizing the use of yuan-backed stablecoins for the first time. This move, revealed by sources familiar with the matter, aims to enhance the global adoption of the Chinese currency.
The State Council, China’s cabinet, is scheduled to review and potentially approve a comprehensive roadmap later this month. This roadmap will detail strategies for increasing yuan usage globally, including measures to compete with the growing influence of US dollar-backed stablecoins.
The plan anticipates setting specific targets for yuan usage in international markets and outlining the responsibilities of Chinese regulators. Crucially, it will also incorporate guidelines for mitigating associated risks.
A high-level meeting, possibly before the end of the month, is expected to focus on yuan internationalization and stablecoins, with senior leaders providing direction and defining the scope of their application and development.
This represents a significant departure from China’s previous policies. The country banned cryptocurrency trading and mining in 2021 due to systemic stability concerns. Despite this, China has long sought to elevate the yuan to global currency status, comparable to the dollar or euro.
However, stringent capital controls have hampered this ambition. These controls are anticipated to pose a significant challenge to the development and implementation of yuan-backed stablecoins.
The potential benefits are substantial. Stablecoins, designed to maintain a constant value, offer the potential for faster, cheaper, and more efficient cross-border payments. This aligns with China’s strategic goals of increasing the yuan’s global presence and countering the dominance of the US dollar in international finance.
Hong Kong and Shanghai are expected to lead the implementation of this initiative. Discussions regarding the expanded use of yuan and potentially stablecoins for cross-border trade are also anticipated at the upcoming Shanghai Cooperation Organisation (SCO) Summit.
