China Weighs Stablecoins as US Pushes Crypto Dominance
China’s top financial minds are quietly debating whether stablecoins—digital tokens tied to traditional currencies—could help the country navigate an increasingly tricky global payments landscape. The discussion comes as the US races ahead with crypto-friendly policies that seem designed to lock in the dollar’s dominance.
For years, China has banned most cryptocurrency activity, fearing capital flight and financial instability. But lately, even senior officials at the People’s Bank of China (PBOC) have hinted that stablecoins might be worth another look. At June’s Lujiazui Forum, PBOC Governor Pan Gongsheng called them potentially “revolutionary” for international finance, especially as traditional payment systems become tools of geopolitical pressure.
Former PBOC chief Zhou Xiaochuan wasn’t as optimistic. He warned that dollar-pegged stablecoins could speed up dollarization—something Beijing desperately wants to avoid. Others, though, floated the idea of a yuan-backed stablecoin to help China’s currency gain global traction.
US Moves Force China’s Hand
The timing isn’t coincidental. Just before Chinese officials spoke at the forum, the US Senate passed a major stablecoin regulation bill, signaling Washington’s commitment to crypto innovation. US Treasury officials have even argued that stablecoins could *strengthen* the dollar’s role, not weaken it—especially compared to centralized digital currencies like China’s e-CNY.
Globally, stablecoins are already gaining ground for cross-border payments, cutting costs and settlement times. Analysts predict their supply could hit $3.7 trillion by 2030, with most currently tied to the dollar. That’s a problem for China, which has struggled to internationalize the yuan.
Hong Kong as a Testing Ground
Beijing’s solution might involve Hong Kong. The city has rolled out a legal framework for stablecoins, and firms like JD.com and Ant Group are reportedly eyeing licenses. JD’s founder has claimed stablecoins could slash cross-border payment costs by 90% and reduce settlement to under 10 seconds.
Even Zhejiang China Commodities City Group, which runs the world’s largest wholesale market, is reportedly exploring stablecoin licensing. Experts like Morgan Stanley’s Robin Xing argue that stablecoins aren’t new currencies—just new ways to move existing ones. For China, that distinction might make all the difference.
The Road Ahead Isn’t Smooth
China’s digital currency efforts haven’t exactly taken off. The e-CNY has seen sluggish adoption, and the mBridge project—a cross-border payment system with other central banks—hit snags over sanctions concerns. Still, Pan announced plans for an international e-CNY hub in Shanghai, suggesting Beijing isn’t giving up.
Some analysts propose a dual-track approach: keep pushing traditional systems like CIPS and currency swaps while letting Hong Kong experiment with yuan stablecoins. The goal? To create alternatives to SWIFT without triggering capital control risks.
But challenges remain. Most stablecoins today are used for crypto trading, not commerce. Regulatory gray areas persist, and Cornell’s Eswar Prasad notes that yuan-linked stablecoins won’t gain traction unless China unifies its onshore and offshore markets.
Yet even he admits they might push China toward reforms. With the US pulling ahead in digital finance, Beijing faces a tough choice: stick to caution or take a calculated gamble on stablecoins. Right now, it seems to be hedging its bets.
