China's New Stablecoin Targets Dollar Dominance in Cross-Border Trade

China has launched a new stablecoin, AxCNH, pegged to the offshore yuan (CNH), marking a significant step in its global digital currency strategy. The stablecoin, developed by AnchorX and deployed on multiple blockchain networks, has received regulatory approval from Kazakhstan’s AIFC, positioning it as a tool to enhance cross-border trade and financial integration in Central Asia. AxCNH operates as a fully collateralized stablecoin, backed by offshore CNH reserves held in regulated custodial banks, enabling 24/7 instant settlements with compliance-aligned protocols for anti-money laundering (AML) and know-your-customer (KYC) standards [1]. This initiative aligns with China’s broader efforts to expand the international use of the yuan, leveraging digital innovation to bypass traditional dollar-dominated payment systems.

The stablecoin’s deployment on Ethereum, BNB Chain, and Conflux networks underscores China’s push to integrate blockchain technology into cross-border commerce. AnchorX, a Hong Kong-based firm, collaborated with Conflux—a domestic blockchain network supported by China’s Ministry of Science and Technology—to ensure technical compliance and scalability. The project also involves strategic partners such as Hony Capital, a $160 billion asset manager under Legend Holdings, which aims to utilize AxCNH for funding projects in Central Asia, including uranium and oil sectors [1]. By anchoring the stablecoin to the CNH, China seeks to reduce reliance on the U.S. dollar in regional trade, particularly along Belt and Road Initiative (BRI) corridors.

Geopolitically, AxCNH represents a strategic collaboration between China and Kazakhstan, a key BRI partner. The stablecoin addresses inefficiencies in traditional cross-border transactions, which often involve high fees and delays. According to the AnchorX white paper, AxCNH reduces settlement costs by over 30% compared to conventional banking systems, enabling faster and cheaper trade flows between China and Central Asia [1]. Kazakhstan’s AIFC, which granted the first stablecoin license in the region, has positioned itself as a regulatory sandbox for digital finance, attracting Chinese-backed projects to test cross-border payment models. This partnership could serve as a template for expanding AxCNH to other Central Asian nations, fostering a regional financial ecosystem tied to the yuan.

The global stablecoin landscape is intensifying as nations compete to digitize their currencies. South Korea, for instance, launched KRW1, its first won-pegged stablecoin, on Avalanche in September 2025, backed by Woori Bank reserves. Similarly, Hong Kong’s monetary authority is advancing yuan-backed stablecoin experiments under a licensing framework, while Japan and the EU are finalizing regulations for yen- and euro-pegged tokens [2]. These developments reflect a broader trend of governments using stablecoins to enhance financial sovereignty and challenge dollar hegemony. However, China’s approach through AxCNH emphasizes collaboration with regional partners to build a parallel digital infrastructure, bypassing U.S. regulatory constraints.

Despite its strategic advantages, AxCNH faces challenges, including regulatory scrutiny and competition from dollar-pegged stablecoins like USDT and USDC. Kazakhstan’s regulatory endorsement provides a local advantage, but international compliance risks persist, particularly in jurisdictions wary of cross-border capital flows. Additionally, the stablecoin must contend with entrenched dollar-based networks, which dominate the $256 billion stablecoin market [3]. Analysts note that AxCNH’s success hinges on its ability to attract adoption among Central Asian institutions and merchants, as well as its capacity to navigate evolving regulatory frameworks in both China and partner countries.

Looking ahead, AxCNH’s launch signals China’s ambition to reshape the global payments landscape through digital innovation. By integrating blockchain with state-backed financial strategies, the stablecoin could serve as a precursor to broader yuan internationalization efforts, including potential cross-chain experiments with digital RMB infrastructure. However, its long-term impact will depend on balancing regulatory compliance, technological robustness, and market demand in a rapidly evolving digital finance ecosystem.