In a monumental shift for global digital finance, China is moving assertively into the realm of yuan-backed stablecoins. This bold strategic maneuver signifies Beijing's departure from its stringent cryptocurrency prohibitions, instead embracing regulated digital currencies as a potent instrument for the internationalization of its currency and the expansion of its geopolitical reach. The audacious plan seeks to erode the prevailing influence of U.S. dollar-pegged stablecoins, which currently command the overwhelming majority of the global market. With Hong Kong's forward-thinking regulatory framework already in motion and the anticipation of initial mainland licenses by early 2026, China is poised to reshape the digital financial ecosystem. This comprehensive strategy encompasses a meticulously designed regulatory framework, the launch of innovative pilot programs, and a clear vision for their profound impact on the worldwide financial architecture.
Unveiling China's Digital Currency Ambition: A Detailed Overview
As of September 2025, China is meticulously refining a comprehensive blueprint for its yuan-backed stablecoins. This strategic push is anchored by Hong Kong's progressive regulatory framework, which became operational on August 1, 2025, with the first mainland licenses slated for issuance in early 2026. This initiative is a direct challenge to the supremacy of U.S. dollar-backed stablecoins, which currently hold over 99% of the global stablecoin market share. The overarching goal is to fortify the yuan's international standing and establish an alternative payment infrastructure.
On the global stage, the yuan's share in international payments via SWIFT saw a dip to 2.88% in June 2025, contrasting sharply with the U.S. dollar's commanding 47.19%. Nevertheless, China's Cross-Border Interbank Payment System (CIPS) demonstrated robust growth, processing over 8.2 million transactions totaling RMB 175.49 trillion (approximately US$24.47 trillion) in 2024, connecting 1,427 financial institutions across 109 nations. Furthermore, the global stablecoin market, valued at $271 billion, is projected to surge to $2 trillion by 2028, presenting a significant opportunity for yuan-denominated alternatives. Hong Kong is at the epicenter of this activity, with 77 firms, including financial giants like Bank of China Hong Kong, Ant Group, and JD.com, vying for stablecoin licenses.
The regulatory landscape is rapidly evolving. Hong Kong's Stablecoin Ordinance came into effect on August 1, 2025, mandating strict compliance. By October 1, 2025, existing issuers must submit their license applications, with the initial batch of approvals expected in early 2026. Simultaneously, pilot programs are set to expand across countries participating in the Belt and Road Initiative throughout 2026. Significant advancements in blockchain infrastructure are underpinning these developments, notably the Conflux 3.0 blockchain, capable of handling 15,000 transactions per second, and its seamless integration with CIPS for streamlined cross-border settlements. Pilot programs are actively launching in vital regions across Central and Southeast Asia.
Several key stablecoins are emerging within China's burgeoning ecosystem. AxCNH, a yuan-backed stablecoin developed by Conflux and AnchorX, is a leading contender. Pegged 1:1 to the offshore yuan (CNH) and built on Conflux 3.0, it has already secured regulatory approval in Kazakhstan and aims to be operational in 10 Belt and Road countries for cross-border payments by 2026. Chinese banking institutions, including Bank of China Hong Kong and Standard Chartered's Anchorpoint JV, are developing institutional-grade stablecoins for business-to-business transactions and trade finance. The energy sector is also exploring yuan-backed stablecoins, with PetroChina and CNPC conducting feasibility studies for cross-border oil trade settlements to reduce dependence on the U.S. dollar. Moreover, tech giants like Ant Group and JD.com are actively seeking licenses to leverage their vast user bases for e-commerce and international trade applications.
Recent developments underscore the urgency and scope of China's strategy. From August to September 2025, China's State Council conducted an extensive review of the yuan-backed stablecoin roadmap, signaling a dramatic reversal from the 2021 cryptocurrency ban. Hong Kong's pioneering framework, enacted on August 1, 2025, requires 100% reserve backing, a minimum HK$25 million capital, and stringent anti-money laundering (AML) and counter-terrorist financing (CFT) compliance. The Hong Kong Monetary Authority (HKMA) anticipates issuing only a limited number of licenses initially. The Shanghai Cooperation Organisation (SCO) Summit, held in Tianjin from August 31 to September 1, 2025, further highlighted multilateral strategies for adopting the yuan and stablecoins in cross-border trade among member nations. Technological advancements continue apace, with the Conflux Network launching version 3.0 and the Shanghai ShuTu Blockchain Research Institute developing a public blockchain platform specifically for Belt and Road projects. Private sector momentum is also building, with TokenPocket wallet (boasting over 30 million users) partnering for stablecoin distribution, and major fintech firms advocating for accelerated regulatory approval to reduce cross-border transaction costs.
The advantages of China's approach are manifold. The state-controlled, permissioned blockchain system ensures full transaction traceability, aligning with China's financial sovereignty goals while maintaining capital controls. Leveraging existing infrastructure, such as the CIPS network (connecting over 1,300 institutions) and the extensive Belt and Road corridors (spanning over 150 countries), provides immediate adoption pathways. Hong Kong's clear and comprehensive regulatory framework offers legal certainty with strict reserve requirements, fostering trust among institutional investors. Technologically, high-performance blockchains like Conflux 3.0 and seamless integration with traditional banking systems position China for scalable implementation. Strategically, this move directly challenges U.S. stablecoin dominance, integrates stablecoins into the Belt and Road Initiative for financing infrastructure projects and trade settlements, and establishes a dual-track system with Hong Kong for international interfaces and Shanghai for domestic coordination. This approach also offers a potential alternative to SWIFT, providing sanctions-resistant payment channels for aligned nations.
Looking ahead to 2026, the near-term outlook includes the rollout of 5-10 initial licenses in Hong Kong, primarily for institutional use, with gradual expansion to retail applications by late 2026. Stablecoin trials are anticipated in over 10 Belt and Road countries for various financial activities, including trade finance, remittances, and infrastructure payments, with significant adoption expected in the energy sector for oil and gas settlements. Yuan-backed stablecoins could capture 5-10% of Belt and Road trade flows (estimated at $500 billion to $1 trillion annually) by the end of 2026. Long-term projections for 2026-2028 indicate a potential capture of $100-200 billion of the projected $2 trillion global stablecoin market, predominantly in Asia and emerging markets. Full stablecoin integration with CIPS could transform it into a viable SWIFT alternative for yuan-denominated transactions, potentially processing over $30 trillion annually. This could also lead to regulatory harmonization among other Asian nations, fostering a yuan-stablecoin economic zone. However, risks and challenges remain, including balancing capital control tensions with internationalization goals, addressing international skepticism regarding financial data and regulatory independence, overcoming technical hurdles related to interoperability, and responding to competitive initiatives from the U.S. and EU.
China's 2026 stablecoin strategy represents a defining moment in the evolution of global digital finance. By meticulously navigating the delicate balance between international expansion and domestic control, and by proactively addressing trust deficits, Beijing aims to offer a compelling alternative to the dollar-centric financial order. As the initial licenses are granted in early 2026, the global community will keenly observe whether China's innovative approach can indeed usher in a new, multipolar era of digital finance.
From a journalist's perspective, this strategic pivot by China highlights the increasing confluence of technology, finance, and geopolitics. The decision to embrace yuan-backed stablecoins, after years of a stringent crypto ban, is not merely an economic calculation but a clear assertion of global ambition. It underscores a meticulously planned, multi-faceted approach to challenge existing financial hegemonies and carve out a new sphere of influence, particularly within the vast network of the Belt and Road Initiative. The careful distinction between decentralized cryptocurrencies and state-controlled stablecoins reveals China’s pragmatic yet authoritative stance on digital assets. This initiative serves as a powerful reminder that in the interconnected world of global finance, innovation is not solely driven by market forces but also by strategic geopolitical imperatives, paving the way for a more diverse and potentially competitive future in digital currencies.