China Weighs Stablecoin Shift Amid US Crypto Dominance Push
- Antwan Koss
- July 2, 2025
- Finance
- 0 Comments
China’s Stablecoin Dilemma Heats Up
China’s top economists and policymakers are quietly pushing for a rethink on stablecoins—those digital tokens tied to traditional currencies like the dollar. The pressure comes as the U.S. races ahead with crypto-friendly regulations, aiming to lock in the dollar’s dominance.
It’s a tricky spot for Beijing. Cryptocurrencies are still banned outright in China, but lately, senior officials at the People’s Bank of China (PBOC) have started dropping hints that maybe, just maybe, stablecoins could be useful. At June’s Lujiazui Forum, PBOC Governor Pan Gongsheng called them potentially “revolutionary” for global finance, especially as sanctions make traditional payment systems riskier.
But there’s unease, too. Former PBOC chief Zhou Xiaochuan warned that dollar-pegged stablecoins might push more countries toward ditching their own currencies. Others floated the idea of a yuan-backed stablecoin instead—something that could help China’s long, slow campaign to make its currency more global.
U.S. Moves Force China’s Hand
The timing isn’t coincidental. Just before Chinese officials spoke at the forum, the U.S. Senate passed a major stablecoin bill, giving the green light to tighter regulation—and, by extension, more legitimacy. U.S. Treasury officials have been quick to argue that stablecoins could actually *strengthen* the dollar’s role, not weaken it.
Meanwhile, the market’s exploding. Stablecoins are already handling billions in cross-border payments—cheaper, faster than old-school banking. Analysts think they could hit $3.7 trillion in circulation by 2030, most of it tied to dollars.
Hong Kong as a Testing Ground
China’s problem? It hates crypto’s volatility but can’t ignore the trend. Some experts think Hong Kong—with its separate legal system—could be the answer. The city recently set up rules for stablecoins, and big players like JD.com and Ant Group are reportedly eyeing licenses.
JD.com’s founder claims stablecoins could slash cross-border payment costs by 90%, settling deals in seconds. Even Zhejiang China Commodities City Group, which runs the world’s biggest wholesale market, is jumping in.
But China’s own digital yuan (e-CNY) hasn’t taken off like hoped. And mBridge, a project with other central banks, hit snags when the Bank for International Settlements backed out over sanctions concerns. Still, Pan’s pushing ahead with plans for an international e-CNY hub in Shanghai.
The Road Ahead: Half In, Half Out?
So what’s the playbook? Some, like economist Li Yang, say China should keep expanding traditional systems like CIPS while letting Hong Kong experiment with yuan stablecoins. It’s a way to hedge bets—avoid SWIFT without fully embracing crypto.
But there are wrinkles. Most stablecoins today are used for trading, not commerce. Regulations are fuzzy. And Cornell’s Eswar Prasad points out that without merging China’s onshore and offshore yuan markets, a yuan stablecoin might not gain much traction.
Then again, maybe that’s the point. If stablecoins force China to loosen capital controls or unify its currency markets, it could be a backdoor to bigger reforms. For now, though, Beijing’s stuck between caution and the fear of falling further behind. The U.S. isn’t waiting—and China’s running out of time to decide.
