China Tests Renminbi-Backed Stablecoins to Challenge Dollar Dominance

China has begun testing the development of stablecoins pegged to the renminbi, seeking to challenge the dominance of U.S. dollar-backed stablecoins such as Tether (USDT) and Circle’s (USDC). The move is part of a broader strategy to reduce reliance on the U.S. dollar and to bypass traditional global payment systems like SWIFT, which officials fear could be compromised in the event of geopolitical tensions with the U.S. [1].

In the past two months, China’s financial regulators have convened experts to explore the technical and regulatory frameworks necessary for the implementation and issuance of these stablecoins. However, internal discussions have revealed concerns over the decentralized nature of the technology and how it could conflict with the country’s tightly controlled financial system [1]. One participant in the discussions emphasized that any stablecoin project in China must be aligned with the country’s “specific national conditions,” a phrase that underscores the government’s strict regulatory stance [1].

The country’s existing financial policies, particularly its 2025 ban on cryptocurrency transactions and mining, have created a closed financial ecosystem. This poses a challenge for stablecoin development, as the technology inherently relies on decentralization and ease of cross-border movement. Rebecca Liao, CEO of blockchain infrastructure firm Saga, warned that stablecoins are difficult to centrally control and may be used to channel funds to destinations that Chinese authorities consider undesirable [1].

At the same time, global momentum around stablecoins is accelerating. Hong Kong has introduced its Stablecoin Ordinance, prompting both local and mainland-based companies to seek stablecoin issuer licenses. JD.com, Standard Chartered, and other firms have expressed interest in the initiative. However, the Hong Kong Monetary Authority is reportedly granting licenses to only a limited number of applicants in the first phase, with only one of the four major state-owned Chinese banks expected to be approved [1].

China’s cautious approach is partly driven by a sense of urgency to avoid falling behind in the global race for stablecoin leadership. While the country has not ruled out the idea of renminbi-backed stablecoins, the regulatory environment remains uncertain. Internationally, the U.S. has proposed the GENIUS Act, while South Korea has seen early pilot projects from firms like fanC and Initech [1]. These developments highlight the growing importance of stablecoins in the evolving financial landscape.

China’s dilemma lies in balancing the potential benefits of stablecoin technology with the need to maintain strict financial control. The success of the renminbi-backed stablecoin initiative will depend not only on technical feasibility but also on the government’s ability to adapt its regulatory framework to the decentralized nature of the technology [1].

Source: [1] China FOMO strikes again as nation tests stablecoin rollout to boost renminbi: report (https://crypto.news/china-fomo-strikes-again-as-nation-tests-stablecoin-rollout-to-boost-renminbi-report/)