China is considering using stablecoins for cross-border payments to counter the global dominance of the USD through innovations in cryptocurrency.
MAIN CONTENT
China reassesses the role of stablecoins in the context of the U.S. promoting a digital USD strategy.
Hong Kong is seen as an important testing ground for yuan-linked stablecoins to internationalize the local currency.
China pursues a dual strategy in cryptocurrency development, coordinating the development of stablecoins and the e-CNY.
Why is China reconsidering stablecoins in the global context?
Experts and senior leaders of the People's Bank of China (PBOC) believe that stablecoins could change the game in international finance, especially when traditional payment systems are vulnerable to international sanctions.
PBOC Governor Pan Gongsheng stated at the Lujiazui Forum in June 2025: "Stablecoins have the potential to revolutionize international finance and help build an alternative infrastructure to mitigate political risks." Former PBOC leader Zhou Xiaochuan warned that USD-linked stablecoins could promote dollarization, while proposing the development of stablecoins linked to the yuan to promote the internationalization of China's currency.
Stablecoins are not a new currency but a new distribution channel for existing currencies, and China needs to embrace the tokenization of its sovereign currency to maintain competitiveness.
Robin Xing, Chief Economist for China at Morgan Stanley, 2025
How has the U.S. promotion of digital currency impacted China’s strategy?
The acceleration of the United States in developing a digital USD and passing stablecoin regulation laws by 2025 has forced China to reassess its plans to avoid falling behind. U.S. Treasury Secretary Scott Bessent emphasized that stablecoins could reinforce the global role of the USD due to trust in the U.S. management system, rather than directly competing with China's centralized digital currency like the e-CNY.
Stablecoins are expected to reach a supply scale of up to 3.7 trillion USD by 2030, mainly backed by USD and short-term treasury bonds, thereby supporting faster and lower-cost cross-border payments.
What role does Hong Kong play in China's stablecoin plans?
Hong Kong is seen as a legal and technical testing ground for offshore yuan-linked stablecoins. This is based on the established legal framework for stablecoins, along with the involvement of major corporations such as JD.com and Ant Group applying for operational licenses.
Shen Jianguang, Chief Economist of JD.com warns that failing to promote stablecoins will cause China to lag behind. JD.com aims to reduce cross-border payment costs by 90% and shorten payment times to under 10 seconds through stablecoins.
Zhejiang China Commodities City Group – managing the world's largest wholesale market, also plans to enter this field through licensing.
China cannot miss the opportunity to develop stablecoins to maintain its competitive position in global finance.
Shen Jianguang, Chief Economist of JD.com, 2025
What cryptocurrency development strategy is China currently pursuing?
Although the digital yuan (e-CNY) has not been widely applied, China focuses on a dual strategy: developing traditional payment infrastructure like CIPS and currency swaps while leveraging the potential of stablecoins in Hong Kong.
The international e-CNY center in Shanghai will be a strategic highlight to promote digital finance. However, the mBridge project in cooperation with other central banks faces challenges due to concerns about evading sanctions.
Remarks from Li Yang – Chairman of the National Finance and Development Institute, stating that "parallel integration of methods will help China establish a more diverse and flexible cryptocurrency ecosystem."
Criteria e-CNY Yuan Stablecoin in Hong Kong Digital USD Scope Domestic, daily payments Cross-border, international trade International, reinforcing the role of USD Management People's Bank of China Legal framework Hong Kong U.S. Treasury, FED Goals Domestic financial innovation Internationalization of yuan Protecting the USD's dominant position Current status Limited testing, not widespread Applying for licenses, testing New laws passed, rapid deployment
What are the main challenges for yuan stablecoins and what are the prospects?
Stablecoins are still primarily used for cryptocurrency transactions rather than in international trade. The legal issue remains open, especially regarding the classification of stablecoins as currency or financial instruments, posing management risks.
Professor Eswar Prasad (Cornell University) believes that yuan-linked stablecoins need extensive reform to unify the domestic and foreign currency markets; otherwise, it will be difficult to achieve significant influence.
He also expects stablecoins to act as a catalyst for market policy reform in China amid an increasingly fierce global digital currency race.
Frequently Asked Questions
What are stablecoins and how do they differ from national digital currencies? Stablecoins are cryptocurrencies pegged to fiat currencies to stabilize value, while national digital currencies like e-CNY are directly issued and controlled by the government. Why does China ban traditional cryptocurrencies but show interest in stablecoins? China is concerned that traditional cryptocurrencies pose financial risks and violate capital controls, but stablecoins, if controlled by the state, could help modernize international payments more effectively. What role does Hong Kong play in developing yuan stablecoins? Hong Kong has a clear legal framework and is seen as a testing and deployment gateway for offshore yuan-linked stablecoins. How can yuan stablecoins help internationalize the yuan? Stablecoins create fast, cost-effective cross-border payment channels, making the yuan more easily used in international markets, enhancing the strength of the Chinese currency. What are the risks and challenges in developing stablecoins in China? These include management challenges, synchronization between domestic and foreign markets, and the risk of stablecoins being used to evade international sanctions.
Source: https://tintucbitcoin.com/china-under-pressure-to-use-stablecoins/
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