China Weighs Yuan-Backed Stablecoin Likely Based in Hong Kong

The cryptocurrency industry has been abuzz with speculation following recent reports suggesting China may soften its stance on a renminbi-backed stablecoin. Reuters reported that Beijing is considering approving a stablecoin pegged to the renminbi as part of its broader strategy to boost the yuan’s internationalization, a story reiterated by Financial Times earlier in the month. However, Chinese officials have not officially confirmed any such plans [1].

Analysts and legal experts caution against overinterpreting the news. Joshua Chu, co-chair of the Hong Kong Web3 Association, noted that while the news about a potential stablecoin is likely genuine, it would most likely be circulated offshore rather than in the mainland [2]. China’s currency operates in two markets—the onshore yuan (CNY) and the offshore yuan (CNH). A stablecoin tied to the CNY would likely clash with Beijing’s strict capital controls, making the CNH the more viable candidate for any such initiative [3].

China has been actively developing its central bank digital currency (CBDC), known as the e-CNY. Winston Ma, an adjunct professor of law at New York University, stated that if a CNY stablecoin is considered, it would need to integrate with the existing e-CNY framework, which has already been tested by millions of users [4]. The government’s push for a sovereign digital currency shows no sign of slowing down, and any stablecoin trials within the mainland are expected to be closely aligned with the e-CNY project.

Hong Kong, as the offshore hub for the CNH, is seen as the most probable venue for any yuan-backed stablecoin experiment. The city has been a key player in the internationalization of the yuan and now hosts new regulatory frameworks for stablecoins. Hong Kong’s Stablecoins Ordinance, which took effect in August, requires stablecoin issuers to obtain a license. This regulatory environment contrasts with the mainland, where crypto trading is restricted and legal frameworks remain unclear [5].

China’s approach to stablecoins also reflects broader geopolitical and financial concerns. Scholars have previously warned that dollar-backed stablecoins pose a threat to China’s financial sovereignty. The recent U.S. push for stablecoin dominance under the GENIUS Act has only heightened these concerns. However, Zhang Monan, a deputy head at the China Center for International Economic Exchanges, suggested that Hong Kong’s regulatory changes could create an opening for a yuan-pegged stablecoin to challenge dollar dominance if permitted [6].

Despite these developments, the potential scale of a CNH-backed stablecoin is limited. The offshore yuan market remains relatively small compared to the onshore CNY. At the end of June, Hong Kong’s CNH deposit pool stood at just 0.88 trillion yuan—less than 0.27% of the mainland’s broad money supply [7]. Joshua Chu acknowledged that a CNH-backed stablecoin may not reach the global volumes of major dollar-backed tokens but emphasized that the initiative is more about strategic positioning than competing in retail demand [8].

The move appears to align with China’s broader digital financial ambitions, aiming to extend the yuan’s reach without compromising its control over the domestic market. In this context, the stablecoin experiment is less about a pilot in Hong Kong and more about embedding the yuan into the global digital financial system. The path forward remains uncertain, but one thing is clear—any yuan-backed stablecoin will likely stay offshore and avoid the tightly controlled mainland [9].

Source: [1] Reuters, [2] Cointelegraph, [3] Cointelegraph, [4] Cointelegraph, [5] Cointelegraph, [6] China Economic Times, [7] Hong Kong Monetary Authority, [8] Cointelegraph, [9] Cointelegraph