Will China Enter the Stablecoin Race?
The modern digital currency market is developing at an incredible pace. The leading positions here are still occupied by dollar-backed stablecoins, which in recent years have become not only a convenient tool for retail users and traders but also a full-fledged element of the international payment infrastructure. At the same time, China is betting on the development and promotion of the digital yuan (e-CNY). More and more analysts and experts believe that the absence of a yuan-based stablecoin may significantly limit Beijing’s ability to compete with the dollar on a global scale. This raises the question: will China decide to enter the stablecoin race?
The United States and Its Bet on Stablecoins
The United States sees stablecoins as a strategic tool to strengthen the international role of the dollar. Moreover, according to many economists, the widespread use of dollar stablecoins may become a way to partially address the issue of public debt and further consolidate the dominance of the U.S. currency in the global financial systеm. The broad integration of stablecoins into payment processes is seen as an important part of Washington’s long-term strategy, where digital assets support the global supremacy of the dollar.
China, in contrast, prefers to take a cautious stance. Beijing’s main efforts are focused on the digital yuan, while the question of creating an independent yuan stablecoin remains open and highly controversial.
Private Yuan Stablecoins and Their Specifics
It should be noted that yuan-pegged private stablecoins already exist in the market. However, the key detail lies in the fact that such tokens are generally pegged not to the onshore yuan (CNY) but to the offshore yuan (CNH). This distinction stems from China’s monetary regulation systеm.
- Onshore yuan (CNY): used exclusively within mainland China, strictly controlled by the People’s Bank of China, and subject to tight capital regulations.
- Offshore yuan (CNH): used in international markets, primarily in Hong Kong, where regulatory rules are more flexible and closer to global currency standards.
The dual structure of the yuan significantly limits demand for yuan stablecoins. Investors and international companies prefer to use the U.S. dollar, which is more predictable and convenient for settlements. Another limiting factor is the official ban on cryptocurrencies in mainland China, with Hong Kong serving as a gateway for international investors. In practice, however, most of them prefer dollar stablecoins (USDT, USDC) or the Hong Kong dollar over yuan-based tokens.
Does China Need an “Official” Yuan Stablecoin?
Analysts increasingly emphasize that genuine global interest would arise only if China issued an officially approved yuan stablecoin. Such an instrument could compete with USDT and USDC in international settlements and potentially promote the internationalization of the yuan.
Nevertheless, opinions within China remain divided. Some experts argue that the country must act decisively and introduce a yuan stablecoin to avoid missing a strategic opportunity. Others, including a former head of the People’s Bank of China, warn that speculative activity around such a stablecoin could undermine financial stability.
Stablecoins and China’s Payment Culture
Even if China were to issue its own yuan stablecoin, its use in everyday payments is unlikely. The Chinese payment ecosystem is already unique: the population has almost completely abandoned cash and bank cards, relying instead on QR-code payments through superapps like WeChat Pay and Alipay. Additionally, the digital yuan is already integrated into these systems and functions as the official state-backed digital currency. In this context, a separate yuan stablecoin would likely prove redundant for domestic use.
China’s Strategy: CIPS Instead of Stablecoins
It seems far more likely that China will continue developing its own cross-border interbank payment systеm, CIPS (Cross-Border Interbank Payment systеm), which is positioned as an alternative to SWIFT. This systеm allows China to conduct cross-border settlements independently and reduce reliance on Western infrastructure. Such an approach aligns more closely with Beijing’s long-term strategy of gradually strengthening the yuan’s role in the global economy.
Prospects and Limitations
At present, the stablecoin market is firmly dominated by USDT and USDC. Their duopoly remains strong, and there appears to be little threat to their position in the foreseeable future. Even if China decides to create its own official yuan stablecoin, success would require several significant conditions:
- a substantial easing of regulations concerning digital assets;
- lifting the ban on cryptocurrencies in mainland China;
- building robust market infrastructure for custody, clearing, and compliance in major global jurisdictions;
- establishing confidence in the yuan as a global settlement currency, not only in Asia but also worldwide.
Without these measures, the likelihood that a yuan stablecoin could seriously challenge the dollar’s duopoly remains extremely low.
Conclusion
China has all the resources and technology needed to issue its own stablecoin and increase the yuan’s role in global settlements. However, Beijing’s current strategy remains cautious and pragmatic: focusing on the development of the digital yuan and CIPS appears to be a higher priority than participating in the stablecoin race. In the coming years, USDT and USDC are expected to maintain their dominance, while a potential yuan stablecoin will remain more of a theoretical concept than a practical reality. The world, however, will continue watching closely to see if China chooses to alter its course and enter the global stablecoin competition.
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