Everybody wants a stablecoin, even China
A little more than a month after President Donald Trump signed the GENIUS Act into law—the country’s first federal regulation for stablecoins backed by the US dollar—enthusiasm for stablecoins is reaching new highs. Analysts estimate the supply of stablecoins could grow to anywhere between $1.6 trillion and $3.7 trillion within the next five years. More than 98 percent of all stablecoins are dollar-denominated, meaning they are backed by underlying assets—including currency holdings, treasuries and repurchase agreements—that are pegged to the dollar.
New entrants are reshaping the stablecoin ecosystem, which was long dominated by few issuers. Just last week, Wyoming launched its own stablecoin. Traditional financial firms are moving in, too. JPMorgan, for instance, recently launched JPMD, a token modeled on stablecoins, for institutional clients. E-commerce giants are experimenting as well: Walmart and Amazon are weighing launching their own stablecoins in an effort to broaden their use from purchases to savings and rewards. This echoes the development of the Starbucks app—which remains an impactful use-case for developing a closed loop payments platform and wallet. Financial players are choosing to partner with each other on new products, seeking to capture market share and work across different functions such as tokenized treasuries and money market funds. A stablecoin ecosystem is emerging as banks and fintech players see a more legally clarified scope for custody, reserve management, and the integration of stablecoins into existing business models.
Beijing shifts from skepticism to strategy
Enthusiasm for stablecoins extends far beyond the United States. In June, the Governor of the People’s Bank of China, Pan Gongsheng, clarified his central bank’s stance on stablecoins—noting that alongside central bank digital currencies (CBDCs), they could facilitate cross-border payments and shape the financial system’s future. This marks a notable shift given China’s previous crackdown on privately issued cryptoassets. Meanwhile, Hong Kong concluded a nearly two-year consultation process to pass stablecoin regulation in May 2025, which finally took effect this month. Reportedly, more than forty companies have already applied for issuer licenses, and the Hong Kong Monetary Authority is expected to approve a select few, with an initial focus on business-to-business applications.
Chinese e-commerce giants JD.com and AliBaba are also interested in launching stablecoins in Hong Kong, where JD.com participated in sandbox testing during the consultation process. To date, experiments have primarily included dollar-denominated stablecoins and stablecoins pegged to the Hong Kong dollar (HKD), which has been tied to the US dollar since 1983 through the Linked Exchange Rate System. At the same time, Chinese companies and state-owned enterprises are also exploring stablecoins backed by offshore yuan (CNH)—and China is simultaneously conducting the largest pilot of its own CBDC, the e-CNY, which currently has seven trillion yuan in circulation.
The rise of yuan-backed stablecoins
The rationale behind China’s pursuit of a yuan-backed stablecoin strategy is not immediately obvious. After all, the e-CNY already faces stiff competition from domestic digital wallets issued by Alipay and WeChat Pay, which together cover over 90 percent of the retail market. Outside of e-commerce driven opportunities—which will coexist with traditional payment methods—it is unclear how a stablecoin could profitably compete in China’s retail payments market. Moreover, if highly controlled actors such as state-owned enterprises and influential Chinese technology companies were to issue stablecoins, they would blur the line between a CBDC and a stablecoin. This would raise similar privacy and surveillance concerns as those associated with CBDCs.
One reason Beijing may pursue yuan-backed stablecoins lies in its concern regarding the use of dollar-denominated stablecoins. Like other countries, China has expressed concerns about dollar-denominated stablecoins, which are primarily used to provide liquidity for crypto-asset transactions, dollarize savings, and facilitate sending money abroad—the latter two driving capital flight. China’s legal restrictions have shielded it from extensive use of dollar-denominated stablecoins. Still, Beijing may see stablecoins backed by offshore yuan or the Hong Kong dollar (HKD) as a tool to curb capital flight or regional remittance payments.
A bid to counter dollar dominance?
There is, of course, an underlying consideration of competition with the United States—as with most of Beijing’s regulatory and technology policy decisions. One theory holds that yuan-denominated stablecoins could further internationalize the yuan, leading to a more multipolar currency system instead of a dollar-dominant one. However, several factors suggest otherwise:
For one, the primary use of stablecoins remains in crypto markets, where dollar-denominated tokens can provide liquidity and reduce transaction limitations. With the passage of GENIUS, there is increased confidence in the reserve-backing of dollar-denominated stablecoins, which help them maintain relative value stability. A yuan-denominated stablecoin would likely be less useful as a stable value marker due to lower confidence in yuan-denominated backing assets, and low trust in Chinese financial markets and regulators.
Moreover, while rhetoric from both the United States and China often conflates currency dominance with stablecoin issuance and adoption, interest in dollar- or yuan-denominated stablecoins reflects, but does not meaningfully replace, the international use of those currencies. In other words, the demand for dollars by foreigners drives the demand for dollar-backed stablecoins abroad, not the other way around. Therefore, even as increased stablecoin use can enhance the financialization of the currency abroad through a rise in treasury or bond holdings by foreign issuers of stablecoins, it will not meaningfully impact its traditional role in cross-border transactions.
China’s stablecoin play has its limits
From Beijing’s perspective, a successful offshore yuan-denominated stablecoin could replace some existing yuan-denominated transactions, increase the purchases of offshore or “dimsum” bonds, and even make them technologically more efficient. However, it is unlikely to compete with the demand for dollar-based networks, as reflected in the use of dollar-denominated stablecoins.
Despite the growing private sector driven interest in China in yuan-backed stablecoins, their use case remains in domestic retail markets, especially in the e-commerce space. Hong Kong’s new licensing regime is also likely to bring some wholesale (business-to-business) applications to light. Lines between public and private issuers of stablecoins will continue to blur—opening up new operational and regulatory questions. However, the strategic relevance of a yuan-backed stablecoin in internationalizing the yuan is limited by the fact that dollar-backed assets ultimately provide more value for investors, both in the crypto-asset ecosystem and outside of it.
Ananya Kumar is the deputy director for future of money at the Atlantic Council’s GeoEconomics Center.
At the intersection of economics, finance, and foreign policy, the GeoEconomics Center is a translation hub with the goal of helping shape a better global economic future.
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Image: Shanghai,China-May 21st 2023: close up Pinduoduo, Taobao, Tmall, Temu, Vipshop and JD.com app icon on screen. Chinese E-commerce online shopping platform