Shanghai Explores Yuan-Backed Stablecoins for Cross-Border Payments

China is exploring the possibility of launching yuan-backed stablecoins through trusted state-owned firms in Shanghai. This move comes as city leaders push for digital currency research and eye stablecoin experiments with companies. The initiative aims to strengthen China’s cross-border payments and enhance its global financial position.

According to local reports, Shanghai leaders are urging two government-owned organizations—a digital service provider and a local financial institution—to research the concept of yuan-backed stablecoins. This information was anonymously spread by two officials, as the plans are not publicly known at the moment. If implemented, large state-owned companies such as Guotai Haitong and Shanghai Data Group may conduct the experiments. Both are reputable names that could handle the task cautiously.

The step follows a key meeting by the Shanghai State-owned Assets Supervision and Administration Commission (SASAC). During the meeting, SASAC Director He Qing requested local regulators and company leaders to monitor new tech trends and research digital currencies. This indicates that Shanghai's leaders are paying close attention to stablecoins.

China has taken a hard stance on cryptocurrencies in recent years, prohibiting crypto trading and mining, and forcing many crypto businesses to close or relocate. However, this hard line might be shifting gradually. Stablecoins, which are backed by actual money or resources, are perceived as more secure and stable. This is why China is considering employing them in a regulated manner.

Last month, the governor of the central bank of China, Pan Gongsheng, also discussed the issue of stablecoins. According to him, stablecoins may assist in cross-border payments, a crucial consideration for China, which desires to remain at the forefront of digital finance. Analysts are sure that soon stablecoins will become a sphere of rivalry between China and the United States.

Cross-border payments are likely to be the first use of stablecoins, according to Xiangcai Securities analyst Qiu Hua in Shanghai. He further asserted that stablecoins would enable the economy of China to relate better with the world economy. Shanghai forms a huge part of the Chinese growth strategy. It is the biggest city of the country in terms of GDP. The economy of Shanghai is valued at 5.4 trillion yuan or approximately 753 billion US dollars last year. Lots of large firms operate there, such as the gigafactory of Tesla and the leading chipmaker of the country, Semiconductor Manufacturing International Corp. Shanghai also boasts of Shanghai Stock Exchange which is one of the largest stock exchanges in the world.

Analysts reckon that stablecoins may be handy provided there are well-defined regulations. China Galaxy International Securities reported last week that stablecoins could be extremely prevalent in world finance if various nations can come into agreement on the way to regulate them.

The fact that China is interested in stablecoins indicates that the nation does not want to lose in the world of digital money. At this point, the concept remains at a planning phase. However, if the plan of Shanghai works, China will be able to have its yuan-stablecoin soon. This would assist China to manage risks, enhance its economy and compete with other countries in the new digital world.