China has expanded the use of digital currencies because it promotes a broader use of its yuan, or renminbi, to reflect its status as a second world economy and challenge the crushing of the US dollar in international trade and finance.
However, restrictions on access to Chinese financial markets and the limits of Yuan’s convertibility, or “people ‘money”, are big obstacles blocking his overall use.
However, Hong Kong already has Stablecoin regulations and some Chinese experts are pressure for regulations to prepare for a possible stablecoin fixed to the Yuan.
Officials of the Banque Populaire de China and the Information Office of the Council of State in Beijing did not immediately respond to requests for comments on a Reuters report that the Council of State, or Cabinet, are preparing to issue an internationalization plan of the Yuan which could include a Stablecoin of Yuan.
In the United States, President Donald Trump made cryptocurrency Policies a priority for his administration. He signed a lawThe act genius, last month regulating stablecoins.
How do Stablecoins work
Stable are digital currencies whose value is linked to a specific currency such as the US dollar. They can be used as a substitute in situations where currency transactions can be difficult or expensive. They are different from cryptocurrencies such as bitcoin in that their only objective is to be a means of payment, and not an investment intended to be exchanged to gain value.
Stablescoins in dollars are generally purchased and sold for $ 1 each. They are based on a reserve equal to their value, but are issued by private institutions, and not central banks such as the American federal reserve.
Stablecoins are not digital central bank currencies, which are digital currency versions issued by central banks. They are based on books distributed based on the blockchain. They are “stable” in the sense that their value is anchored to the currency on which they are based.
Stablecoins detractors say that, as they are essentially an ordinary currency indicator that can bypass banking systems and the guarantees set up to manage traditional financial transactions, they can be the most useful for illegal purposes.
China thumb in the use of digital currencies
China has launched its own digital yuan, E-CNY Emitted by his central bank, on a test basis in 2019, and McDonalds was an early participant in this project. Chinese regulators have prohibited mining, trade and other transactions in private and decentralized digital currencies such as Bitcoin, while encouraging the use of digital yuan.
The almost universal use of electronic payments has facilitated the use of E-CNY on the Chinese continent, some cities using it to pay the salaries of civil servants. The state media indicated that in July 2024, there were 7.3 billions of transactions yuan using the currency in the areas where it is used in the event of a trial.
China has also favored the use of E-CNY in Africa because it widens commercial transactions on the continent.
But E-CNY are not stablecoins. Experts claim that regulations are necessary to safely manage the use of stablecoins and to ensure that they could be used gently with bank accounts and payment systems.
The role of Hong Kong in digital currencies
Hong Kong, a former British colony which has its own financial markets, currency and its partly autonomous legal system, promulgated a Stablecoin law which entered into force on August 1.
Aiming to attract rich investors who wish to use digital currencies and other financial products, it requires that a stablecoin linked to the Hong Kong dollar is equal to the reserves of the Hong Kong dollar for this digital currency.
As a global port of rights and financial center, Hong Kong has often served as a basis for trying routes to the liberalization of Chinese financial markets. But new regulations specifically governing Yuan Stablecoin would be necessary if such a digital currency was issued for use in Hong Kong, Liu Xiaochun, assistant director of the Shanghai Institute of New Finance, recently wrote in a report on the Chinese financial site Yicai.com.
China’s limits on cross -border relationships
The Chinese currency is not freely convertible in the global financial markets and its rigorous controls on foreign exchange is the greatest obstacle to making the Yuan a world currency, according to experts.
According to the Society for Worldwide Interbank Financial Telecommunication, or FASTIn June, the Yuan was the sixth most active currency for world payments per value, with a share of 2.88%. Its use culminated in July 2024 at around 4.7%.
It is used more often in the financing of trade, where it represents almost 6% of these transactions, according to this report.
The share of the lion of transactions in Yuan takes place in Hong Kong.
The share of the US dollar as a global payment currency was more than 47% in June, followed by the euro, the British book, the Canadian dollar and the Japanese yen, according to the report.
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Researcher AP Shihuan Chen contributed from Beijing.
