China is considering the introduction of yuan-backed stablecoins to enhance international usage of its currency. This step is seen in the context of global changes in the cryptocurrency market.
Significance of Yuan-Backed Stablecoins
Sources indicate that the State Council may approve a roadmap for increasing global yuan utilization. This move marks a significant policy shift following the 2021 ban on cryptocurrency trading.
Response to US Stablecoin Growth
The introduction of yuan-backed stablecoins is a response to the GENIUS Act passed by the US Congress, which established the first regulatory framework for dollar-pegged stablecoins. The rise of dollar stablecoins poses a threat to China's currency internationalization efforts.
Technical and Regulatory Challenges
China faces technical and regulatory challenges associated with a closed capital account. Approvals for yuan-backed stablecoins may be complicated due to concerns about capital flight.
The yuan stablecoin initiative reflects China's desire to respond to current challenges in digital currency and strengthen its influence in the global financial system.
