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China is planning for a major shift in its digital asset policy.

As per a report from Reuters, China is considering Yuan-backed stablecoins for the first time, to boost Yuan’s global use. Hong Kong and Shanghai are leading the rollout, while Asian markets are also exploring their own stablecoin initiatives.

China’s Major Shift Amid Global Stablecoin Push

China’s State Council may review and approve a plan this month to promote the yuan globally, as the country looks to match the U.S. in the stablecoin race.

If approved, this move would be a big reversal from China’s earlier ban on cryptocurrency trading and mining in 2021.

China has long wanted the yuan to rival the dollar or euro globally, but strict capital controls and huge trade surpluses have held it back. Experts warn these same restrictions could also limit stablecoin growth.

Previously, China’s tech giants JD.com and Ant Group have pushed the central bank to approve yuan-backed stablecoins.

USD Stablecoins Dominate Global Payments

U.S. dollar-backed stablecoins currently dominate the market, making up over 99% of the global supply. U.S. has embraced stablecoins through the GENIUS Act, a landmark law signed by President Trump, which establishes a comprehensive regulatory framework for stablecoins.

Hong Kong and Shanghai to Lead Rollout

Beijing sees stablecoins as a way to boost the yuan’s global role as the influence of dollar-based digital money grows. The details of the plan could be revealed in the next few weeks, with Chinese regulators, including the central bank, the People’s Bank of China (PBOC), tasked with putting it into action.

Meanwhile, Shanghai is setting up an international hub for the digital yuan. 

China may also discuss expanding yuan and stablecoin use for cross-border trade at the Shanghai Cooperation Organisation Summit later this month. Meanwhile, South Korea and Japan are also preparing their own local stablecoin initiatives.

Hong Kong’s long-awaited stablecoin law took effect on August 1, making it one of the first places in the world to regulate fiat-backed stablecoin issuers.

Morgan Stanley believes Hong Kong dollar stablecoins could help connect China’s digital yuan with global digital assets and make cross-border payments easier. Investors could use them to convert USDT or USDC into e-CNY and invest offshore, supporting yuan internationalisation without breaking mainland capital rules.

A Hong Kong SFC official recently warned that new stablecoin rules have increased fraud risks, urging investors to stay cautious. After the August 1 regulations, some firms saw sharp losses, while others’ shares jumped just by announcing plans to apply for a license.

Nevertheless, China’s yuan-backed stablecoins mark a new step to boost the yuan globally and rival dollar-linked digital currencies.