Why China’s Crypto Law Now Favors Stablecoins Over Bitcoin

China is pivoting toward stablecoins after years of stringent cryptocurrency bans, signaling a strategic shift to promote its yuan-backed digital currency. The move aims to counter the global dominance of U.S. dollar-pegged stablecoins and stem capital outflows. Discussions within the People’s Bank of China highlight stablecoins' disruptive impact on cross-border payments, with strict regulatory compliance as a non-negotiable condition.

Hong Kong has emerged as a testing ground for these policies, recently passing legislation to license stablecoin issuers. This incremental approach reflects Beijing’s balancing act between financial innovation and control. The focus remains squarely on RMB-denominated stablecoins, sidelining decentralized assets like Bitcoin in favor of state-aligned digital liquidity tools.