China Challenges the Dollar: Yuan-Stablecoins on the Horizon
A Radical Shift in Digital Asset Policy
China is preparing for a major change in its digital asset policy by considering the issuance of stablecoins pegged to the yuan. According to Reuters, at the end of August 2025, the State Council of the People's Republic of China will review a roadmap aimed at expanding global use of the Chinese currency. This move will be a turning point for the country, which in 2021 banned cryptocurrency trading and mining due to concerns over financial system stability. The document will set objectives for increasing the yuan's share in global markets, assign responsibilities among regulators, and establish measures to prevent risks.
The Yuan on the Path to Global Leadership
China has long sought to make the yuan a global reserve currency alongside the US dollar and euro, reflecting its status as the world's second-largest economy. However, strict currency controls and significant trade surpluses hinder this goal. According to SWIFT data, in June 2025, the yuan's share in global payments fell to a two-year low of 2.88%, while the dollar holds 47.19% of the market. Yuan-backed stablecoins could become an effective tool for currency internationalization, leveraging blockchain technology for quick, inexpensive cross-border transactions.
First Steps and Regional Initiatives
The Chinese blockchain Conflux has already launched a stablecoin pegged to the offshore yuan (CNH) aimed at cross-border payments within the Belt and Road Initiative. This project is designed to simplify settlements between countries in Asia, Africa, and Europe. Meanwhile, Hong Kong has become one of the first regulated markets for issuers of stablecoins pegged to fiat currencies, thanks to a new law that took effect on August 1, 2025. Hong Kong and Shanghai will become key centers for implementing Beijing's new plan. At the Shanghai Cooperation Organization summit in Tianjin from August 31 to September 1, China will discuss expanding the use of the yuan and stablecoins in cross-border trade.
Global Competition and Challenge to the Dollar
China's initiative unfolds against the backdrop of growing competition in the stablecoin market, which, according to CoinGecko, amounts to about $280 billion. In the US, President Donald Trump has been supporting the development of dollar-pegged stablecoins since January 2025 and is working on establishing an appropriate regulatory framework. Dollar stablecoins dominate with over 99% of global supply, according to the Bank for International Settlements. South Korea and Japan also promote initiatives to issue stablecoins pegged to national currencies. For China, stablecoins represent an opportunity to bolster the yuan's influence amid geopolitical tensions with Washington and the active use of dollar stablecoins by Chinese exporters.
Prospects and Impact
US Treasury Secretary Scott Bessent predicts that by the end of the decade, the stablecoin market could grow to $3.7 trillion. Beijing's plan to launch yuan-stablecoins, backed by a powerful economy, could radically change the balance of power in digital finance. The success of the initiative will enhance the yuan's competitive advantages over the dollar, especially in regions covered by Chinese trade initiatives. However, to achieve its ambitious goals, China will have to overcome regulatory and technological challenges while maintaining a balance between innovation and financial stability.