China Considers Global Yuan-Backed Stablecoins to Challenge Dollar Dominance

China is actively evaluating the potential of yuan-backed stablecoins as part of a strategic shift in its approach to digital finance. For the first time, the government is considering allowing these stablecoins to be used globally, a significant departure from its traditionally cautious stance on cryptocurrency. The move is aimed at boosting the international adoption of the yuan and challenging the dominance of U.S. dollar-backed stablecoins, which currently hold nearly the entire global market share [1]. This development aligns with a broader effort to expand the yuan’s role in the global economy amid intensifying geopolitical tensions and the rapid evolution of digital financial systems [2].

The idea of yuan-backed stablecoins has been circulating since at least mid-2025, with reports indicating that China has been gradually warming up to the concept. The proposed stablecoins would be pegged to the yuan and could facilitate cross-border transactions, potentially reducing reliance on the U.S. dollar in international trade and finance. According to a report, Shanghai and China Hong Kong are expected to lead the rollout, leveraging their financial expertise and regulatory frameworks [3].

China’s interest in this space is also driven by concerns over the growing influence of dollar-backed stablecoins. The country has been accelerating the development of systems it can monitor and control, signaling a desire to maintain economic sovereignty in an increasingly digital world [4]. This strategy reflects a broader policy shift, with officials reportedly reviewing the feasibility of permitting yuan-backed stablecoins as part of a comprehensive reassessment of China's crypto policy [5].

The potential approval of yuan-backed stablecoins represents a key turning point in China’s digital finance strategy. If implemented, it could enhance the yuan’s global reach and provide a viable alternative to U.S. dollar-backed counterparts. However, the success of such a plan will depend on regulatory clarity and the ability to establish trust in the new system [6]. The move also underscores the competitive dynamics emerging in the global stablecoin market, with China now positioning itself as a serious contender in what was once seen as a U.S.-dominated space [7].