After years of strict crypto bans, China is now quietly preparing to take its first big step toward stablecoins. The goal? To promote a yuan-backed digital currency and compete in the growing global stablecoin race.
But behind this shift lies a deeper concern, the fear of capital leaving the country and the growing dominance of U.S. dollar-backed stablecoins.
Let’s take a closer look at what’s happening.
China Slowly Warms to Stablecoins
For years, China was strongly against crypto. It banned exchanges, mining, and warned citizens not to invest in digital assets. But now, reports suggest that China may approve the launch of its first stablecoins.
China’s renewed interest is mainly focused on stablecoins tied to the renminbi (RMB). This shift comes at a time when the U.S. is leading global adoption of dollar-backed tokens, pushing China to rethink its position.
According to the People’s Bank of China, stablecoins have already changed how global payments work. In response, officials are holding discussions with financial experts to find the safest way forward.
But they’ve made one thing clear, any stablecoin allowed in China must follow the country’s strict financial rules.
Hong Kong Becomes a Testing Ground
Even in China, where crypto is banned on the mainland, conversations around stablecoins have picked up. Hong Kong, often used as China’s crypto testing ground, has passed a new law allowing licensed firms to issue fiat-backed tokens.
But officials are being very cautious. Only a small number of licences will be given at first, focusing on business use rather than individual users.
Strategy to Keep Money Inside China
One key reason behind China’s interest in stablecoins is to stop capital from flowing out of the country. Officials fear that if people continue using U.S. dollar-backed stablecoins like USDT or USDC, it could weaken China’s grip on its financial system.
To counter this, China is likely to support the development of yuan-backed stablecoins, digital tokens that can strengthen the RMB’s position in global trade while keeping money within Chinese borders.
Balancing Control and Innovation
China’s central bank has openly voiced concerns about how dollar-based stablecoins boost U.S. financial influence. While China wants to push back against this trend, it’s also deeply cautious.
Experts warn that once stablecoins are released into the market, they are hard to fully control, something that goes against China’s tightly managed financial model. The risk is that money could leave the country in ways regulators can’t easily track or stop.
Not a Green Light for All Crypto
It’s important to note that this isn’t a full reversal of China’s crypto ban. The country still doesn’t allow the open trading of Bitcoin or Ethereum. However, by allowing certain stablecoins, China may be opening a door, just wide enough to test the waters without giving up control.
