China is considering permitting the use of yuan-backed stablecoins for the first time, a move that would mark a significant policy shift as the government explores ways to expand the currency’s role in global finance, according to people familiar with the matter.
Sources said the State Council, China’s cabinet, is set to review a roadmap later this month that could outline steps for broader international adoption of the yuan through stablecoins. The plan comes as Beijing seeks to keep pace with the United States, where policymakers are advancing regulations for dollar-pegged tokens.
Roadmap Under Review
The proposed framework is expected to set specific targets for yuan usage in international markets while detailing the responsibilities of Chinese regulators. It would also include guidelines to mitigate risks tied to digital currencies, the sources said.
Senior government leaders are expected to convene before the end of the month for a study session on the internationalisation of the yuan and the potential role of stablecoins. The meeting could establish the boundaries for their use and provide direction for future development.
From Ban to Possible Approval
If approved, the initiative would mark a reversal of China’s 2021 ban on cryptocurrency trading and mining. Authorities at the time cited concerns about financial stability and capital flight, positioning the country as one of the strictest regulators of digital assets.
Despite those restrictions, Beijing has long sought to elevate the yuan as a global reserve currency, reflecting its position as the world’s second-largest economy. Efforts to promote the currency abroad have been slowed by tight capital controls and persistent trade surpluses, which limit the yuan’s flexibility in cross-border markets.
Analysts said those same constraints could hinder the development of yuan-backed stablecoins, even if approved, given the government’s cautious approach to capital flows.
Competing with the U.S. Dollar
Stablecoins, digital tokens typically tied to fiat currencies, are widely used by investors and traders to transfer funds across markets. Dollar-backed stablecoins dominate global circulation, supporting the dollar’s position as the leading global payment currency.
In June, the yuan’s share of global transactions fell to 2.88 per cent, the lowest in two years, according to payment network SWIFT. By contrast, the dollar held nearly half of all payments at 47.19 per cent.
The U.S. has also moved quickly on regulation, with President Donald Trump backing stablecoins shortly after taking office in January. Washington is now working on a framework that could further entrench dollar-based tokens in global finance.
