China’s decision to approve yuan-backed stablecoins marks a significant shift in its digital currency policy, reversing a longstanding ban on cryptocurrency activities that has been in place since 2021. This policy reversal, which breaks a 12-year prohibition on crypto operations including trading and mining, is expected to be formalized following a review by the State Council by the end of August 2025. The approval aims to integrate stablecoins into the business ecosystem with clear regulatory frameworks, reflecting senior leadership’s focus on yuan internationalization and digital currency innovation. The new legal status of yuan-backed stablecoins represents a recalibration of China’s approach to digital assets, balancing innovation with state control.
The strategic intent behind this move is to elevate the yuan’s role in international finance and trade, countering the dominance of US dollar-pegged stablecoins, which currently control over 99% of the $275–$279 billion global stablecoin market. China’s share of global payments has declined to 2.88% as of June 2025, its lowest in two years, while the US dollar still governs approximately 47% of international transactions. By introducing yuan-backed stablecoins, China seeks to challenge the dollar’s supremacy in cross-border digital payments, a rivalry further intensified by recent US legislative efforts to promote USD-backed stablecoins. Hong Kong and Shanghai are being developed as key launch sites to support this initiative, with Hong Kong handling offshore issuance under a new stablecoin ordinance. Launch hubs This regulatory framework is planned to be discussed at the upcoming Shanghai Cooperation Organisation (SCO) Summit, signaling China’s intent to negotiate yuan-based stablecoin use with partner countries SCO Summit.
The proposed regulatory framework emphasizes robust risk management, capital controls, and anti-money laundering protocols to safeguard financial stability and investor protection. The roadmap includes oversight mechanisms designed to prevent speculation and fraud, responding to warnings from local authorities about risks associated with fiat-pegged tokens. This cautious approach aims to foster steady global expansion of yuan digital assets without fully liberalizing China’s capital account, maintaining a controlled environment for international business and cross-border settlements.
