China’s digital currency strategy has shifted dramatically since its 2021 cryptocurrency ban, as policymakers now lobby for yuan-based stablecoins through Hong Kong's regulatory sandbox.
This pivot reflects a pragmatic effort to balance financial innovation and state control in the face of global digital finance trends. Although cryptocurrencies remain banned in mainland China, the country is leveraging blockchain technology for regulated use, especially in cross-border payments. This mirrors China’s larger blockchain investment strategy, which promotes technological adoption without decentralization.
Key Highlights
The proposed stablecoin strategy offers a calculated compromise—using blockchain’s efficiency while preserving regulatory oversight.
Globally, dollar-backed stablecoins dominate 99 percent of the $247 billion stablecoin market, underscoring the urgency for yuan internationalization. Despite domestic success with the digital yuan (over 7 trillion yuan in transaction volume), its lack of international functionality limits China’s influence in global trade.
With the yuan’s share in global payments dropping to 2.89 percent, Chinese tech firms are focusing on Hong Kong, where new regulations (effective August 1, 2025) allow for yuan-backed stablecoin issuance. The Hong Kong Stablecoins Bill, passed on May 21, 2025, mandates full reserve backing and licensing, creating a safe space for financial experimentation.
Also Read: GoFintech: Hardware Wallets Power Stablecoin Growth in HK
This comes amid a global stablecoin regulation race, with the EU’s MiCA, the US GENIUS Act, and the UK’s upcoming laws aiming to dominate cross-border digital finance. Whoever defines the global standard will shape the future of digital currency infrastructure and currency competition.
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