China is reportedly exploring a yuan-backed stablecoin for the first time, marking a significant change in its digital asset strategy.
New Initiatives in China's Digital Assets
On August 20, Reuters reported that China's State Council plans to review a roadmap for the internationalization of the yuan that for the first time includes the creation of a sovereign stablecoin.
Sources indicate that this move responds directly to the overwhelming dominance of U.S. dollar-linked stablecoins like USDT and USDC, which serve as the backbone of global crypto trading and are starting to permeate traditional cross-border payments.
A Shift in Approach: Control vs. Ambition
The potential launch of a yuan-backed stablecoin represents a stark turnaround from China's crackdown on cryptocurrency trading and mining in 2021, when such activities were banned over financial stability concerns.
However, a sovereign digital currency is the ultimate expression of state control, utilizing blockchain's efficiency for geopolitical goals. This does not embrace crypto's ethos, but rather co-opts its technology for a particular purpose.
The Urgency for a Stablecoin
The urgency behind China's initiative is emphasized by the staggering dominance of dollar-pegged stablecoins, which account for over 99% of the global stablecoin supply. The growing use of these stablecoins by Chinese exporters poses a significant vulnerability for Beijing.
The upcoming Shanghai Cooperation Organization Summit in Tianjin is expected to be a diplomatic testing ground for this strategy, discussing the expansion of the yuan’s use and possibly its stablecoin concept.
Thus, China's initiative to create a yuan-backed stablecoin represents a shift in the global trade structure and aims to strengthen its currency's position on the international stage.
