Will China’s Stablecoin Further Push For De-Dollarization?

China is poised to launch its first stablecoin, marking a significant step in its financial strategy. Hong Kong has already paved the way by passing legislation allowing licensed businesses to issue fiat-backed tokens. Chen Lin of the University of Hong Kong notes China's growing interest in crypto and stablecoins, signaling a potential shift in global currency dynamics.

The rise of dollar-pegged stablecoins was initially seen as a boon for the USD. However, a yuan-backed stablecoin could disrupt this narrative, aligning with China's broader de-dollarization efforts. The country has already made strides with initiatives like the Cross-Border Interbank Payment System (CIPS), which bypasses the USD in favor of the yuan.

David Sacks, the White House cryptocurrency czar, has argued that dollar-pegged crypto assets bolster demand for the USD. Yet, China's latest move challenges this assertion, potentially weakening the dollar's dominance in the crypto space.