China is weighing a plan to introduce yuan-backed stablecoins as part of a broader push to internationalize its currency, sources familiar with the matter told Reuters, signaling a major policy shift in Beijing's approach to digital assets.
The State Council, China's cabinet, is expected to review the plan later this month, which could include new targets for global use of the yuan, regulatory responsibilities for domestic agencies, and guidelines for risk prevention, the sources said. A study session with senior leadership is likely to deliver remarks setting the tone for how stablecoins would be applied in business.
Such a move would represent a reversal for Beijing, which banned cryptocurrency trading and mining in 2021 out of concern for financial stability. "Financial innovation, specifically stablecoins, is viewed by Beijing as a promising tool for yuan internationalisation," one source said.
Stablecoins are digital tokens pegged to fiat currencies, such as the U.S. dollar, and are used for cross-border payments and crypto trading. Dollar-backed stablecoins dominate the market, accounting for more than 99% of global supply, according to the Bank for International Settlements. The global market stood at roughly $247 billion in August, though Standard Chartered estimates it could reach $2 trillion by 2028.
China has already tested its own central bank digital currency, the e-CNY, which is distinct from stablecoins. Trials began in 2019, and state media reported that by July 2024, transactions using the e-CNY totaled 7.3 trillion yuan in pilot regions. McDonald's was an early participant, and some local governments have used the digital yuan to pay civil servants.
Still, unlike stablecoins, the e-CNY is directly issued by the People's Bank of China and cannot bypass banking controls. "Persistent restrictions on access to Chinese financial markets and limits on convertibility of the yuan are big obstacles blocking its global use," said Liu Xiaochun, deputy director of the Shanghai Institute of New Finance, in a commentary for Yicai.com.
The yuan accounted for just 2.88% of global payments in June, according to SWIFT, down from a peak of 4.7% in July 2024. By contrast, the U.S. dollar maintained a 47% share, followed by the euro, British pound, Canadian dollar and Japanese yen. In trade finance, the yuan accounts for about 6% of deals, with most transactions routed through Hong Kong.
Hong Kong is expected to play a central role if Beijing approves yuan stablecoins. The territory implemented a stablecoin law on Aug. 1 requiring digital tokens linked to the Hong Kong dollar to maintain one-to-one reserves. People's Bank of China adviser Huang Yiping told local media recently that an offshore yuan stablecoin in Hong Kong is "a possibility."
Shanghai, meanwhile, is setting up an international operation center for the digital yuan. Sources said China may discuss expanding the use of yuan and stablecoins for cross-border trade at the Shanghai Cooperation Organisation summit scheduled for Aug. 31-Sept. 1 in Tianjin.
