China quietly prepares yuan stablecoins as 99% of supply minted in dollars

China is evaluating yuan-backed stablecoins for the first time, with the State Council set to review a roadmap on currency internationalization and stablecoin usage later this month, per Reuters.

The plan would assign regulatory responsibilities, outline risk controls, and task the People’s Bank of China with implementation, and pilot activity is expected in Hong Kong and Shanghai, as Reuters reported.

The move would depart from China’s 2021 prohibition on crypto trading and mining. It fits a broader objective to expand the yuan’s role in cross-border payments as dollar stablecoins dominate crypto settlement rails. Dollar-pegged tokens account for more than 99% of global stablecoin supply, according to Reuters.

The roadmap is expected to be paired with messaging from senior leadership on boundaries for commercial use, with further discussion of yuan use in trade scheduled around the Shanghai Cooperation Organization summit in Tianjin on Aug. 31 to Sept. 1, per China’s official schedule.

Policymakers face a practical constraint: China’s capital controls, which shape how any yuan-referenced token could circulate offshore rather than onshore. The yuan’s global payment share was 2.88% in June, down from highs seen in late 2023, according to SWIFT’s July RMB Tracker.

A stablecoin that preserves convertibility and compliance could support invoicing and settlement in regional trade corridors, while design choices around custody, redemption, and reserve composition would drive market uptake and regulatory comfort.

Hong Kong is positioned as a primary venue for structured experimentation. The city’s licensing regime for fiat-referenced stablecoin issuers takes effect Aug. 1, with final guidelines on supervision, AML, and application procedures published by the Hong Kong Monetary Authority (HKMA).

Corporate interest has emerged, including a plan by Ant International to apply for a Hong Kong issuer license once applications open, per Reuters. These steps create a path for yuan-pegged instruments in an offshore setting that interfaces with mainland payment infrastructure only through controlled channels.

Market sizing frames the opportunity and the limits. The stablecoin market stood near the mid-$200 billion range in recent months, with growth tied to trading, collateral, and settlement use. Forecasts vary.

A widely cited $2 trillion projection by 2028 has met pushback, with J.P. Morgan cutting its estimate to $500 billion and noting that payments account for a small share of demand. For a yuan-referenced token to scale, issuance architecture would need to address transparency, redemption at par, reserve quality, and interaction with existing e-CNY pilots, while remaining consistent with China’s balance-of-payments management.

Operational design matters more than labels. An offshore yuan stablecoin could be structured with ring-fenced reserves and clear redemption rules, then used for cross-border trade settlement, treasury, and market-making.

Onshore convertibility would remain governed by quota systems and banking controls. Market participants will parse how responsibilities are divided among the PBOC, securities and banking regulators, and local authorities in Hong Kong and Shanghai..

The policy sequence is straightforward. Hong Kong’s ordinance comes into force, issuers prepare applications, mainland authorities set parameters for permitted uses and supervision, and cross-border pilots are coordinated around trade flows and financial centers. The State Council review later in August sets the next steps.

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