As one of the strictest jurisdictions for cryptocurrency globally, China is reportedly considering allowing yuan-backed stablecoins, marking a significant policy shift, according to Reuters.
On Wednesday, Reuters cited sources familiar with the matter, stating that China may authorize yuan-backed stablecoins for the first time to promote the global use of its currency.
If approved, China's stablecoin usage plan would signify a major change in its attitude towards cryptocurrencies after banning cryptocurrency trading and mining in September 2021.
This news comes after several reports indicated a warming attitude towards stablecoins in mainland China in light of the U.S. stablecoin advancements expected by 2025.
According to sources, the State Council of China will review and possibly approve a roadmap to expand the global use of the yuan later in August. The plan reportedly includes steps to counter the progress of U.S. stablecoins and guidelines for risk prevention.
One potential use case for a yuan-backed stablecoin in mainland China would be its implementation in cross-border trade and payments with certain countries.
This issue is expected to be discussed at the Shanghai Cooperation Organization (SCO) summit in Tianjin from August 31 to September 1.
Sources indicate that Hong Kong and Shanghai have been identified as priority hubs for launching this policy.
China's entry into the stablecoin market would align with its ambitions for the globalization of the yuan and help it compete with key global reserve currencies like the U.S. dollar and the euro.
According to the SWIFT yuan tracker, as of June, the Chinese yuan was the sixth most active currency in global payments by value, with a share of about 2.9%.
Reports indicate that in June, amid a 9% drop in the U.S. dollar index, mainland China has been exploring new ways for foreign institutions to use the yuan.
At that time, Pan Gongsheng, the governor of the People's Bank of China, outlined plans to "reduce excessive reliance on a single sovereign currency" and established a digital yuan internationalization center in Shanghai.
While the dollar accounts for 47.2% of global payments, its role in the stablecoin market is much larger; according to CoinMarketCap, dollar-backed tokens account for nearly 98% of the total market capitalization of stablecoins, which is $288 billion.
With former President Trump promising to expand the global influence of the dollar through the promotion of stablecoins, many jurisdictions worldwide, including China, have expressed concerns.
In June, an official from the People's Bank of China acknowledged the transformative potential of emerging technologies like stablecoins in the global payment system, intensifying calls for regulatory approval of yuan-backed stablecoins.
In July, the blockchain platform Conflux launched a new stablecoin backed by offshore yuan.
Neighboring jurisdictions like Hong Kong have also taken steps towards stablecoin approval, launching a dedicated regulatory framework on August 1.
Related: Federal Reserve Governor Waller: Cryptocurrency payments are "nothing to be afraid of."
Original text: “Reuters: China considers launching yuan stablecoin to promote currency internationalization, significant policy shift”
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