Everybody desires a stablecoin, even China

Discover key highlights within the NFT area. This article dives into: “Everybody wants a stablecoin, even China”.

Fintech Frontlines

August 25, 2025 • 12:53 pm ET

Everybody desires a stablecoin, even China

By
Ananya Kumar

A bit of greater than a month after President Donald Trump signed the GENIUS Act into regulation—the nation’s first federal regulation for stablecoins backed by the US greenback—enthusiasm for stablecoins is reaching new highs. Analysts estimate the provision of stablecoins may develop to wherever between $1.6 trillion and $3.7 trillion inside the subsequent 5 years. More than 98 % of all stablecoins are dollar-denominated, that means they’re backed by underlying belongings—together with forex holdings, treasuries and repurchase agreements—which might be pegged to the greenback.

New entrants are reshaping the stablecoin ecosystem, which was lengthy dominated by few issuers. Just final week, Wyoming launched its personal stablecoin. Traditional monetary corporations are transferring in, too. JPMorgan, as an example, just lately launched JPMD, a token modeled on stablecoins, for institutional shoppers. E-commerce giants are experimenting as effectively: Walmart and Amazon are weighing launching their very own stablecoins in an effort to broaden their use from purchases to financial savings and rewards. This echoes the event of the Starbucks app—which stays an impactful use-case for creating a closed loop funds platform and wallet. Financial gamers are selecting to companion with one another on new merchandise, searching for to seize market share and work throughout totally different capabilities corresponding to tokenized treasuries and cash market funds. A stablecoin ecosystem is rising as banks and fintech gamers see a extra legally clarified scope for custody, reserve administration, and the mixing of stablecoins into current enterprise fashions.

Beijing shifts from skepticism to technique

Enthusiasm for stablecoins extends far past the United States. In June, the Governor of the People’s Bank of China, Pan Gongsheng, clarified his central financial institution’s stance on stablecoins—noting that alongside central financial institution digital currencies (CBDCs), they may facilitate cross-border funds and form the monetary system’s future. This marks a notable shift given China’s earlier crackdown on privately issued cryptoassets. Meanwhile, Hong Kong concluded an almost two-year session course of to cross stablecoin regulation in May 2025, which lastly took impact this month. Reportedly, greater than forty firms have already utilized for issuer licenses, and the Hong Kong Monetary Authority is predicted to approve a choose few, with an preliminary concentrate on business-to-business functions.

Chinese e-commerce giants JD.com and AliBaba are additionally fascinated about launching stablecoins in Hong Kong, the place JD.com participated in sandbox testing through the session course of. To date, experiments have primarily included dollar-denominated stablecoins and stablecoins pegged to the Hong Kong greenback (HKD), which has been tied to the US greenback since 1983 by way of the Linked Exchange Rate System. At the identical time, Chinese firms and state-owned enterprises are additionally exploring stablecoins backed by offshore yuan (CNH)—and China is concurrently conducting the biggest pilot of its personal CBDC, the e-CNY, which at the moment has seven trillion yuan in circulation.

The rise of yuan-backed stablecoins

The rationale behind China’s pursuit of a yuan-backed stablecoin technique is just not instantly apparent. After all, the e-CNY already faces stiff competitors from home digital wallets issued by Alipay and WeChat Pay, which collectively cowl over 90 % of the retail market. Outside of e-commerce pushed alternatives—which can coexist with conventional fee strategies—it’s unclear how a stablecoin may profitably compete in China’s retail funds market. Moreover, if extremely managed actors corresponding to state-owned enterprises and influential Chinese know-how firms have been to difficulty stablecoins, they’d blur the road between a CBDC and a stablecoin. This would increase related privateness and surveillance issues as these related to CBDCs.

One motive Beijing could pursue yuan-backed stablecoins lies in its concern concerning the usage of dollar-denominated stablecoins. Like different international locations, China has expressed issues about dollar-denominated stablecoins, that are primarily used to supply liquidity for crypto-asset transactions, dollarize financial savings, and facilitate sending cash overseas—the latter two driving capital flight. China’s authorized restrictions have shielded it from intensive use of dollar-denominated stablecoins. Still, Beijing might even see stablecoins backed by offshore yuan or the Hong Kong greenback (HKD) as a instrument to curb capital flight or regional remittance funds.

A bid to counter greenback dominance?

There is, in fact, an underlying consideration of competitors with the United States—as with most of Beijing’s regulatory and know-how coverage choices. One principle holds that yuan-denominated stablecoins may additional internationalize the yuan, resulting in a extra multipolar forex system as a substitute of a dollar-dominant one. However, a number of components recommend in any other case:

For one, the first use of stablecoins stays in crypto markets, the place dollar-denominated tokens can present liquidity and cut back transaction limitations. With the passage of GENIUS, there may be elevated confidence within the reserve-backing of dollar-denominated stablecoins, which assist them keep relative worth stability. A yuan-denominated stablecoin would probably be much less helpful as a secure worth marker because of decrease confidence in yuan-denominated backing belongings, and low belief in Chinese monetary markets and regulators.

Moreover, whereas rhetoric from each the United States and China usually conflates forex dominance with stablecoin issuance and adoption, curiosity in dollar- or yuan-denominated stablecoins displays, however doesn’t meaningfully exchange, the worldwide use of these currencies. In different phrases, the demand for {dollars} by foreigners drives the demand for dollar-backed stablecoins overseas, not the opposite approach round. Therefore, whilst elevated stablecoin use can improve the financialization of the forex overseas by way of an increase in treasury or bond holdings by international issuers of stablecoins, it is not going to meaningfully affect its conventional position in cross-border transactions.

China’s stablecoin play has its limits

From Beijing’s perspective, a profitable offshore yuan-denominated stablecoin may exchange some current yuan-denominated transactions, enhance the purchases of offshore or “dimsum” bonds, and even make them technologically extra environment friendly. However, it’s unlikely to compete with the demand for dollar-based networks, as mirrored in the usage of dollar-denominated stablecoins. 

Despite the rising personal sector pushed curiosity in China in yuan-backed stablecoins, their use case stays in home retail markets, particularly within the e-commerce area. Hong Kong’s new licensing regime can be prone to deliver some wholesale (business-to-business) functions to gentle. Lines between private and non-private issuers of stablecoins will proceed to blur—opening up new operational and regulatory questions. However, the strategic relevance of a yuan-backed stablecoin in internationalizing the yuan is restricted by the truth that dollar-backed belongings finally present extra worth for buyers, each within the crypto-asset ecosystem and outdoors of it.

Ananya Kumar is the deputy director for future of cash on the Atlantic Council’s GeoEconomics Center.

At the intersection of economics, finance, and international coverage, the GeoEconomics Center is a translation hub with the purpose of serving to form a greater international financial future.

Further studying

Image: Shanghai,China-May twenty first 2023: shut up Pinduoduo, Taobao, Tmall, Temu, Vipshop and JD.com app icon on display. Chinese E-commerce on-line procuring platform

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