China is considering yuan-backed stablecoins for the first time to enhance the yuan’s role in cross-border payments. The plan involves assigning regulatory responsibilities and implementing pilot activities in Hong Kong and Shanghai. The move is part of a broader objective to internationalize the currency and compete with dollar stablecoins dominating the market. Policymakers face challenges due to China’s capital controls. Hong Kong is a key venue for experimentation, with corporate interest emerging. The market for stablecoins has potential for growth, but operational design and regulatory compliance are crucial for success. The policy sequence involves setting parameters for usage and supervision, with the State Council reviewing the roadmap later this month.
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