China Explores Yuan-Backed Stablecoins to Challenge Dollar Dominance in Global Trade

China is exploring the development of yuan-backed stablecoins as part of a strategic shift in its digital currency policy, with the potential to disrupt the U.S. dollar’s dominance in global trade and payments [1]. This move marks a significant evolution from China’s historically stringent approach to cryptocurrencies, including its 2021 ban on crypto trading and mining [6]. The proposed stablecoins—intended to be pegged 1:1 to the Chinese yuan—aim to facilitate faster, cheaper, and more efficient cross-border transactions, competing with existing dollar-backed stablecoins like USDT and USDC [2].

The initiative is currently under review by the State Council and aligns with broader efforts to elevate the yuan’s role in international finance [3]. Officials see the 24/7 settlement capabilities and low transaction costs of stablecoins as advantages that could enhance the yuan’s utility in global trade [4]. However, the implementation of such a system faces considerable regulatory and structural challenges. Capital controls, along with the yuan’s relatively low global influence—SWIFT data shows it accounted for just 2.88% of international payments in June, compared to the U.S. dollar’s 47%—remain key constraints [3]. Authorities have also moved to restrict the domestic promotion of stablecoins, citing risks of fraud and misuse [3].

The development also coincides with shifting dynamics in U.S. crypto policy, particularly with President Trump’s endorsement of the GENIUS ACT, a proposed regulatory framework for stablecoins [3]. Analysts view the timing as part of a broader geopolitical competition for financial influence, rather than a purely economic strategy [5]. While the yuan-backed stablecoin project is still in early stages, it signals a more nuanced and potentially open stance from China toward digital assets. The country remains committed to its central bank digital currency (CBDC) efforts but is now considering complementary strategies that include regulated stablecoins [1].

If implemented, the yuan-backed stablecoin could contribute to a multi-tiered digital financial ecosystem in China that supports both state-backed and private-sector innovation [5]. However, success will depend on navigating regulatory, operational, and geopolitical complexities, as well as the ability to increase the yuan’s global appeal in a market currently dominated by the U.S. dollar.

Sources:

[1] China Eyes Yuan-Backed Stablecoins to Challenge Dollar Dominance – [https://news.bitcoin.com/china-eyes-yuan-backed-stablecoins-to-challenge-dollar-dominance/](https://news.bitcoin.com/china-eyes-yuan-backed-stablecoins-to-challenge-dollar-dominance/)

[2] China Explores Yuan-Backed Stablecoins in Strategic Digital Currency Pivot – [https://www.blockhead.co/2025/08/21/china-explores-yuan-backed-stablecoins-in-strategic-digital-currency-pivot/](https://www.blockhead.co/2025/08/21/china-explores-yuan-backed-stablecoins-in-strategic-digital-currency-pivot/)

[3] China Eyes Yuan-Backed Stablecoins for Global Trade Push – [https://coinmarketcap.com/academy/article/china-eyes-yuan-backed-stablecoins-for-global-trade-push](https://coinmarketcap.com/academy/article/china-eyes-yuan-backed-stablecoins-for-global-trade-push)

[4] China Eyes Yuan-Backed Stablecoin as Beijing Seeks Power – [https://www.ccn.com/news/crypto/china-eyes-yuan-backed-stablecoin-beijing-stronger-digital-hold/](https://www.ccn.com/news/crypto/china-eyes-yuan-backed-stablecoin-beijing-stronger-digital-hold/)

[5] China Set to Shake Crypto Markets with First-Ever Yuan Stablecoin Plan Amid Dollar Dominance – [https://www.cryptoninjas.net/news/china-set-to-shake-crypto-markets-with-first-ever-yuan-stablecoin-plan-amid-dollar-dominance/](https://www.cryptoninjas.net/news/china-set-to-shake-crypto-markets-with-first-ever-yuan-stablecoin-plan-amid-dollar-dominance/)

[6] China Considers Yuan-Backed Stablecoins to Rival Dollar – [https://ground.news/article/china-considers-allowing-yuan-backed-stablecoins-report-global-voices](https://ground.news/article/china-considers-allowing-yuan-backed-stablecoins-report-global-voices)