Chinese Yuan Joins the Stablecoin Game

Image source: https://www.pexels.com/photo/selective-focus-photo-of-silver-and-gold-bitcoins-8369648/

What's happening?

China may soon launch a yuan-backed stablecoin[1]! Well, to the world of US Dollar backed stablecoins, this is not only a major event in the digital currency world, but it could also put pressure on the traditional payments industry.

Senior Chinese leaders are also expected to convene a special study session as early as the end of this month, focusing on the internationalization of the Chinese yuan, AKA renminbi, and the global rise of stablecoins. At the meeting, top leadership may set the tone for stablecoins and define the boundaries for their commercial application and development[2].

For years, transferring money between United States and China could be a hassle. The limit is $50K per transaction, and it can take more than five days to go through the SWIFT system. Not to mention the fees senders have to pay.

According to Reuters, China’s State Council will review a new roadmap for yuan internationalization later this month. The most eye-catching part of the plan is the introduction of a yuan stablecoin into the market for the first time. This means the yuan could enter global competition in a brand-new way.

So what exactly is a stablecoin?

Simply put, it's a type of cryptocurrency pegged to a fiat currency. I used the term A fiat current since technically it does not need to be the US dollar. Though any stable coins I could think about are indeed worth a dollar per coin. USDT, as an example, fits the bill. Because it runs on the blockchain, transactions cost almost nothing, settle in seconds, and are available around the clock worldwide.

Because of these features, stablecoins have become increasingly popular in cross-border payments and digital transactions.

US dollar stable coins dominate the market

As far as I know I don't even know, there are also Euro, Japanese, Singaporean, Brazilian pagged stablecoins.

Count Singaporean as Chinese if you are Tom Cotton.

The yuan accounts for less than 3% of global payment flows. If a yuan stablecoin is introduced, it could help narrow this gap.

Challenge the traditional payment methods

When we use credit cards abroad, the fees are often 2% to 3%, and settlement takes time. Stablecoin transfers, on the other hand, are virtually free and instantaneous.

China is late on the credit cards game, but bypassed it with Wechat Pay or Ali Pay. Now it would be easier for the second most populated nation to adopt the stablecoin payment system even easier.

If more merchants and consumers start choosing yuan stablecoins for transactions, cross-border credit card services could take a significant hit.

The plan also highlights Hong Kong and Shanghai as the first pilot regions. Hong Kong already has a regulatory framework for stablecoins, while Shanghai is building an international operations hub for the digital yuan. These two cities are set to become the pioneering gateways for the yuan stablecoin.

Conclusion

The launch of a yuan pegged stablecoin could mark a turning point not only for the China's stands against cryptocurrencies, but also for the broader global payments landscape.

Just think about this with the development of BRICS Pay, n initiative aimed at reducing reliance on the US dollar through cross‑border local currency settlement systems[3].

By offering a low-cost, real-time alternative to traditional banking channels and credit card systems, it may help the yuan gain a stronger foothold internationally.

To think about that we heard rumors that China might have re-banned crypto mining or trading recently, those were debunked: the comprehensive ban remains from 2021, with no new prohibitions enacted in 2025[4].

Posted Using INLEO