China Trials Yuan Stablecoin, Threatening US Dollar Dominance
China Plans to Allow Use of Yuan-Based Stablecoins
China is considering a new policy that would allow the use of Yuan-based stablecoins. This initiative aims to increase the adoption of national currencies globally and challenge the dominance of the United States Dollar in the world of digital finance.
In plans being considered by the state council, a roadmap for the use of stablecoins will be drawn up and possibly approved by the end of this month. The roadmap includes steps to expand the use of the Yuan in international markets as well as the responsibilities of domestic regulators. Additionally, the roadmap will also provide guidance for mitigating risks associated with the use of digital assets.
If this policy is passed by China’s senior leaders, it would be a major shift in the country’s approach to digital assets. Previously, China banned crypto trading and mining in 2021 due to concerns about disruption to the stability of the financial system.
China has a long-standing ambition to make the Yuan a global currency, on a par with the Dollar or Euro. However, several factors such as strict capital controls and a large trade surplus hampered these ambitions. This could also be a major challenge in stablecoin development.
To date, there has been no official response from China’s central bank, the People’s Bank of China, or the State Council Information Office in Beijing regarding plans to develop the Yuan through stablecoins. However, some experts from China have pushed for regulations to prepare for Yuan-based stablecoins.
Stablecoins are a type of digital currency whose value is tied to an official currency, such as the US Dollar or Chinese Yuan. This instrument can be used as an alternative means of payment if regular currency transactions are considered too expensive or difficult.
In contrast to crypto coins such as Bitcoin which are often used as investment tools, stablecoins are generally only used as a means of payment. Stablecoin exchange prices tend to be stable, making them suitable for daily transactions.
Currently, the stablecoin market is dominated by the United States, which has 99 percent of the global supply of stablecoins. This data comes from the Bank of International Settlements (BIS). US President Donald Trump also signed a law called the GENIUS Act which regulates the use of stablecoins as part of his commitment to crypto trading.
In Asia, apart from China and Hong Kong, South Korea is also committed to introducing Won-based stablecoins and building supporting infrastructure. Japan is also doing the same, showing the trend of stablecoin development in the region.
