China's strategy for leveraging stablecoins to transform the yuan into a globally recognized currency.
China Moves Towards Authorization of Yuan-Backed Stablecoins
In a significant shift for the global digital economy, China is set to establish regulations for the use of stablecoins in businesses, international commerce, and financial services. This move comes as the country seeks to internationalize its currency and compete with the U.S. dollar.
The State Council is scheduled to review a roadmap for the authorization of yuan-backed stablecoins this month, marking a turning point in China's discourse on digital assets. The global context has put geopolitical pressure on China to catch up and position the yuan as a viable alternative in the digital ecosystem.
The plan involves creating emission, custody, and liquidation protocols that ensure traceability and interoperability with existing financial systems. Regulatory responsibilities for the yuan-backed stablecoins will be assigned to national agencies like the People's Bank of China, the Securities Regulatory Commission, and the Ministry of Commerce.
The high-level study session scheduled for late August will be crucial in setting the political tone of the project. The session is led by a political actor or group not explicitly named in the given search results.
The use of stablecoins is strategic for China, as they facilitate international payments, reduce transaction costs, and strengthen the yuan's presence on digital platforms. However, this approach does not imply a full opening to the crypto ecosystem, but rather an institutional design strategy that seeks to take advantage of the benefits of stablecoins without compromising financial sovereignty.
Backed yuan stablecoins are seen as an intermediate solution to expand the use of China's sovereign currency. The plan includes guidelines for risk prevention, especially regarding cross-border flows and convertibility. Specific objectives for the use of the yuan in international markets are also part of the plan.
Hong Kong and Shanghai could lead regulatory pilots for stablecoins, taking advantage of their more flexible legal frameworks and experience in financial innovation. This is evident with Hong Kong's launch of a new stablecoin licensing regime earlier this month.
Meanwhile, the U.S. has advanced in the regulation of stablecoins under the Trump administration and the GENIUS Act. The authorization of yuan-backed stablecoins aims to close the gap between the U.S. dollar's dominance (47.19%) and the yuan's current representation (2.88%) in global payments.
As the world watches, China is poised to make a significant impact on the digital economy with its strategic approach to stablecoins.
