China is preparing to consider yuan-linked stablecoins as part of its efforts to expand the currency's use worldwide, in what would represent a significant departure from its previous stance on digital assets.
What Happened: The State Council, China's cabinet, is expected to review a policy roadmap later this month that could authorize the issuance and use of yuan-backed stablecoins, Reuters reported on Wednesday.
The plan is likely to set targets for global yuan adoption and assign responsibilities to regulators such as the People's Bank of China (PBOC), the report quoting sources said.
Senior leaders are also scheduled to meet before the end of August to discuss yuan internationalization and the role of stablecoins, which have grown increasingly important in global financial flows.
If adopted, the strategy would mark a reversal from Beijing's 2021 ban on cryptocurrency trading and mining, which had been introduced over financial stability concerns.
Officials are now considering stablecoins as a potential instrument to advance yuan internationalization, particularly as U.S. dollar-backed tokens dominate the global market and gain traction in cross-border trade.
China has long sought a greater international role for the yuan, but strict capital controls and persistent trade surpluses have constrained progress.
Those restrictions remain a challenge for the rollout of yuan-backed stablecoins, analysts note.
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Why It Matters: The yuan accounted for just 2.88% of international payments in June, down to a two-year low, according to data from SWIFT. In comparison, the U.S. dollar held a 47% share.
Dollar-linked stablecoins currently make up more than 99% of the $247 billion global stablecoin market, according to the Bank for International Settlements.
Beijing's move comes as other Asian countries also explore local stablecoins. South Korea has pledged to allow won-backed tokens, while Japan is developing its own frameworks.
Hong Kong, meanwhile, enacted a regulatory regime for fiat-backed stablecoins on August 1, positioning itself as one of the first global jurisdictions to do so.
Shanghai and Hong Kong are expected to spearhead domestic implementation of China's stablecoin plan, sources said.
Beijing may also raise the issue during the upcoming Shanghai Cooperation Organization (SCO) Summit in Tianjin from Aug. 31 to Sep. 1, as it seeks to broaden yuan usage in regional trade.
Financial institutions project the stablecoin sector could expand rapidly.
While today's market stands at roughly $247 billion, Standard Chartered estimates the figure could climb to $2 trillion by 2028.
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