China Considers Issuing CNY-Backed Stablecoins

China is considering allowing the use of stablecoins backed by the Chinese Yuan (CNY)—marking its first acceptance of such stable digital assets—to promote the wider global use of its currency (according to Reuters, August 2025). This move represents a significant shift in Beijing's digital monetary policy, following the country's strict ban on cryptocurrency trading and mining in 2021 due to financial stability concerns.

This article on the WEEX Crypto Wiki will help beginners understand what stablecoins are, why China wants to issue a CNY stablecoin, the roles of Hong Kong and Shanghai in this plan, the potential market impact, as well as the risks and challenges involved.

Stablecoins: What are they and how do they differ from other digital assets?

A stablecoin is a type of cryptocurrency designed to maintain a stable value by being pegged to a fixed asset, typically a fiat currency like the US dollar or the euro. In other words, a stablecoin's value is anchored to an underlying asset, making it less volatile compared to popular cryptocurrencies like Bitcoin, which can fluctuate significantly from day to day.

For example, major stablecoins today such as USDT or USDC always maintain a price around 1 USD per unit, backed by corresponding reserves (according to AP, August 2025). The primary purpose of a stablecoin is to serve as a payment medium or a stable store of value, rather than for speculative profit-seeking like Bitcoin or other cryptocurrencies (according to AP, August 2025).

Stablecoins are typically issued by private entities that commit to holding sufficient collateral to allow for a 1:1 exchange with the base currency, rather than being issued by a central bank. This differs from Central Bank Digital Currencies (CBDCs)—such as the digital yuan, e-CNY—which are official electronic versions of state-issued currency (according to AP, August 2025).

Currently, more than 99% of the global stablecoin supply is pegged to the US dollar and issued by American companies (according to BIS, July 2025). This reality has led many central banks to worry about the risk of "digital dollarization," where USD stablecoins could replace local currencies in digital transactions (according to the Atlantic Council, July 2025).

Why does China want to issue a CNY stablecoin?

China's primary goal is the internationalization of the Chinese Yuan. Currently, the RMB accounts for only about 2.9% of global payment values, while the US dollar accounts for nearly 47% (according to SWIFT, June 2025). The RMB's share has even declined from its previous peak (according to AP, August 2025).

A Yuan-backed stablecoin is expected to become a new tool to promote the RMB's international reach. Chinese policymakers view financial innovation through stablecoins as a way to expand the global role of the Yuan, especially since USD-pegged stablecoins currently dominate the market (according to Reuters, August 2025).

Furthermore, this is a move to counter the USD. Currently, Chinese businesses still have to use USD stablecoins like USDT to receive payments from abroad, which indirectly increases the influence of the greenback (according to Reuters, August 2025). By having a CNY stablecoin, China will provide an alternative, encouraging bilateral trade and limiting reliance on the dollar.

Additionally, stablecoins serve as a geopolitical tool to reduce dependence on the US-dominated financial system. A report by Morgan Stanley suggests that stablecoins pegged to the HKD or RMB could become a "bridge" connecting e-CNY with global digital assets, thereby promoting the internationalization of the Yuan (according to SCMP, August 2025).

The role of Hong Kong and Shanghai

Hong Kong is considered an ideal testing ground due to its flexible legal system. On August 1, 2025, Hong Kong enacted its first stablecoin regulation, requiring all stablecoins pegged to the Hong Kong dollar to be 100% backed (according to SCMP, August 2025).

Major corporations such as JD.com and Ant Group have also applied for licenses to issue Yuan-pegged stablecoins in Hong Kong (according to CoinDesk, July 2025). Issuing through offshore (CNH) channels allows China to expand the international role of the RMB while still complying with domestic capital controls.

Meanwhile, Shanghai is stepping up research into stablecoins and developing an international operations hub for e-CNY. The city is expected to become a domestic testing site, monitoring payment models and managing risks (according to Reuters, August 2025).

Potential impact on the Chinese and global markets

• Domestically, an RMB stablecoin will help businesses make international payments in Yuan instead of converting to USD, thereby reducing costs and increasing autonomy.
• Internationally, if a CNY stablecoin is widely accepted, it could change the landscape of the stablecoin market, which is currently dominated by the USD. BRICS nations or China's major trading partners could use this stablecoin as a bilateral payment tool.
• Financial innovation: stablecoins could drive the development of blockchain-based payment services, helping China keep pace with global digital finance trends. Standard Chartered Bank forecasts that the stablecoin market could reach 2 trillion USD by 2028 (according to Reuters, August 2025).

Risks and challenges

• Capital controls: If an RMB stablecoin is freely used, there is a risk it could become a "backdoor" for capital flight from China or be exploited for money laundering. Domestic experts emphasize the need for a clear legal framework before implementation (according to AP, August 2025).
• Financial stability: Former Governor of the People's Bank of China, Zhou Xiaochuan, warned that stablecoins could be exploited for speculation or fraud if managed loosely (according to SCMP, August 2025).
• Public trust: For users to accept it, China needs to prove that this stablecoin is truly transparently backed and can be easily converted into real Yuan.
• International reaction: A China-backed stablecoin may face scrutiny and restrictions from the US and the West.

Conclusion

China's consideration of issuing a Yuan-backed stablecoin is a strategic move: both to promote the internationalization of its currency and to counter the influence of the USD. With Hong Kong and Shanghai as testing grounds, this stablecoin could become a game-changer in the digital financial market.

However, it comes with many challenges regarding capital controls, financial stability, and market confidence. The success or failure of the project will depend on how Beijing implements it and engages in international cooperation.

Open a crypto trading account on WEEX

WEEX offers:

• A simple, easy-to-use interface, even for those who have never invested before.
• 24/7 customer support in Vietnamese to quickly answer all your questions.
• A multi-layered security system to ensure your assets are always safe.
• A deep repository of investment knowledge to help you track market trends and make accurate decisions.

WEEX is the ideal choice if you are looking for a reputable platform to start your crypto investment journey and explore potential AI projects.

Disclaimer:

WEEX and its affiliates provide digital asset exchange services, including derivatives and margin trading, only where legal and for eligible users. All content is for general information purposes and does not constitute financial advice—seek independent advice before trading. Cryptocurrency trading carries high risks and can lead to total loss. By using WEEX services, you accept all related risks and terms. Never invest more than you can afford to lose. See our Terms of Use and Risk Disclosure Statement for details.