Dollar-Pegged Tokens Dominate Yuan 80:1 – Will China’s Stablecoin Gamble Flip the Script?
The dollar’s crypto dominance isn’t just holding—it’s humiliating. USD-pegged stablecoins now outpace China’s yuan-linked tokens by a staggering 80-to-1 ratio. Beijing’s response? A full-court press for digital yuan adoption.
Can the Dragon Catch Up?
China’s central bank digital currency (CBDC) push faces brutal headwinds. Dollar stablecoins like USDT and USDC dominate cross-border flows, while yuan tokens struggle for liquidity beyond mainland firewalls. The pitch? "Stability with Chinese characteristics." The reality? A 1.25% market share against the greenback’s 80% stranglehold.
Betting on the Inevitable
State-backed issuers are flooding Hong Kong with CNH tokens, hoping to leverage the city’s crypto infrastructure. But traders aren’t biting—not when dollar pairs offer deeper liquidity and fewer geopolitical surprises. As one hedge fund manager quipped: "Nothing says ‘stable’ like a currency that bans Bitcoin but launches its own ETF."
Li Calls for CNY Stablecoin Strategy
The Chinese yuan’s market exchange rate is undervalued compared to the country’s purchasing power parity (PPP), Li states in the piece. “This undervaluation is mainly due to the renminbi’s insufficient global liquidity, which results in an elevated liquidity premium,” said Li.
He notes that while other jurisdictions are advancing regulatory frameworks for stablecoins, citing recent developments in the U.S. and Hong Kong, China has yet to introduce formal legislation.
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He recommends pilot programs in free trade zones and Belt and Road markets, backed by clear rules on reserve management and legal definitions.
According to Li, the People’s Bank of China (PBOC) should explore issuing yuan-pegged stablecoins under a regulatory framework aligned with the principle of “same activity, same risk, same regulation.”
He says such a move WOULD expand the yuan’s cross-border use in settlements, financing, and digital payments without undermining monetary control.
“The core function of stablecoins is not to replace fiat, but to provide a digital, efficient cross-border FORM of fiat circulation, enhancing the liquidity of the pegged currency and its global status,” he writes.
Yuan’s Path to Internationalization
Li also recommends broader steps to support the yuan’s internationalization, including increasing capital account openness and adjusting China’s foreign reserve structure.
He concludes that without such measures, the gap between the yuan’s economic weight and its international usage will persist, leaving China at a disadvantage in shaping the future of global currency systems.
The yuan’s absence in stablecoin markets limits its role in digital finance. Without a compliant, widely used digital form, the currency cannot easily scale in cross-border payments or compete with dollar-backed tokens.
Regulation will determine how stablecoins evolve. If China delays action, others will set the standards. A clear framework for yuan-denominated stablecoins would let China shape digital payment flows and reduce reliance on dollar-based systems.
