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China is considering allowing yuan-backed stablecoins for the first time, in what would mark a dramatic reversal of its long-held stance on digital assets and a new push to internationalise its currency.

According to people familiar with the matter, the State Council is set to review a roadmap later this month that could authorise the rollout of yuan-linked stablecoins. The plan would include targets for global yuan adoption, clear responsibilities for regulators, and guidelines to mitigate financial risks.

Senior leaders are also expected to convene for a study session on the issue, where they are likely to outline how stablecoins can be applied in trade and finance, and set boundaries for their use in China’s economy.

From ban to cautious embrace

China banned cryptocurrency trading and mining in 2021 over concerns about financial stability, capital flight, and speculation. Stablecoins—digital tokens usually pegged to a fiat currency—were caught in that crackdown.

Now, with the dollar dominating both global finance and the stablecoin market, Beijing appears ready to reconsider. Officials see yuan-backed stablecoins as a potential tool to promote wider international usage of the currency, particularly in cross-border trade.

“The reviews will finally reveal the true health of the banks, which is essential before any merger or recapitalisation decision,” said one person briefed on the discussions.

The push comes amid mounting geopolitical rivalry with Washington, where policymakers have embraced stablecoins as part of efforts to bolster the dollar’s supremacy in digital finance.

Capital controls remain a hurdle

Despite its ambition, Beijing faces structural barriers. The yuan accounted for just 2.88% of global payments in June, down to its lowest share in two years, according to SWIFT data. In contrast, the dollar held nearly half the global market.

China’s tight capital controls, which limit cross-border flows, remain a major obstacle to making the yuan a freely used international currency—whether through traditional trade or new digital tools.

Analysts warn that similar restrictions could limit the appeal of yuan-backed stablecoins, unless Beijing allows more flexibility in offshore usage.

Global race for stablecoins

The market for stablecoins is still small, worth about $247 billion, but could expand to $2 trillion by 2028, according to Standard Chartered. Dollar-backed tokens currently account for more than 99% of supply, the Bank for International Settlements says.

Other Asian economies are moving ahead: South Korea has pledged to allow won-based stablecoins, while Japan has introduced regulations for issuers. Hong Kong, under Chinese oversight, launched its stablecoin ordinance on 1 August, making it one of the first markets globally to regulate fiat-backed stablecoins.

Shanghai is also preparing to serve as an international hub for the digital yuan, complementing Hong Kong’s offshore role.

Next steps

Sources said Beijing may use the upcoming Shanghai Cooperation Organisation (SCO) Summit, scheduled for 31 August–1 September in Tianjin, to discuss stablecoin use in cross-border trade with partner countries.

Details of China’s roadmap are expected to be released in the coming weeks. Regulators including the People’s Bank of China will be responsible for implementation if the plan receives final approval.

If confirmed, the move would represent one of China’s most significant financial policy shifts since its digital yuan project—an attempt not only to modernise payments but also to challenge the dollar’s dominance in global markets.