Everybody wants a stablecoin, even China

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August 25, 2025 • 12:53 pm ET

Everybody wants a stablecoin, even China

By
Ananya Kumar

A bit greater than a month after President Donald Trump signed the GENIUS Act into legislation—the nation’s first federal regulation for stablecoins backed by the US greenback—enthusiasm for stablecoins is reaching new highs. Analysts estimate the availability of stablecoins may develop to wherever between $1.6 trillion and $3.7 trillion inside the subsequent 5 years. More than 98 % of all stablecoins are dollar-denominated, that means they’re backed by underlying belongings—together with foreign money holdings, treasuries and repurchase agreements—which can be pegged to the greenback.

New entrants are reshaping the stablecoin ecosystem, which was lengthy dominated by few issuers. Just final week, Wyoming launched its personal stablecoin. Traditional monetary corporations are transferring in, too. JPMorgan, for example, lately launched JPMD, a token modeled on stablecoins, for institutional shoppers. E-commerce giants are experimenting as properly: Walmart and Amazon are weighing launching their very own stablecoins in an effort to broaden their use from purchases to financial savings and rewards. This echoes the event of the Starbucks app—which stays an impactful use-case for growing a closed loop funds platform and pockets. Financial gamers are selecting to associate with one another on new merchandise, in search of to seize market share and work throughout completely different capabilities similar to tokenized treasuries and cash market funds. A stablecoin ecosystem is rising as banks and fintech gamers see a extra legally clarified scope for custody, reserve administration, and the combination of stablecoins into current enterprise fashions.

Beijing shifts from skepticism to technique

Enthusiasm for stablecoins extends far past the United States. In June, the Governor of the People’s Bank of China, Pan Gongsheng, clarified his central financial institution’s stance on stablecoins—noting that alongside central financial institution digital currencies (CBDCs), they may facilitate cross-border funds and form the monetary system’s future. This marks a notable shift given China’s earlier crackdown on privately issued cryptoassets. Meanwhile, Hong Kong concluded a almost two-year session course of to go stablecoin regulation in May 2025, which lastly took impact this month. Reportedly, greater than forty firms have already utilized for issuer licenses, and the Hong Kong Monetary Authority is predicted to approve a choose few, with an preliminary deal with business-to-business purposes.

Chinese e-commerce giants JD.com and AliBaba are additionally thinking about launching stablecoins in Hong Kong, the place JD.com participated in sandbox testing throughout the session course of. To date, experiments have primarily included dollar-denominated stablecoins and stablecoins pegged to the Hong Kong greenback (HKD), which has been tied to the US greenback since 1983 by means of the Linked Exchange Rate System. At the identical time, Chinese firms and state-owned enterprises are additionally exploring stablecoins backed by offshore yuan (CNH)—and China is concurrently conducting the biggest pilot of its personal CBDC, the e-CNY, which presently has seven trillion yuan in circulation.

The rise of yuan-backed stablecoins

The rationale behind China’s pursuit of a yuan-backed stablecoin technique just isn’t instantly apparent. After all, the e-CNY already faces stiff competitors from home digital wallets issued by Alipay and WeChat Pay, which collectively cowl over 90 % of the retail market. Outside of e-commerce pushed alternatives—which is able to coexist with conventional cost strategies—it’s unclear how a stablecoin may profitably compete in China’s retail funds market. Moreover, if extremely managed actors similar to state-owned enterprises and influential Chinese know-how firms have been to situation stablecoins, they’d blur the road between a CBDC and a stablecoin. This would increase comparable privateness and surveillance issues as these related to CBDCs.

One motive Beijing could pursue yuan-backed stablecoins lies in its concern concerning using dollar-denominated stablecoins. Like different international locations, China has expressed issues about dollar-denominated stablecoins, that are primarily used to supply liquidity for crypto-asset transactions, dollarize financial savings, and facilitate sending cash overseas—the latter two driving capital flight. China’s authorized restrictions have shielded it from intensive use of dollar-denominated stablecoins. Still, Beijing may even see stablecoins backed by offshore yuan or the Hong Kong greenback (HKD) as a instrument to curb capital flight or regional remittance funds.

A bid to counter greenback dominance?

There is, in fact, an underlying consideration of competitors with the United States—as with most of Beijing’s regulatory and know-how coverage choices. One idea holds that yuan-denominated stablecoins may additional internationalize the yuan, resulting in a extra multipolar foreign money system as an alternative of a dollar-dominant one. However, a number of elements counsel in any other case:

For one, the first use of stablecoins stays in crypto markets, the place dollar-denominated tokens can present liquidity and scale back transaction limitations. With the passage of GENIUS, there may be elevated confidence within the reserve-backing of dollar-denominated stablecoins, which assist them keep relative worth stability. A yuan-denominated stablecoin would doubtless be much less helpful as a steady worth marker attributable to decrease confidence in yuan-denominated backing belongings, and low belief in Chinese monetary markets and regulators.

Moreover, whereas rhetoric from each the United States and China usually conflates foreign money dominance with stablecoin issuance and adoption, curiosity in dollar- or yuan-denominated stablecoins displays, however doesn’t meaningfully exchange, the worldwide use of these currencies. In different phrases, the demand for {dollars} by foreigners drives the demand for dollar-backed stablecoins overseas, not the opposite method round. Therefore, even as elevated stablecoin use can improve the financialization of the foreign money overseas by means of a rise in treasury or bond holdings by overseas issuers of stablecoins, it is not going to meaningfully impression its conventional function in cross-border transactions.

China’s stablecoin play has its limits

From Beijing’s perspective, a profitable offshore yuan-denominated stablecoin may exchange some current yuan-denominated transactions, improve the purchases of offshore or “dimsum” bonds, and even make them technologically extra environment friendly. However, it’s unlikely to compete with the demand for dollar-based networks, as mirrored in using dollar-denominated stablecoins. 

Despite the rising non-public sector pushed curiosity in China in yuan-backed stablecoins, their use case stays in home retail markets, particularly within the e-commerce area. Hong Kong’s new licensing regime can also be more likely to deliver some wholesale (business-to-business) purposes to mild. Lines between private and non-private issuers of stablecoins will proceed to blur—opening up new operational and regulatory questions. However, the strategic relevance of a yuan-backed stablecoin in internationalizing the yuan is proscribed by the truth that dollar-backed belongings finally present extra worth for traders, each within the crypto-asset ecosystem and out of doors of it.

Ananya Kumar is the deputy director for future of cash on the Atlantic Council’s GeoEconomics Center.

At the intersection of economics, finance, and overseas coverage, the GeoEconomics Center is a translation hub with the aim of serving to form a higher international financial future.

Further studying

Image: Shanghai,China-May twenty first 2023: shut up Pinduoduo, Taobao, Tmall, Temu, Vipshop and JD.com app icon on display screen. Chinese E-commerce on-line purchasing platform

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