China is reportedly considering the launch of a yuan-backed stablecoin, potentially marking a new chapter in the global financial system. The move, with an initial rollout suggested in Hong Kong and Shanghai, would represent a shift in policy after years of strict crackdowns on cryptocurrency while simultaneously promoting the central bank’s digital yuan.
Beijing’s Stablecoin Ambitions
The news, first reported this week, has drawn attention to Beijing’s growing ambition to strengthen the international role of the yuan. However, analysts caution that the pathway is far from certain. China’s existing digital currency, the e-CNY, has struggled to gain widespread traction in domestic markets where Alipay and WeChat Pay dominate everyday payments.
This leaves a yuan-backed stablecoin with a potentially distinct role. Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, said the most interesting application lies in cross-border payments. “One of the most interesting things about having renminbi stablecoins circulating is whether this allows people to move money in ways they could not through the banking system,” he noted.
Trust and Surveillance Concerns
Yet scepticism remains over whether such a project could overcome long-standing concerns. China’s financial system is closely monitored, raising questions about the freedom and usability of a state-linked stablecoin.
“China is famously anti-crypto,” Chorzempa said. “So if this stablecoin carries the same restrictions and surveillance as the renminbi, it may not be that attractive compared with the US dollar, which is freely usable.”
This credibility gap underscores one of the key challenges: while the yuan might offer some cross-border utility, its broader appeal could be undermined by limitations on accessibility and trust.
Dollar’s Continued Dominance
The scale of the challenge becomes clear when looking at market data. Patrick Tan, chief executive of blockchain intelligence firm ChainArgos, pointed out that almost all stablecoins in circulation are dollar-backed. “Ninety-eight percent of all stablecoins and stablecoin transactions are dollar-based,” he said.
Global crypto exchanges, including Binance, OKEx and Bybit, many of which have strong links to China, overwhelmingly use dollar-backed stablecoins. “The currency of choice on all of these platforms remains the US dollar,” Tan explained.
Political and Economic Obstacles
For Tan, the difficulties extend well beyond the crypto sector. “If China wants to make the digital yuan attractive, it first needs to make the yuan itself attractive,” he said. This, however, would require sweeping political and economic reforms. “Given the current climate in China, such reforms would be extremely challenging at best,” he added.
Geopolitical Significance
Even if the project struggles to rival the dollar, analysts agree that China’s exploration of a stablecoin is strategically important. It underscores how digital assets have moved beyond the realm of crypto infrastructure to become tools in a larger geopolitical contest over the future of money.
