Global Shake-Up Looms – China’s Yuan-Backed Stablecoin May Redefine Cross-Border Payments

China is weighing the introduction of yuan-backed stablecoins to advance the international use of its currency, marking a shift from its earlier stance on digital assets, Reuters reported on August 20.

Sources familiar with the matter said the State Council, the Central Government of China, will review and potentially approve the plan later this month.

China’s State Council to Discuss Digital Currency

The roadmap under discussion includes targets for expanding yuan use in global markets and assigning oversight roles to regulators such as the People’s Bank of China. Risk management guidelines are expected to be part of the framework, alongside measures to balance policy support with financial stability.

Senior Chinese leaders are scheduled to convene for a study session by the end of August that will focus on yuan internationalization and stablecoins. According to one source, this meeting could provide direction on how such digital instruments should be developed and applied in commercial activities.

📰 A commentary publsihed by https://t.co/C3Cvy06AMt economists urges offshore issuance of yuan-backed stablecoin to expand the currency’s global use.#china #stablecoinhttps://t.co/roviQdT5as

— Cryptonews.com (@cryptonews) June 11, 2025

If adopted, the policy would represent a major change in approach. China banned cryptocurrency trading and mining in 2021 due to concerns over capital flight and financial risks.

Stablecoins, typically pegged to government currencies like U.S. dollars, are now being reconsidered as tools to increase the yuan’s global circulation at a time when the dollar-backed market dominates.

Disrupting USD Stablecoin Dominance

The yuan’s share in global payments fell to 2.88% in June, its lowest in two years, according to SWIFT. By comparison, the U.S. dollar held 47.19%. Stablecoins pegged to the dollar make up more than 99% of the global supply, according to the Bank for International Settlements.

Hong Kong and Shanghai are set to play leading roles in implementing the plan. Hong Kong introduced a regulatory regime for fiat-backed stablecoins on August 1, while Shanghai is building an international hub for digital yuan operations.

China is expected to discuss the potential use of yuan-backed stablecoins for cross-border trade at the Shanghai Cooperation Organisation summit in Tianjin from August 31 to September 1. The proposal comes as U.S. policymakers advance their own stablecoin rules under President Donald Trump, underscoring the competitive importance of digital currencies in global finance.

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