China Explores Yuan-Backed Stablecoins to Challenge Dollar Dominance

China is preparing a significant pivot in its digital currency strategy, with plans to introduce yuan-backed stablecoins as part of a broader effort to internationalize its currency. The State Council could greenlight the initiative as early as this month, marking a stark reversal from Beijing's 2021 cryptocurrency ban.

Hong Kong and Shanghai are positioned as testing grounds for the rollout, while other Asian markets reportedly explore parallel stablecoin projects. The MOVE comes as U.S. dollar-pegged stablecoins continue to dominate cross-border payments, accounting for 99% of global supply following America's regulatory embrace through the GENIUS Act.

Domestic tech giants including JD.com and ANT Group have long advocated for yuan-linked digital tokens. Yet capital controls and trade imbalances—the same factors that historically constrained yuan globalization—may now limit stablecoin adoption. The development signals China's attempt to weaponize blockchain infrastructure in its decades-long campaign to dethrone the dollar.