China is considering allowing the usage of yuan-backed stablecoins for the first time to boost wider adoption of its currency globally, sources familiar with the matter said, in a major reversal of its stance towards digital assets.
The State Council – China’s cabinet – will review and possibly approve a roadmap later this month for the greater usage of the currency globally, including catching up with a U.S. push on stablecoins, said the sources.
The plan is expected to include targets for usage of the Chinese currency in the global markets and outline the responsibilities of domestic regulators, they said, adding that the roadmap will also include guidelines for risk prevention.
The country’s senior leadership is also expected to meet for a study session as early as the end of this month, focusing on yuan internationalisation and stablecoins, which are gaining momentum worldwide, said one of the sources.
In that meeting, senior leaders are likely to deliver remarks to set the tone for stablecoins and define the boundaries of its application and development in business, said the source.
China’s plan for the usage of stablecoins, if approved, would mark a major shift in its approach towards digital assets. The country banned cryptocurrency trading and mining in 2021 due to concerns about the stability of the financial system.
China has long aspired for the yuan to achieve global currency status, akin to the dollar or euro, reflecting its weight as the world’s second-biggest economy. However, its tight capital controls and its trillion-dollar annual trade surpluses have worked against that aim.
Those restrictions are likely to be a key hurdle to the development of stablecoins as well, market participants have said.
Stablecoins are a type of cryptocurrency designed to maintain a constant value. They are usually pegged to a fiat currency such as the U.S. dollar and are commonly used by crypto traders to move funds between tokens.
The yuan’s share as a global payment currency fell to 2.88% in June, its lowest in two years, according to payment platform SWIFT. In contrast, the U.S. dollar commanded a 47.19% market share.
China places strong capital controls to manage flows in and out of the border, with a few connect schemes permitting capital to be deployed in some key offshore market such as Hong Kong.
In the U.S., President Donald Trump backed stablecoins days after his inauguration in January and is establishing a regulatory framework that helps legitimise dollar-pegged cryptocurrencies.
