China is considering allowing yuan-backed stablecoins for global use, sources familiar with the matter told Reuters.

The State Council is expected to review a plan later this month that could set targets for international yuan usage and outline regulatory roles for domestic bodies.

The proposal may also include guidelines for managing risks related to stablecoins, a type of cryptocurrency typically pegged to a fiat currency.

Senior Chinese leaders are expected to discuss yuan internationalization and stablecoins at a study session by the end of August.

If approved, this would mark a change in China’s approach to digital assets, as the country banned cryptocurrency trading and mining in 2021.

Hong Kong and Shanghai are expected to lead in local implementation, according to the sources.

China is also expected to discuss expanding the use of yuan and possibly stablecoins for cross-border trade at the Shanghai Cooperation Organisation Summit in Tianjin from August 31 to September 1.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ China’s stablecoin reversal reflects strategic concerns over declining yuan influence

China’s pivot from banning all cryptocurrencies in 2021 to now considering yuan-backed stablecoins represents a significant policy shift driven by measurable declines in its currency’s global standing 1.

The yuan’s share of global payments dropped to just 2.88% in June, its lowest level in two years, while the U.S. dollar maintained dominance at 47.19% of market share 1.

This decline coincides with dollar-backed stablecoins capturing over 99% of the global stablecoin market, currently valued at $247 billion and projected to reach $2 trillion by 2028 1.

The reversal highlights how geopolitical currency competition can influence policy decisions, with China now willing to explore previously banned technologies to counter U.S. financial dominance.

2️⃣ China’s digital payments infrastructure provides unique foundation for stablecoin deployment

China’s existing digital payments ecosystem, processing $17 trillion annually through 890 million mobile users, offers a strong foundation for rapid stablecoin adoption 2.