China is making waves in the digital currency arena, pivoting toward stablecoins as a strategic response to global financial pressures. Dr. Vera Yuen of Hong Kong University’s Business School underscores this as a calculated move by Beijing to counterbalance U.S. dollar dominance, spotlighting offshore opportunities while wrestling with domestic constraints.
The Stablecoin Shift: A Tactical Maneuver
China’s foray into stablecoins isn’t about a newfound love for cryptocurrency. Instead, it’s a tactical maneuver to safeguard its currency’s relevance on the global stage. As the U.S. accelerates its regulatory framework for stablecoins—cemented by the GENIUS Act, which integrates dollar-pegged tokens into global finance—Beijing is compelled to act swiftly. Evan Auyang of Animoca Group asserts this legislation pressures China to view stablecoins as critical infrastructure rather than speculative assets, responding to the global trade and settlement dynamics.
Dr. Yuen elaborates on the strategic rationale: while the e-CNY, China’s Central Bank Digital Currency, was initially prioritized for its control and traceability, stablecoins offer a distinct advantage in international transactions, overcoming the interoperability challenges that plague CBDCs. “Stablecoins are designed for international use, making them a more viable option for cross-border transactions,” she explains. This sentiment echoes developments in Japan, where Chainlink’s partnership with SBI Group aims to advance tokenized assets and stablecoins, highlighting regional efforts to leverage stablecoin technology.
Navigating Domestic Hurdles and Offshore Opportunities
Despite these advantages, China’s path isn’t free of hurdles. Capital controls ensure any yuan-backed stablecoin remains offshore, with Hong Kong’s regulatory environment serving as a testing ground. Yet, this offshore focus underscores the limited runway for China’s broader internationalization efforts, as Yuen points out, “This limits the issuance of offshore renminbi stablecoins, constraining their attractiveness as a payment method.”
The landscape is shifting across Asia. Over in Japan, Monex Group is gearing up to launch a yen-backed stablecoin tied to government bonds, aligning with domestic players like SBI and JPYC. Unlike China, Japan’s regulators are fostering an environment where stablecoins can circulate locally, reflecting Asia’s broader race to stay competitive with U.S. dollar tokens.
Market Dynamics and Future Implications
Amid these developments, the cryptocurrency market remains dynamic. Bitcoin is holding steady at $111K, while Ethereum trades at $4,500, with historical patterns suggesting a potential year-end rally. Gold, meanwhile, sees a modest uptick, continuing its impressive year-over-year ascent. The S&P 500 edges up as investors await Nvidia’s earnings, highlighting the interconnectedness of traditional and digital markets. As noted in our recent Asia Morning Briefing, the market is bracing for consolidation without new liquidity, signaling potential shifts in the crypto landscape.
China’s stablecoin strategy appears less as a replacement for the e-CNY and more as a cautious complement, extending the yuan’s international reach without relinquishing domestic control. But with limited CNH liquidity and stringent capital controls, questions linger about the potential scale and impact of this initiative.
As Beijing navigates these complex waters, it remains to be seen how its stablecoin endeavors will reshape the global digital currency landscape—raising questions about whether this trend can sustain momentum and what new challenges might emerge in the quest for currency sovereignty.
Source
This article is based on: Asia Morning Briefing: Stablecoins Offer Beijing What e-CNY Can’t in Cross-Border Use, Economist Says
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Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
