Will China Enter Cryptocurrencies? They Want to Strengthen Their Currency's Position

According to Reuters, the plan will include targets for the use of the Chinese currency in global markets and define the responsibilities of national regulators.

The Chinese are working on the limits of token operation.

The country's leadership is also expected to meet for a study session later this month, focusing on the internationalization of the yuan and stablecoins—payment tokens tied to the value of a given asset, such as a traditional currency. At this meeting, top leaders are likely to deliver speeches that will set the tone for stablecoins and define the limits of their application and development in business.

China's plan to use stablecoins, if approved, would mark a significant shift in its approach to digital assets. In 2021, the country banned cryptocurrency trading and mining due to concerns about the stability of the financial system .

China has long sought to establish the yuan as a global currency, similar to the dollar or euro , reflecting its importance as the world's second-largest economy. However, tight capital controls and annual trade surpluses in the trillions of dollars stand in the way of this goal. Market participants say these restrictions are also likely to be a key obstacle to the development of stablecoins .

The global dominance of the dollar as a payment currency

According to the SWIFT payments platform, the yuan's share as a global payments currency fell to 2.88% in June, its lowest level in two years. By comparison, the U.S. dollar held a 47.19% market share.

China uses strict capital controls to manage cash flows, and several interconnection systems allow capital to be invested in key overseas markets such as Hong Kong.

In the United States, President Donald Trump endorsed stablecoins days after his inauguration in January and is establishing a regulatory framework that helps legitimize dollar-pegged cryptocurrencies.

The blockchain technology they rely on enables instant, borderless, 24/7 funds transfer at low costs, giving stablecoins the potential to revolutionize traditional daily money transfers and cross-border payment systems.

Financial innovation, and stablecoins in particular, is seen by Beijing as a promising tool for internationalizing the yuan amid the growing influence of US dollar-linked cryptocurrencies in global finance, the sources said.

Details of the plan are expected to be revealed in the coming weeks, with Chinese regulators, including the central bank, the People's Bank of China (PBOC), tasked with implementation.