China Greenlights Yuan-Backed Stablecoins for Global Expansion

In a significant policy shift, China is preparing to approve a roadmap for the greater usage of the yuan globally, including the use of yuan-backed stablecoins. According to sources familiar with the matter, the State Council, China's cabinet, will review and potentially approve this plan later this month.

The plan is expected to include targets for the usage of the Chinese currency in global markets and outline the responsibilities of domestic regulators. It will also provide guidelines for risk prevention, as China seeks to harness the potential of stablecoins while mitigating associated risks.

This move marks a major reversal of China's previous stance towards digital assets. In 2021, the country banned cryptocurrency trading and mining due to concerns about the stability of the financial system. However, China now sees stablecoins as a promising tool for yuan internationalization, as the country aims to challenge the dominance of the U.S. dollar in global finance.

The plan is expected to be implemented primarily in China's commercial hubs of Hong Kong and Shanghai, with the country also likely to discuss expanding the use of the yuan and stablecoins for cross-border trade and payments with other nations at the upcoming Shanghai Cooperation Organisation Summit.

This shift in China's digital currency strategy comes amid growing geopolitical tensions with the United States and the increasing use of dollar-backed stablecoins by Chinese exporters. By embracing yuan-backed stablecoins, China hopes to bolster the global status of its currency and reduce its reliance on the U.S. dollar.