China to Approve Yuan-Backed Stablecoins in Major Policy Shift

China is preparing to approve the issuance of yuan-backed stablecoins, marking a significant policy shift and signaling its intent to challenge the U.S. dollar’s dominance in the global cryptocurrency market. According to recent reports, the State Council, China’s top decision-making body, will soon review a proposed roadmap for the development and regulation of these stablecoins [1]. This initiative aligns with Beijing’s broader goal of promoting faster, cheaper, and more efficient global payments through blockchain technology [2].

The proposed yuan-backed stablecoins are seen as a strategic response to the growing influence of U.S.-dollar-backed stablecoins such as Tether and USD Coin, which have become a key component in the global digital economy. The move reflects China’s recognition of the role stablecoins can play in facilitating cross-border transactions and increasing the international use of the yuan [3]. Despite a strict 2021 ban on cryptocurrency trading and mining, China is now reconsidering its approach, aiming to catch up with U.S. advancements in the sector [1].

The potential rollout of yuan-backed stablecoins could also have broader economic implications. Similar to how dollar-backed stablecoins increase demand for U.S. Treasury securities through reserve requirements, yuan-backed stablecoins could boost demand for China’s sovereign debt, potentially enhancing the yuan’s role in global finance [4]. However, according to SWIFT data, the yuan still trails far behind the U.S. dollar in global payments, with the dollar accounting for 47.19% of transactions compared to 2.88% for the yuan as of June 2025 [1].

The State Council meeting will likely include discussions on regulatory responsibilities, risk management, and the commercial application of these stablecoins. Senior officials are expected to emphasize the strategic importance of the initiative and define the scope of their use in domestic and international business contexts [5]. This move could encourage widespread adoption among Chinese enterprises, mirroring the trend observed in the U.S. following the passage of the GENIUS Act, which provided regulatory clarity for stablecoins [1].

While the exact timeline for the launch of these stablecoins remains unclear, the decision to permit their issuance represents a major reversal in China’s stance on cryptocurrencies. It indicates a willingness to embrace blockchain technology for global financial integration and to reduce reliance on the U.S. dollar in international transactions [6].

Sources:

[1] https://ambcrypto.com/china-eyes-yuan-backed-stablecoin-to-rival-u-s-dominance-in-crypto/

[2] https://coingape.com/china-considers-yuan-backed-stablecoins-to-rival-dollar-dominance/

[3] https://www.ainvest.com/news/china-eyes-yuan-backed-stablecoins-challenge-dollar-dominance-2508-46/

[4] https://www.mitrade.com/insights/news/live-news/article-3-1055063-20250820

[5] https://thecryptobasic.com/2025/08/20/china-considers-yuan-backed-stablecoins-in-major-policy-reversal/

[6] https://coincentral.com/china-to-approve-yuan-backed-stablecoins-to-compete-with-us-dollar-reuters/