China’s Digital Currency Pivot: Exploring the Yuan-Backed Stablecoin
According to reports, China is investigating a stable coin supported by Yuan for the first time, signaling a significant pivot point in its digital approach. Sources say that the step aims to strengthen the global influence of the Yuan, as stable coins are predominantly connected to the US dollar. This move is seen as a challenge to the US dollar’s dominance in the global economy.
The Chinese State Council is expected to review a roadmap for the internationalization of the Yuan this month. People familiar with the matter say that the move is a direct response to the overwhelming dominance of stablecoins such as USDT and USDC, which currently act as a backbone for a large part of the global crypto ecosystem and facilitate traditional cross-border payments.
Navigating the Objection: Control vs. Global Ambition
China’s potential launch of a stable coin supported by Yuan represents a striking turn from its 2021 crackdown on cryptocurrency trading and mining. At that time, Beijing banned such activities due to concerns about financial stability and speculative risks. However, a sovereign digital currency is the ultimate expression of state control, leveraging the efficiency of blockchain technology for its own goals. This is not an embracing of crypto’s ethos, but rather a co-opting of its technology for a specific geopolitical objective.
The details of this ambitious plan are expected to be unveiled in the coming weeks, with responsibility for implementation falling on the shoulders of domestic regulatory authorities, including the People’s Bank of China. Hong Kong and Shanghai are expected to serve as test beds for the project, with a high-ranking management study meeting on stable coins intended to define the state’s approach.
Why the Urgency?
The urgency of China’s move is underscored by the remarkable dominance of what it seeks to challenge. According to the Bank for International Settlements, stable coins make up over 99% of the global stable coin supply. Reuters notes a “growing use of dollar-backed stable coins by Chinese exporters,” which is an alarming vulnerability for Beijing. Each invoice settled in USDT or USDC increases the orbit of the dollar and creates a shadow financial system that operates outside China’s influence, directly undermining the goals of Yuan internationalization.
The upcoming Shanghai Cooperation Organization summit in Tianjin, scheduled for the end of this month, is poised to be the first diplomatic test for this new strategy. China is expected to discuss the use of the Yuan and possibly the resulting stable coin concept with member states, aligning with its broader ambition to create a multipolar world order that is less dependent on Western financial systems.
For more information on this developing story, please visit: https://crypto.news/china-mulls-yuan-backed-stablecoin-to-counter-dollar-dominance-report/
