China’s yuan-backed stablecoin initiative represents a watershed moment in global digital finance, as Beijing pivots from its strict cryptocurrency ban to embrace regulated stablecoins as a tool for currency internationalization and geopolitical influence.
As of September 2025, China is reviewing a comprehensive roadmap for yuan-backed stablecoins, with Hong Kong’s regulatory framework already operational since August 1, 2025, and the first mainland licenses expected in early 2026.
The initiative aims to challenge the dominance of U.S. dollar-backed stablecoins, which currently account for over 99% of the global stablecoin supply.
This report provides a comprehensive analysis of China’s strategic shift, regulatory framework, pilot programs, and the potential impact on global financial systems.
Current Market Data
Yuan Internationalization Metrics
1. Global Payment Share: The yuan’s share as a global payment currency fell to 2.88% in June 2025, its lowest in two years, while the U.S. dollar commanded 47.19% market share via SWIFT.
2. CIPS Growth: China’s Cross-Border Interbank Payment System (CIPS) processed 8.2169 million transactions totaling RMB175.49 trillion (US$24.47 trillion) in 2024, with 1,427 financial institutions across 109 countries connected.
3. Stablecoin Market Projections: The global stablecoin market, currently at $271 billion, is projected to reach $2 trillion by 2028, presenting a massive opportunity for yuan-backed alternatives.
4. Hong Kong Activity: 77 firms are competing for Hong Kong’s stablecoin licenses, with applications from major institutions including Bank of China Hong Kong, Ant Group, and JD.com.
Implementation Timeline and Milestones
Regulatory Milestones:
August 1, 2025: Hong Kong Stablecoin Ordinance takes effectOctober 1, 2025: Deadline for pre-existing issuers to apply for licensesEarly 2026: First batch of licenses expected to be issuedThroughout 2026: Expansion of pilot programs in Belt and Road countries
Infrastructure Development:
Conflux 3.0 blockchain supporting 15,000 transactions per secondIntegration with CIPS for cross-border settlementsPilot programs launching in Central and Southeast Asia
Top Stablecoins in China’s Ecosystem
AxCNH (Conflux/AnchorX)
Leading offshore yuan-backed stablecoin with 1:1 peg to CNH.
Built on Conflux 3.0 with regulatory approval in Kazakhstan.
Targeting 10 BRI countries by 2026 for cross-border payments.
Bank-Backed Initiatives
Major Chinese banks including Bank of China Hong Kong and Standard Chartered’s Anchorpoint JV are developing institutional-grade stablecoins for B2B settlements and trade finance.
Energy Sector Pilots
PetroChina and CNPC conducting feasibility studies for yuan-backed stablecoins in cross-border oil trade settlements, aiming to reduce dollar dependency in energy markets.
Tech Giant Entries
Ant Group and JD.com applying for licenses to leverage their vast user bases for e-commerce and cross-border trade applications.
Recent News and Developments
State Council Review (August-September 2025)
China’s State Council is reviewing a comprehensive roadmap for yuan-backed stablecoins, marking a dramatic policy reversal from the 2021 cryptocurrency ban.
Senior leadership convened study sessions on yuan internationalization.
Hong Kong’s Pioneer Framework
Hong Kong enacted the world’s first comprehensive stablecoin ordinance on August 1, 2025, requiring 100% reserve backing, minimum HK$25 million capital, and strict AML/CFT compliance.
The HKMA expects to issue only a “handful” of licenses initially.
Shanghai Cooperation Organisation Summit
The August 31-September 1, 2025 SCO Summit in Tianjin discussed yuan and stablecoin usage for cross-border trade among member nations, signaling multilateral adoption strategies.
Blockchain Infrastructure Advances
Conflux Network launched version 3.0 with native AI agent support and 15,000 TPS capacity.
The Shanghai ShuTu Blockchain Research Institute is developing a public blockchain platform for Belt and Road projects.
Private Sector Momentum
TokenPocket wallet (30M+ users) partnering for stablecoin distribution.
Major fintech firms urging faster regulatory approval to reduce cross-border transaction costs.
Insights and Analysis
Advantages of China’s Approach
1. State Control: Permissioned blockchain system with full transaction traceability, aligned with China’s financial sovereignty goals while maintaining capital controls.
2. Infrastructure Leverage: Integration with existing CIPS network (1,300+ institutions) and Belt and Road corridors covering 150+ countries provides ready adoption pathways.
3. Regulatory Clarity: Hong Kong’s comprehensive framework provides legal certainty with strict reserve requirements, creating trust for institutional adoption.
4. Technological Readiness: High-performance blockchains like Conflux 3.0 and integration capabilities with traditional banking systems position China for scalable implementation.
Strategic Positioning
1. Dollar Challenge: Direct response to U.S. stablecoin dominance and GENIUS Act, aiming to reduce reliance on dollar-based financial infrastructure.
2. BRI Integration: Stablecoins as financing tools for infrastructure projects, trade settlements, and economic integration across Asia, Africa, and Latin America.
3. Dual-Track System: Hong Kong for international interface, Shanghai for domestic coordination, allowing experimentation while maintaining mainland control.
4. Geopolitical Tool: Potential SWIFT alternative through CIPS-stablecoin integration, offering sanctions-resistant payment channels for aligned nations.
Future Outlook + Predictions
Near-Term Developments (2026)
1. License Rollout: 5-10 initial licenses in Hong Kong focusing on institutional use cases. Gradual expansion to retail applications by late 2026.
2. Pilot Expansion: Stablecoin trials in 10+ BRI countries for trade finance, remittances, and infrastructure payments.
Energy sector adoption for oil/gas settlements.
3. Market Growth: Yuan-backed stablecoins could capture 5-10% of BRI trade flows ($500B-$1T annually) by end-2026.
Long-Term Projections (2026-2028)
Market Share: Potential to capture $100-200 billion of the projected $2 trillion global stablecoin market by 2028, primarily in Asia and emerging markets.CIPS Evolution: Full stablecoin integration making CIPS a viable SWIFT alternative for yuan-denominated transactions, processing $30+ trillion annually.Regulatory Harmonization: Other Asian nations adopting compatible frameworks, creating a yuan-stablecoin economic zone.
Risks and Challenges
Capital Control Tensions: Balancing internationalization goals with domestic financial stability and control requirements.Trust Deficit: International skepticism about Chinese financial data and regulatory independence limiting adoption beyond aligned nations.Technical Hurdles: Interoperability with global systems while maintaining compliance and control features.Competitive Response: U.S. and EU acceleration of their own CBDC and stablecoin initiatives to maintain currency dominance.
Conclusion
China’s 2026 stablecoin strategy marks a pivotal shift in global digital finance.
With Hong Kong’s regulatory framework operational and mainland implementation imminent, Beijing is executing a calculated challenge to dollar hegemony through state-controlled digital currencies.
Success hinges on navigating the tension between internationalization and control while building trust beyond politically aligned partners.
As the first licenses roll out in early 2026, the world will witness whether China’s approach can offer a viable alternative to the dollar-dominated status quo, potentially ushering in a new era of multipolar digital finance.
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FAQs:
1. What is China’s 2026 stablecoin strategy?
China’s 2026 stablecoin strategy involves authorizing yuan-backed stablecoins for the first time since its 2021 crypto ban. The initiative aims to boost yuan internationalization through blockchain-based digital currencies, with Hong Kong serving as the testing ground and the first mainland licenses expected in early 2026.
2. Why is China reversing its stance on cryptocurrencies?
China isn’t embracing decentralized cryptocurrencies but rather state-controlled stablecoins. This reversal responds to U.S. dollar-backed stablecoin dominance (99% market share) and aims to create alternative payment infrastructure that reduces reliance on Western financial systems while maintaining government oversight.
3. How do yuan-backed stablecoins differ from the digital yuan (e-CNY)?
The digital yuan is China’s central bank digital currency (CBDC) for domestic use, while yuan-backed stablecoins are blockchain-based tokens pegged to offshore yuan (CNH) designed for international trade and cross-border payments, operating under different regulatory frameworks.
4. What are the key requirements for stablecoin issuers in Hong Kong?
Issuers must maintain 100% reserve backing with high-quality liquid assets, have minimum HK$25 million in paid-up capital, implement comprehensive KYC/AML procedures, provide daily redemption within one business day, and undergo regular third-party audits.
5. Which companies are leading China’s stablecoin initiatives?
Major players include Conflux Network (AxCNH stablecoin), Bank of China Hong Kong, Ant Group, JD.com, PetroChina (energy sector pilots), and Standard Chartered’s Anchorpoint JV. About 77 firms are competing for Hong Kong licenses.
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