China Considers Creating Stablecoins - Seeks to Boost Global Use of Local Currency
China is considering allowing stablecoins, or stable currencies pegged to the yuan, for the first time in an effort to boost its currency's global presence. It's a major shift in Beijing's approach to digital assets.
The Chinese government's cabinet is expected to review and possibly approve later this month a plan that includes promoting the yuan's wider use in international markets, including efforts to compete with the U.S. on stablecoins, the sources said.
The plan is expected to include targets for the international use of the yuan, tasks for domestic regulatory institutions, and guidelines for risk management. A source added that the country's top leaders will gather for a study session that could be held as early as the end of this month, where the focus will be on the internationalization of the yuan and the role of stable currencies in this process.
If approved, the initiative would represent a major shift in China's approach to digital assets. China banned cryptocurrency trading in 2021, citing concerns about the stability of the financial system.
Beijing has long aspired to give the yuan a greater role in global markets, similar to that of the dollar or euro, in keeping with its status as the world’s second-largest economy. However, strict capital controls and a large trade surplus have been obstacles to that goal. These restrictions are also expected to pose a challenge to the development of stablecoins, according to market experts.
Stablecoins are a type of cryptocurrency that aims to maintain a stable value and are widely used for fund transfers in the cryptocurrency world. China maintains strict capital controls on the movement of funds in and out of the country, with some limited schemes to allow investment in select markets outside China, such as Hong Kong.
In the US, President Donald Trump endorsed stablecoins shortly after taking office in January and is creating a regulatory framework to make dollar-pegged cryptoassets more legitimate. The blockchain technology behind these coins allows for instant, borderless, and low-cost transfers, challenging traditional payment systems and international transfers.
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