China Eyes Yuan-Backed Stablecoins to Challenge Dollar Dominance in Global Payments

China is considering the introduction of yuan-backed stablecoins for the first time, signaling a significant policy shift as it seeks to enhance the global adoption of its currency [1]. This potential move comes after China imposed a sweeping ban on crypto trading and mining in September 2021, making it one of the most restrictive jurisdictions in the world for cryptocurrencies. According to sources familiar with the matter, the State Council is expected to review and possibly approve a roadmap later in August to expand the global use of the yuan, with stablecoins positioned as a key tool [2].

The initiative aims to counter the growing dominance of U.S. dollar-backed stablecoins, which currently represent nearly 98% of the $288 billion stablecoin market capitalization, and to challenge the dollar’s role in global payments [3]. If implemented, yuan-backed stablecoins could be used in cross-border trade and payments with selected countries, with Shanghai identified as a priority hub for deployment [4].

China's interest in stablecoins aligns with its broader strategy to internationalize the yuan. As of June 2025, the yuan ranked as the sixth most active currency for global payments by value, with a share of approximately 2.9% [5]. The shift comes amid a broader trend of global exploration into alternative reserve currencies and increased scrutiny of U.S. dollar dominance, particularly following a 9% drop in the U.S. Dollar Index during the same period [6].

According to People’s Bank of China (PBOC) Governor Pan Gongsheng, the plan includes weakening the global economy’s “excessive reliance on a single sovereign currency,” with Shanghai identified as a potential center for digital yuan internationalization [7]. The policy pivot is also expected to be discussed at the upcoming Shanghai Cooperation Organization (SCO) Summit in Tianjin, scheduled from August 31 to September 1 [8].

Local blockchain platform Conflux recently launched a new stablecoin backed by offshore Chinese yuan, signaling growing momentum within the domestic market [9]. Meanwhile, neighboring jurisdictions like China Hong Kong have also advanced their regulatory frameworks for stablecoins, launching a dedicated regulatory system on August 1 [10].

The potential approval of yuan-backed stablecoins represents a strategic digital currency pivot for China and could redefine its approach to global financial competition. However, challenges remain, including capital controls and global skepticism toward China’s regulatory transparency and market access [11]. The move also reflects a broader global trend, as jurisdictions increasingly explore the role of stablecoins in reshaping international payment systems.

Source: [1] China considering yuan-backed stablecoins to boost global currency usage - (https://www.reuters.com/business/finance/china-considering-yuan-backed-stablecoins-boost-global-currency-usage-sources-2025-08-20/)

[2] China weighs yuan-backed stablecoins in major policy shift - (https://cointelegraph.com/news/china-considering-yuan-backed-stablecoins-global-currency-usage)

[3] China May Approve Yuan-Backed Stablecoins to Compete with US Dollar - (https://coincentral.com/china-to-approve-yuan-backed-stablecoins-to-compete-with-us-dollar-reuters/)

[4] China Eyes Yuan-Backed Stablecoins to Challenge Dollar Dominance - (https://www.ainvest.com/news/china-eyes-yuan-backed-stablecoins-challenge-dollar-dominance-2508-46/)

[6] China quietly prepares yuan stablecoins as 99% of supply minted in dollars - (https://cryptoslate.com/china-quietly-prepares-yuan-stablecoins-as-99-of-supply-minted-in-dollars/)

[7] China Considers Yuan-Backed Stablecoins in Major Policy Reversal - (https://thecryptobasic.com/2025/08/20/china-considers-yuan-backed-stablecoins-in-major-policy-reversal/)