In a significant turnaround of its position on digital assets, China is thinking of permitting the use of yuan-backed stablecoins for the first time in an effort to encourage broader acceptance of its currency internationally.
China’s cabinet, the State Council, will examine and perhaps approve a roadmap later this month for increased currency usage worldwide, which includes catching up with the United States’ drive on stablecoins.
In addition to outlining the duties of domestic authorities, the plan is anticipated to include targets for the use of the Chinese yuan in international markets, they added.
The roadmap will also include risk prevention measures.
As early as the end of this month, the nation’s top officials are also anticipated to convene for a research session that would concentrate on stablecoins and yuan internationalization, which are gaining traction globally.
Senior officials are expected to make statements at that meeting that would establish the tone for stablecoins and outline the parameters of their use and advancement in the corporate world.
If accepted, China’s plan to use stablecoins would represent a significant change in how it views digital assets.
In 2021, the nation outlawed cryptocurrency mining and trading because of worries about the stability of the financial system.
As the second-largest economy in the world, China has long hoped that the yuan will become a worldwide currency, comparable to the dollar or the euro.
But that goal has been hampered by its strict capital controls and trillion-dollar yearly trade surpluses.
According to market participants, those limitations are probably going to be a major obstacle to the growth of stablecoins as well.
A particular kind of cryptocurrency called a stablecoin is made to keep its value steady.
Crypto traders frequently utilize them to transfer money between tokens, and they are typically based on a fiat currency, like the US dollar.
Payment platform SWIFT reports that the yuan’s share of the global payment currency dropped to 2.88% in June, the lowest level in two years.
On the other hand, the U.S. dollar held a 47.19% market share.
Strong capital controls are in place in China to regulate the movement of wealth into and out of the country; however some link schemes allow funds to be deployed in important offshore markets like Hong Kong.
Days after taking office in January, U.S. President Donald Trump supported stablecoins and is creating a supportive regulatory environment that helps legitimize dollar-pegged cryptocurrencies.
Stablecoins have the ability to upend conventional everyday money transfers and cross-border payment systems because of their underlying blockchain technology, which allows for immediate, borderless, and low-cost fund transfers around-the-clock.
Beijing sees financial innovation—more especially, stablecoins—as a possible instrument for yuan internationalization in light of the growing prominence of cryptocurrencies connected to the US dollar in international banking.
The plan’s specifics will be revealed in the upcoming weeks and Chinese regulators—including the People’s Bank of China (PBOC), the country’s central bank—would be tasked with carrying it out.
Mainland China stock valuation released after market closure on Wednesday, gains in fintech and stablecoin-concept shares propelled China stocks higher on Thursday.
Leading gains in Hong Kong-listed stablecoin concept stocks was ZhongAn Online up 11.5%.
Other stocks of this type also increased: Guotai Junan International up 8.6%, and Bright Smart Securities up 9.9%.
A LARGE CHANGE
According to the Bank for International Settlements, over 99% of the stablecoin supply worldwide is now made up of stablecoins backed by the US dollar.
In Asia, South Korea has promised to let businesses launch won-based stablecoins and build the required infrastructure, while Japan is also taking similar steps.
Beijing’s most recent drive coincides with increased geopolitical tensions with Washington and the expansion of Chinese exporters’ use of stablecoins backed by the dollar.
The most recent intentions come after a Shanghai regulator announced last month that it had convened a meeting for officials from local governments to discuss strategic approaches to digital currencies and stablecoins.
A recent interview with local media revealed that an offshore yuan stablecoin in Hong Kong is “a possibility” according to PBOC advisor Huang Yiping.
In addition, Hong Kong became one of the first markets in the world to regulate fiat-backed stablecoin issuers on August 1st when its long-awaited stablecoin regulation went into force.
Shanghai, the commercial center of China, is also setting up a global operation center for the digital yuan.
Shanghai and Hong Kong would be the primary locations to expedite the local execution of the most recent plan.
At the Shanghai Cooperation Organization (SCO) Summit, which will take place in Tianjin from August 31 to September 1, China is expected to discuss extending the use of the yuan and potentially stablecoins for cross-border payments and trade with select nations.
The cryptocurrency analytics company CoinGecko estimates that the current size of the worldwide stablecoin market is about $247 billion.
But by 2028, Standard Chartered Bank predicts it will reach $2 trillion.
