Is A Global Currency Reset Possible? China Moves In To Launch Yuan-Backed Stablecoins

China's potential introduction of yuan-backed stablecoins has sparked global debate about a possible global currency reset, challenging the US dollar's dominance in international finance.

With the State Council set to review a roadmap for yuan internationalisation by late August, Beijing aims to leverage digital currencies to boost the yuan's global share, currently at a modest 2.88%.

As the world's second-largest economy shifts its stance on digital assets, questions arise about whether this could reshape the global financial order.

China's Strategic Pivot to Stablecoins

In a major reversal of its 2021 cryptocurrency ban, China is exploring yuan-backed stablecoins to enhance its currency's global reach. Sources familiar with the matter told Reuters that the State Council will review a plan later in August 2025, outlining targets for yuan usage and regulatory frameworks.

The initiative, driven by the People's Bank of China (PBOC), aims to counter the US dollar dominance in stablecoins, which hold over 99% of the £184.3 billion ($247 billion) global market, per CoinGecko. PBOC advisor Huang Yiping stated, 'An offshore yuan stablecoin in Hong Kong is a possibility.'

Hong Kong's stablecoin ordinance, effective 1 August 2025, and Shanghai's digital yuan hub signal readiness to fast-track implementation. Discussions at the Shanghai Cooperation Organisation Summit (31 August–1 September 2025) will explore using these stablecoins for cross-border trade, potentially bypassing traditional financial systems.

Implications for a Global Currency Reset

A global currency reset, where major currencies realign or a new reserve currency emerges, hinges on disrupting the dollar's 48.46% share in global payments, per SWIFT data from June 2025. China's stablecoin push could accelerate yuan internationalisation, but experts doubt its immediate impact.

On 14 August 2025, Jin Weiping an associate professor at Insitute of Economics at Tsinghua Universit told Think China, 'If you don't participate, you will not have a chance in the future..' China's trade surplus, reaching £753.7 billion ($1.01 trillion) in 2024, supports yuan adoption, yet limited convertibility hampers progress.

X posts reflect scepticism, with @2xnmore stating, 'If approved, expect faster cross-border payments, but a true dollar challenge needs more than stablecoins.'

Conversely, @DefiWimar noted, 'China is considering yuan-backed stablecoins to boost global currency usage.'

Standard Chartered Bank projects the stablecoin market could reach £1.49 trillion ($2 trillion) by 2028, offering China a window to gain ground.

Risks and Global Financial Stability

While financial innovation drives China's plan, risks loom large. The Financial Action Task Force warns that stablecoins could become channels for illicit finance without robust regulations like know-your-customer checks. China's roadmap includes risk prevention guidelines, but its capital controls may limit stablecoin scalability.

On 1 July 2025, Federal Reserve Chair Jerome Powell pointed out that the lack of clear federal regulation for stablecoins has long been a major concern for regulators and investors. The US has struggled to implement consistent standards for stablecoin issuers, but a recent surge in momentum suggests a comprehensive framework could soon require full, one-to-one reserves to prevent financial instability and restore trust after past crypto collapses.

The US, with dollar-backed stablecoins like USDT dominating, may counter China's move, escalating geopolitical tensions. China's exporters, increasingly using dollar-based stablecoins, add urgency to Beijing's pivot.

If successful, yuan stablecoins could disrupt cross-border payment systems, but a full currency reset would require broader economic and policy shifts globally.

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Originally published on IBTimes UK