China is examining measures to counter the growing influence of dollar stablecoins, including expanding its digital yuan usage and potentially developing its own stablecoins.
Influence of Dollar Stablecoins
Stablecoins pegged to the US dollar have become dominant in crypto trading and decentralized finance. In countries with weak currencies, they are used as a store of value. Economist Zhang Ming warns that these digital assets could further solidify the US dollar's global financial power as they connect the real-world credit of the dollar with the virtual economy.
Expanding China's Digital Yuan Use
One of Zhang's key suggestions is expanding the use of China's central bank digital currency (CBDC), the digital yuan. Currently, it mainly serves as a digital alternative to cash (M0) for retail transactions. However, Zhang suggests that it should also cover bank deposits (M1 and M2) and business transactions. Although China has already conducted some business-to-business (B2B) cross-border CBDC payments, Zhang believes the digital yuan must go further to counter the rise of dollar-backed stablecoins.
China's Stablecoin Potential
Another option is for China to develop its own stablecoins. Zhang views this as an unexplored area, but China has already started experimenting, mainly through Hong Kong. The region has approved several crypto exchanges, launched a stablecoin regulatory sandbox, and recently saw the formation of a stablecoin venture involving Standard Chartered and other companies.
China's crypto strategy is a clear sign of its ambitions to reshape global finance. Whether it succeeds or not, it is already influencing how nations view digital currencies and financial independence.
