China’s Quiet Preparation for Yuan Stablecoins
China has taken a significant step towards evaluating stablecoins supported by the Yuan, with the State Council reviewing a roadmap for the internationalization of currencies and stablecoin use earlier this month. This move marks a departure from the country’s 2021 ban on crypto trade and mining, and is part of a broader effort to expand the role of the Yuan in cross-border payments. Currently, dollar stablecoins dominate the crypto settlement rails, with tokens in dollars making up the majority of the market.
The plan would assign regulatory responsibilities, outline risk controls, and task the People’s Bank of China with implementation. Pilot activities are expected to take place in Hong Kong and Shanghai, as reported by Reuters. The roadmap is expected to be paired with commercial use, along with messaging from senior leadership on borders, with the use of Yuan in retail planned for August 31 to September 1, following the official schedule of China.
Regulatory Framework and Capital Controls
The political decision-makers face a practical restriction: China’s capital controls, which can circulate off the coast rather than on the coast. The Yuan’s worldwide payment share was 2.88% in June, according to the RMB Tracker. A stablecoin that preserves convertibility and conformity could support invoicing and settlement in regional trading corridors. The design selection would drive market recording and regulatory comfort in terms of custody, redemption, and reserve composition.
Hong Kong is positioned as a primary location for structured experimentation, with the city’s license regime for fiat reference stable emitters coming into force on August 1. Final guidelines for supervisory, anti-money laundering (AML), and application processes were published by the Hong Kong Monetary Authority (HKMA). Corporate interest has arisen, including a plan by Ant International to apply for an issuer license in Hong Kong as soon as applications are open, according to Reuters.
Market Opportunity and Limits
The StableCoin market has been near $200 billion in the past few months, with forecasts varying. A widespread $2 billion projection by 2028 was fulfilled, but JP Morgan reduced its estimate to $500 billion, realizing that payments make up a small proportion of demand. For a yuan-referenced token to be scaled, the exhibition architecture would have to fix transparency, redemption in par, reserve quality, and interaction with existing e-CNY pilots, while also being in line with Chinese payment management.
Operating design is more important than labels. An offshore Yuan StableCoin could be structured with ring-fenced reserves and clear redemption rules, and then used for cross-border trade, finance ministry, and market painting. The onshore convertibility would consist of quota systems and bank controls. Market participants will analyze how responsibility is divided among the regulatory authorities of PBOC, Securities, and Banking, as well as in Hong Kong and Shanghai.
The political sequence is uncomplicated, with Hong Kong’s ordinance coming into force, issuers creating applications, mainland authorities setting parameters for permissible use and supervision, and cross-border pilots being coordinated with regard to trading currents and financial centers. The State Council’s review later sets the next steps in August. For more information, visit https://cryptoslate.com/china-quietly-prepares-yuan-stablecoins-as-99-of-supply-minted-in-dollars/
