China appears to be weighing the launch of a yuan-backed stablecoin, with an initial rollout in Hong Kong and Shanghai, a surprising shift after years of cracking down on crypto while promoting its central bank digital currency, the digital yuan.
In the latest episode of Byte-Sized Insight, Cointelegraph spoke with two leaders analyzing Chinaโs potential move into stablecoins: Martin Chorzempa, senior fellow at the Peterson Institute for International Economics, and Patrick Tan, CEO of blockchain intelligence firm ChainArgos.ย
China in the stablecoin race
The news, first reported on Wednesday, highlighted Beijingโs ambitions to strengthen the yuanโs role in international finance. Still, experts say the path forward is anything but certain, especially with the track record of its central bank digital currency (CBDC), the digital yuan.ย
According to Chorzempa, the dominance of Alipay and WeChat Pay in everyday transactions has left little room for Chinaโs CBDC experiment.ย
That leaves a yuan stablecoin with a different potential role. โI tend to think that probably the most interesting applications of a renminbi [yuan] stablecoin is going to be cross-border payments,โ Chorzempa said.ย
โOne of the most interesting things about having renminbi stablecoins floating around is, is this going to allow people to get money out in ways that they werenโt through the banks?โ
Related: China Merchants Bank subsidiary launches crypto exchange in Hong Kong
Still, cross-border utility doesnโt erase the credibility gap between the yuan and the US dollar. Chorzempa said:
ย โChina is famously anti-cryptoโฆ So the interesting thing with this stablecoin idea is: OK, you have something you call a stablecoin, itโs denominated in renminbi, but is it going to have all the same restrictions and surveillance and controls on it that the current forms of renminbi have?โย
โAnd if the answer is yes,โ he said, โitโs probably not going to be that attractive in comparison to something in USD, which is really freely usable.โ
Challenging dollar dominance
From a market perspective, the hurdles are just as steep. โNinety-eight percent of all stablecoins and stablecoin transactions are dollar-based,โ said Tan.ย
โThe biggest crypto asset exchanges globally, Binance, OKEx, Bybit, theyโre all linked to the Chinese, and whatโs the currency of choice on all of these exchanges? Itโs always a dollar-backed stablecoin.โ
For Tan, the real issue is systemic: โIf China wants to make the digital yuan attractive, it needs to make the yuan attractive first. And to make the yuan attractive requires significant, large systemic political and economic changes and reforms, which, given the current climate in China, I think would be extremely challenging at best.โ
Whether Chinaโs stablecoin push succeeds or stalls, it signals one thing clearly: Stablecoins are no longer just crypto plumbing; theyโve become tools in a larger geopolitical contest over the future of money.
Listen to the full episode of Byte-Sized Insight for the complete interview on Cointelegraphโs Podcasts page, Apple Podcasts or Spotify. And donโt forget to check out Cointelegraphโs full lineup of other shows!
Magazine: Stablecoins in Japan and China, India mulls crypto tax changes: Asia Express
