China stablecoin shift: Beijing mulls yuan-backed tokens to push global adoption; plans major policy reversal

China is considering allowing the usage of yuan-backed stablecoins for the first time in a move aimed at boosting the global adoption of its currency, sources familiar with the matter told Reuters. If approved, the plan would mark a significant reversal of China’s earlier hardline stance against digital assets.According to the sources, the State Council — China’s cabinet — will review and possibly approve a roadmap later this month to expand the yuan’s international role, including measures to compete with the US push on stablecoins. The plan is expected to set targets for wider usage of the Chinese currency in global markets, define the responsibilities of regulators, and establish guidelines for risk prevention.The country’s top leadership is also expected to convene for a study session as early as the end of this month, focusing on yuan internationalisation and stablecoins. At the meeting, senior leaders are likely to outline remarks that will set the tone for stablecoin adoption and define the boundaries of its development in business, one source said.Stablecoins, a form of cryptocurrency pegged to fiat currencies like the dollar, are widely used to move funds between tokens and for cross-border transactions. China banned cryptocurrency trading and mining in 2021, citing risks to financial stability, but officials now see yuan-backed stablecoins as a tool for promoting financial innovation and strengthening the yuan’s global role.China has long aspired for the yuan to achieve global currency status on par with the dollar or euro, but tight capital controls and its large trade surpluses have held back progress. Market participants say those restrictions will remain a hurdle for the development of stablecoins as well.The yuan’s share in global payments fell to 2.88% in June, its lowest in two years, according to SWIFT data, while the US dollar accounted for 47.19%. In contrast, US President Donald Trump has backed stablecoins since January and is establishing a regulatory framework to legitimise dollar-pegged cryptocurrencies.Sources told Reuters China’s roadmap will assign implementation duties to regulators, including the People’s Bank of China (PBOC). Hong Kong and Shanghai are expected to fast-track local rollouts, with Hong Kong’s new stablecoin ordinance, effective August 1, already positioning the territory as one of the first jurisdictions to regulate fiat-backed issuers. Shanghai is also building an international operations hub for the digital yuan.China’s next steps could be unveiled at the Shanghai Cooperation Organisation (SCO) Summit in Tianjin from Aug. 31-Sep. 1, where Beijing may discuss expanding the use of yuan and stablecoins for cross-border trade and payments, said the sources.Globally, stablecoins backed by the dollar dominate the market, making up more than 99% of supply, according to the Bank for International Settlements. South Korea and Japan are also advancing plans for won- and yen-based stablecoins. The global stablecoin market is valued at $247 billion, but Standard Chartered Bank estimates it could reach $2 trillion by 2028.