In a surprising pivot that could reshape the international financial landscape, China is reportedly exploring the introduction of yuan-backed stablecoins as a strategy to enhance the global adoption of its currency. This move, revealed by sources close to the matter, signals a significant departure from Beijing’s previous hardline stance against cryptocurrencies. As the world’s second-largest economy seeks to challenge the dominance of the U.S. dollar, stablecoins emerge as a key tool in this ambition. Drawing from recent insights, let’s delve into how this development could accelerate yuan internationalization while navigating regulatory and geopolitical hurdles.
A Major Policy Reversal in the Making
China’s potential embrace of yuan-backed stablecoins represents a stark reversal from its 2021 blanket ban on cryptocurrency trading and mining, which was enacted over concerns about financial stability. According to sources, the State Council—China’s cabinet—is set to review and potentially approve a comprehensive roadmap later this month. This plan outlines targets for increasing the yuan’s global usage, assigns responsibilities to domestic regulators, and includes guidelines for risk prevention.
A senior leadership study session, possibly as early as the end of August 2025, will focus on yuan internationalization and the rising momentum of stablecoins worldwide. During this meeting, top officials are expected to set the tone for stablecoin applications in business, defining clear boundaries for their development. This initiative underscores Beijing’s view of financial innovation, particularly stablecoins, as a promising avenue to counter the growing influence of U.S. dollar-linked digital assets in global finance.
The Yuan’s Global Ambitions and Current Challenges
For years, China has aspired to elevate the yuan to the status of major reserve currencies like the dollar or euro, reflecting its economic heft. However, stringent capital controls and massive trade surpluses have hindered progress. Recent data from SWIFT highlights the disparity: the yuan’s share in global payments dipped to 2.88% in June 2025, its lowest in two years, while the U.S. dollar held a commanding 47.19%.
Stablecoins, cryptocurrencies pegged to fiat currencies for stability, could bridge this gap. Typically used for seamless fund transfers in crypto trading, they leverage blockchain technology for instant, low-cost, borderless transactions—potentially disrupting traditional cross-border payment systems. Yet, China’s capital restrictions pose a formidable obstacle, as market participants note, limiting the free flow essential for stablecoin efficacy.
Learning from the U.S. and Regional Peers
This push comes amid heightened U.S.-China tensions and Washington’s own advancements in digital assets. Following his January 2025 inauguration, President Donald Trump endorsed stablecoins and is crafting a regulatory framework to legitimize dollar-pegged variants. U.S. dollar-backed stablecoins currently dominate, comprising over 99% of the global supply, per the Bank for International Settlements.
In Asia, competitors are not idle. South Korea plans to permit won-based stablecoins and build supporting infrastructure, while Japan pursues similar efforts. China’s strategy includes fast-tracking implementation in key hubs like Hong Kong—where a stablecoin ordinance effective August 1, 2025, regulates fiat-backed issuers—and Shanghai, which is developing an international center for the digital yuan. A PBOC advisor recently floated the idea of an offshore yuan stablecoin in Hong Kong as “a possibility.”
Implementation and Broader Implications
Details of the plan are slated for unveiling in the coming weeks, with the People’s Bank of China (PBOC) and other regulators tasked with execution. This follows a Shanghai regulator’s recent meeting on strategic responses to stablecoins and digital currencies, amid growing use of dollar-backed stablecoins by Chinese exporters.
If realized, yuan-backed stablecoins could propel China’s currency into new realms of global trade, remittances, and finance, potentially eroding the dollar’s hegemony. However, success hinges on balancing innovation with risk management, especially given geopolitical frictions. For investors and businesses, this signals opportunities in digital assets tied to emerging markets, but also underscores the need for caution in a regulated environment.
As China navigates this bold frontier, the world watches closely. This development not only highlights the evolving role of stablecoins in currency competition but also the accelerating convergence of traditional finance and blockchain technology.