China is said to weigh yuan-backed stablecoins to boost global currency usage

China is considering a significant policy shift that would allow the use of yuan-backed stablecoins, aiming to boost the global adoption of its currency.

The State Council will review a plan to enhance the yuan's international presence, setting objectives and clarifying regulatory roles while also addressing risk mitigation.

A study session among China's leadership will focus on strategies for yuan internationalization and the importance of stablecoins in the global financial landscape.

Despite this potential shift, Chinese regulators have previously instructed financial institutions to cease research and discussions on stablecoins due to concerns over financial fraud and market stability.

Recommendation Rating: Significant Shift in China's Digital Currency Policy

China is contemplating a landmark decision to permit the use of yuan-backed stablecoins, marking a significant change in its approach to digital currencies. This potential policy shift aims to enhance the global adoption of the yuan.

Later this month, the State Council, which serves as China's executive branch, is set to review a comprehensive plan that could facilitate broader international usage of the yuan. This initiative seeks to align with the growing emphasis in the United States on stablecoins, as reported by Reuters.

The proposed plan is expected to establish specific objectives for increasing the yuan's presence in global markets while clarifying the roles and responsibilities of domestic regulatory bodies. Additionally, the roadmap is anticipated to outline guidelines aimed at mitigating associated risks.

In conjunction with this initiative, China's top leadership is scheduled to convene for a study session around the end of the month. This session will focus on strategies for yuan internationalization and the emerging relevance of stablecoins in the global financial ecosystem.

Stablecoins, which are digital assets designed to maintain a stable value—typically pegged to traditional currencies like the U.S. dollar or commodities such as gold—offer the benefits of cryptocurrency, including speed and flexibility, without the accompanying price fluctuations.

However, previous reports indicate that Chinese financial regulators have instructed major brokerages and think tanks to halt research publications and cancel discussions related to stablecoins. This regulatory caution stems from concerns regarding potential financial fraud and market instability.