China’s Strategic Shift Toward Yuan-Backed Stablecoins: A New Frontier for Blockchain Innovation

China’s regulatory landscape for blockchain and digital assets has long been characterized by strict controls, but 2025 marks a pivotal shift. The country is now actively pursuing the development of yuan-backed stablecoins to challenge the dominance of U.S. dollar-pegged stablecoins in global trade and payments. This strategic move, driven by geopolitical and economic ambitions, has created a fertile ground for early-stage blockchain platforms to thrive. For investors, the question is no longer whether China will embrace this technology but which firms are best positioned to capitalize on its rollout.

The Regulatory Framework: Hong Kong and Shanghai as Launchpads

Hong Kong’s Stablecoins Ordinance, effective August 1, 2025, has established a robust legal framework for fiat-backed stablecoins, including those pegged to the yuan. The ordinance mandates 100% reserve backing, real-time monitoring, and licensing by the Hong Kong Monetary Authority (HKMA), ensuring stability while fostering innovation [1]. Shanghai, meanwhile, is integrating yuan-backed stablecoins with its existing digital yuan (e-CNY) infrastructure, aiming to harmonize traditional and digital monetary systems [2]. These cities are not just regulatory testbeds but strategic hubs for cross-border experimentation, particularly along Belt and Road Initiative (BRI) corridors.

Early-Stage Platforms: Conflux, PetroChina, and Beyond

Conflux has emerged as a critical infrastructure provider. Its Conflux 3.0 blockchain, launched in August 2025, supports 15,000 transactions per second (TPS) and underpins AxCNH, a yuan-backed stablecoin pegged to the offshore yuan (CNH). AxCNH has already secured in-principle approval in Kazakhstan and plans to expand to 10 BRI countries by 2026 [3]. This expansion aligns with China’s goal to redirect trade flows away from dollar-based systems.

PetroChina, a state-owned energy giant, is leveraging stablecoins for cross-border oil transactions. Pilot programs in Shenzhen have demonstrated the potential to reduce exchange rate losses compared to traditional SWIFT transfers [4]. This use case is part of a broader push to adopt a “petro-yuan” model, particularly in energy trade with non-dollar-aligned partners like Russia.

Beyond these names, Ant International and JD.com are lobbying for stablecoin licenses in offshore markets, signaling private-sector interest in the yuan-backed ecosystem [5]. AnchorX, a fintech firm partnering with Conflux, is developing tools to facilitate stablecoin custody and compliance, addressing a critical gap in the regulatory framework [6].

Geopolitical Implications and Market Potential

China’s yuan-backed stablecoin strategy is not merely economic but geopolitical. By creating a parallel channel for cross-border transactions, the country aims to reduce reliance on the U.S. dollar and SWIFT, particularly in BRI corridors. The yuan’s global payment share currently stands at 2.88%, compared to the dollar’s 47.19% [7]. However, market projections suggest the yuan-backed stablecoin sector could grow to $2 trillion by 2028, driven by adoption in energy, infrastructure, and retail trade [8].

Risks and Challenges

Structural hurdles remain. China’s strict capital controls and the yuan’s limited convertibility could restrict the free circulation of stablecoins. Additionally, the coexistence of yuan-backed stablecoins with the state-controlled digital yuan (e-CNY) may create regulatory friction. However, the controlled rollout through Hong Kong and Shanghai—where geofencing and redemption mechanisms are tightly managed—mitigates these risks [9].

Conclusion: A Strategic Investment Opportunity

For investors, the key lies in identifying platforms that align with China’s dual goals of technological innovation and geopolitical influence. Conflux, with its high-throughput infrastructure and BRI-focused expansion, is a prime candidate. PetroChina’s energy trade use case and AnchorX’s compliance tools also present compelling opportunities. As Hong Kong’s regulatory sandbox matures and Shanghai’s digital infrastructure expands, early-stage blockchain firms that navigate the regulatory landscape effectively will be best positioned to benefit from this strategic shift.

Source:
[1] Hong Kong Implements New Regulatory Framework for Stablecoins [https://www.sidley.com/en/insights/newsupdates/2025/08/hong-kong-implements-new-regulatory-framework-for-stablecoins]
[2] China's Strategic Push for Yuan-Backed Stablecoins in Global Trade [https://www.ainvest.com/news/china-strategic-push-yuan-backed-stablecoins-global-trade-assessing-investment-potential-blockchain-infrastructure-fintech-firms-2508/]
[3] Conflux Launches Offshore Yuan Stablecoin for Belt and Road Initiative [https://www.ainvest.com/news/conflux-launches-offshore-yuan-stablecoin-belt-road-initiative-2507/]
[4] China's Energy Giant Eyes Stablecoins for Cross-Border Transactions [https://www.cointribune.com/en/chinas-energy-giant-eyes-stablecoins-for-cross-border-transactions/]
[5] China Softens Stance: What A Yuan-Backed Stablecoin Dream Could Mean for Global Fintech [https://www.forbes.com/sites/digital-assets/2025/08/21/china-softens-stance-what-a-yuan-backed-stablecoin-dream-could-mean-for-global-fintech/]
[6] China's Strategic Push for Yuan-Backed Stablecoins in Global Trade [https://www.ainvest.com/news/china-strategic-push-yuan-backed-stablecoins-global-trade-assessing-investment-potential-blockchain-infrastructure-fintech-firms-2508/]
[7] 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-2025-08-21/]
[8] China's Strategic Move Toward Yuan-Backed Stablecoins [https://www.ainvest.com/news/china-strategic-move-yuan-backed-stablecoins-challenging-dollar-dominance-reshaping-global-forex-dynamics-2508/]
[9] China Considers Yuan-Backed Stablecoins to Advance ... [https://fintechnews.hk/35261/fintechchina/china-yuan-stablecoins-global-adoption/]