"China Considers Launching Yuan-Based Stablecoin... Challenges Remain in Dollar Dominance and Trust Gap"

Reports have emerged that China is considering the issuance of a yuan-based stablecoin. Analysts point out that the key lies in whether China can simultaneously challenge the dominance of the dollar in the global financial order and overcome the gap in trust.

According to Cointelegraph, a media outlet specializing in cryptocurrency, the Chinese government is currently discussing piloting a yuan-pegged stablecoin centered in Hong Kong and Shanghai. This move is seen as a new financial experiment diverging from the ongoing central bank digital currency (CBDC) initiative, the Digital Yuan, which had been promoted in tandem with cryptocurrency regulation.

Experts view this move as part of the yuan’s internationalization strategy, but also diagnose that it will be difficult to overcome the existing overwhelming dominance of dollar-based stablecoins and the trust gap.

Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, said, “Alipay and WeChat Pay have already dominated the payments market, so the Digital Yuan has struggled to spread.” He added, “While the yuan-based stablecoin could be used as a means for cross-border payments, if it is subjected to the same controls and monitoring as the existing yuan, its attractiveness will be lower compared to dollar-based stablecoins.”

Patrick Tan, CEO of ChainArgos, also pointed out, “Currently, 98% of stablecoin trading worldwide is dollar-based,” adding, “For the yuan to be competitive, fundamental political and economic reforms are needed. However, that is not easy given the current situation.” He also highlighted the limits by noting, “Dollar-based stablecoins remain central even on major exchanges such as Binance, OKX, and Bybit.”