China is reportedly considering the launch of a yuan-backed stablecoin, potentially marking a new stage in the global financial system. The move would represent a sharp shift for Beijing, which has previously cracked down on cryptocurrencies while promoting its central bank digital currency, the digital yuan.
According to initial reports, the rollout could begin in Shanghai and Hong Kong, signalling Beijing’s intention to expand the yuan’s role in international finance. Yet, experts caution that the path ahead is uncertain, with trust, liquidity and the entrenched dominance of the US dollar presenting significant hurdles.
A Shift in Strategy
For years, Chinese regulators have imposed strict controls on cryptocurrency trading and ownership, while pushing forward trials of the digital yuan. However, uptake of the central bank digital currency has been slow. Analysts argue that the dominance of Alipay and WeChat Pay in daily transactions has left little space for the digital yuan to flourish within China’s domestic economy.
This has led some to see a yuan-backed stablecoin as a tool with a different function. Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, told that the most interesting application of such a stablecoin may lie in cross-border payments.
“One of the key questions is whether renminbi stablecoins would allow people to move money across borders in ways that traditional banks currently restrict,” he said.
The Dollar’s Grip on Stablecoins
Even if a yuan stablecoin were launched, experts say it would face an uphill battle against the dominance of the US dollar in both traditional and digital finance. Patrick Tan, CEO of blockchain intelligence firm ChainArgos, noted that 98% of existing stablecoins and their transactions are dollar-based.
“The biggest global crypto exchanges, including Binance, OKEx and Bybit, all have strong links to Chinese markets,” Tan explained. “Yet the currency of choice on these platforms remains dollar-backed stablecoins.”
The prevalence of the dollar reflects not only its deep liquidity but also the trust international markets place in the currency. In contrast, scepticism over China’s financial transparency and political controls raises questions about whether a yuan-backed stablecoin would be widely adopted.
Credibility and Control
Trust, analysts argue, may be the defining issue for any Chinese stablecoin. China’s economic model and regulatory framework remain tightly controlled, with heavy surveillance over financial flows.
“China is famously anti-crypto,” Chorzempa said. “So the question with this stablecoin idea is whether it would come with the same restrictions, surveillance and controls that already exist with the renminbi. If that is the case, then it is unlikely to be attractive compared to a freely usable dollar-backed alternative.”
Without a freer financial system, critics suggest, a yuan stablecoin would struggle to gain ground internationally, especially in regions where businesses value ease of use and regulatory clarity.
Systemic Challenges Ahead
For Beijing, the challenge extends far beyond the technical design of a stablecoin. Tan argues that China must first make the yuan itself attractive as a global currency before any digital version can succeed.
“To make the yuan competitive requires significant systemic political and economic reforms,” he said. “Given the current climate in China, such reforms would be extremely difficult to achieve.”
This reflects a broader geopolitical contest over the future of money. Stablecoins, once considered niche instruments of the crypto industry, are increasingly viewed as tools of financial influence. Beijing’s interest in a yuan-backed stablecoin highlights its ambition to reduce reliance on the dollar, yet experts remain unconvinced about its ability to deliver the trust and openness that global users demand.
The Road Ahead
Whether or not China proceeds with a stablecoin launch, its consideration alone underlines the shifting role of digital assets in the international monetary system. The conversation is no longer limited to technology or crypto markets but now touches on questions of currency dominance, global liquidity and political trust.
For now, the dollar-backed stablecoin remains the undisputed leader, supported by deep financial markets and global acceptance. China’s experiment, if it materialises, may open a new chapter in financial innovation, but overcoming the credibility gap remains its greatest obstacle.
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