China is contemplating permitting the utilization of yuan-backed stablecoins to promote the global acceptance of its currency, marking a significant shift in the government’s position on digital assets.
The Chinese Council of State is set to review and potentially authorize a project within this month that aims to enhance the global utilization of the currency, potentially matching U.S. backing for stablecoins, as per sources.
The proposal should outline specific goals for the utilization of the Chinese currency in international markets and define the roles of local regulatory authorities. Additionally, it will incorporate risk mitigation strategies.
The nation’s leaders are expected to gather for a study session this month to discuss the global expansion of iuan and stablecoins, according to a source.
Leaders are expected to give remarks at this gathering to establish the direction for stablecoins and define the boundaries of their use and growth prospects.
China’s Transformation
China’s potential acceptance of stablecoins signifies a significant shift in its stance on digital assets, following the ban on cryptocurrency trading and mining in 2021 over financial system stability concerns.
China has long desired for the yuan to achieve global currency status like the dollar or euro, showcasing its significance as the world’s second largest economy. Yet, its strict capital controls and trillion-dollar trade surpluses have hindered this objective.
These limitations are expected to pose a significant barrier to stablecoin growth, as indicated by market players.
Stablecoins are a form of digital currency created to retain a consistent value, often pegged to a specific currency like the dollar. They are frequently utilized by individuals to transfer funds among different tokens.
In June, the iuan’s global payment usage dropped to 2.88%, its lowest level in two years, while the dollar held a market share of 47.19%, according to the Swift payment platform.
President Donald Trump has been in favor of stablecoins in the United States since he took office in January, and is working on creating regulations to validate cryptocurrencies linked to the dollar.
Beijing views financial innovation, particularly stablecoins, as a promising strategy for boosting the international use of the yuan in response to the increasing prevalence of dollar-linked cryptocurrencies in global finance.
The specifics of the plan will be disclosed in the upcoming weeks, with Chinese authorities, such as the central bank, being assigned tasks for its execution, as per the sources.
The sources preferred not to be named as they were prohibited from talking to the media.
Dollar-backed stablecoins currently hold a dominant position in the market, comprising more than 99% of the total global supply of stablecoins as reported by the International Compensation Bank.
