China Considers Stablecoins Amid US Digital Dollar Push

China is facing mounting pressure from influential economists and policy advisors to explore the use of stablecoins for cross-border payments. This push comes as the United States accelerates its efforts to solidify the dollar’s global dominance through advancements in cryptocurrency technology.

Despite maintaining a comprehensive ban on cryptocurrency activities, recent statements from senior officials at the People’s Bank of China (PBOC) have reignited discussions about stablecoins, which are digital assets typically tied to fiat currencies like the US dollar.

PBOC Governor Pan Gongsheng acknowledged that stablecoins could significantly transform international finance, particularly in a geopolitical environment where traditional payment systems are susceptible to being weaponized through sanctions. Pan emphasized the strategic importance of developing alternative infrastructure to mitigate such risks during his speech at the Lujiazui Forum in June.

Former PBOC chief Zhou Xiaochuan also addressed the event, cautioning that dollar-linked stablecoins could facilitate dollarization. Concurrently, other officials proposed the idea of yuan-based stablecoins to enhance China’s ambitions of internationalizing its currency.

The renewed interest in China coincides with the US intensifying its digital dollar agenda. Just before Chinese officials spoke at the Lujiazui Forum, the US Senate passed a significant bill to regulate stablecoins, marking a major victory for the crypto industry and President Donald Trump’s digital asset strategy.

US Treasury Secretary Scott Bessent further endorsed this stance, asserting that stablecoins could reinforce the dollar’s role rather than undermine it. He highlighted the greater trust in US regulatory oversight compared to centralized digital currencies like the e-CNY.

Stablecoins, already gaining traction for their ability to expedite and reduce the cost of cross-border payments, are forecasted to grow to $3.7 trillion in supply by 2030, with most currently backed by US dollars and short-term Treasuries.

Beijing has traditionally viewed crypto as a threat to capital controls and financial stability. However, experts now see a critical opportunity. Chief China Economist at Morgan Stanley, Robin Xing, noted that stablecoins are not new currencies but new distribution channels for existing ones. China must embrace sovereign currency tokenization to stay competitive.

Xing and others suggest that Hong Kong could serve as a regulatory sandbox for offshore yuan-linked stablecoins. Hong Kong has already established a legal framework for fiat-referenced stablecoins, and tech giants like JD.com and Ant Group are reportedly preparing license applications.

JD.com’s Chief Economist Shen Jianguang warned that China risks falling behind without a serious push into stablecoins. Founder Richard Liu has stated that the firm aims to cut cross-border payment costs by 90% and reduce settlement times to under 10 seconds using stablecoins.

Meanwhile, Zhejiang China Commodities City Group Co., operator of the world’s largest wholesale market, also announced intentions to enter the space via licensing.

China’s current digital currency efforts have faced challenges. The e-CNY, the state-backed digital yuan, has seen limited adoption. Additionally, mBridge, a cross-border project with several central banks, faced uncertainty after the Bank for International Settlements (BIS) withdrew over concerns that it could be used to skirt sanctions.

Despite these setbacks, Pan announced plans for an international e-CNY center in Shanghai, signaling Beijing’s continued ambitions in digital finance. To move forward, experts suggest a dual-track strategy. The National Institution for Finance and Development Chairman Li Yang said China should expand traditional efforts like CIPS and currency swaps while leveraging Hong Kong’s capabilities to pilot yuan stablecoins.

However, hurdles remain. Stablecoins are currently used more for crypto trading than global commerce. Regulatory uncertainties persist, especially regarding whether they qualify as currencies or financial instruments.

Eswar Prasad, a Cornell professor and author of The Future of Money, cautioned that yuan-linked stablecoins may struggle without deeper reforms. “Without unifying onshore and offshore yuan markets, these stablecoins won’t gain much traction,” he said. Yet he also believes they may catalyze reform, nudging China toward more market-oriented policies. As the US continues to cement its lead in the digital currency race, China is now at a critical crossroads in either cautiously observing or stepping boldly into the future of global finance through stablecoin innovation.