China seems to be considering the launch of a yuan-backed stablecoin, initially in the Hong Kong region and Shanghai. This is a surprising shift, as China has been cracking down on cryptocurrencies for years while promoting its central bank digital currency—the digital yuan.
In the latest episode of "Byte-Sized Insight," Cointelegraph interviewed two leaders analyzing China's potential stablecoin initiatives: Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, and Patrick Tan, CEO of blockchain intelligence firm ChainArgos.
The news was first reported on Wednesday, highlighting China's ambition to strengthen the role of the yuan in international finance. However, experts say the path forward is far from certain, especially considering the track record of its central bank digital currency (CBDC), the digital yuan.
According to Chorzempa, the dominance of Alipay and WeChat Pay in everyday transactions leaves little room for China's CBDC experiment.
This leaves a different potential role for the yuan stablecoin. "I tend to think the most interesting application of a yuan stablecoin might be in cross-border payments," Chorzempa said.
However, cross-border utility does not eliminate the credibility gap between the yuan and the dollar. Chorzempa stated:
"If the answer is yes," he said, "it may not be as attractive compared to dollars that can be freely used."
From a market perspective, the obstacles are equally significant. "98% of stablecoins and stablecoin transactions are dollar-based," Tan said.
"The world's largest crypto asset exchanges, Binance, OKEx, Bybit, all have ties to China. What is the preferred currency of these exchanges? It's always dollar-backed stablecoins."
For Tan, the real issue is systemic: "If China wants to make the digital yuan attractive, it first needs to make the yuan attractive."
Whether China's stablecoin push is successful or stagnates, it clearly indicates one thing: stablecoins are no longer just the infrastructure of cryptocurrencies; they have become tools in a larger geopolitical competition surrounding the future of money.
Related: Hong Kong construction company stock surges due to $483 million Bitcoin (BTC) treasury bet
Original article: “China's Stablecoin Push Raises Questions on Dollar Dominance and Market Trust”
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