China Considering Yuan-Backed Stablecoins

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(This is an exclusive story first reported by Reuters)

Later this month, at a summit of The State Council, the Chinese government may approve a roadmap towards yuan-backed stablecoins. It would represent a major reversal of China’s previous attitude to digital assets.

The move comes as the US surges ahead with stablecoin regulation and adoption in the wake of the GENIUS Act. The Chinese government hopes the move will accelerate global usage of the yuan. 

As a global currency, the yuan’s usage is under 3%. This compares to 47% for the dollar, according to payment platform SWIFT. 

The roadmap, set to be unveiled in the next few weeks, will outline guidelines for risk prevention, the role of regulators, and the role of the Chinese central bank for implementation. 

The GENIUS Act, signed into law in the US last month, is a federal framework for the regulation of stablecoins in the United States. The legislation is designed to provide clarity around the use and deployment of stablecoins, including reserve ratios, disclosure rules and mandatory audits.

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The GENIUS Act requires stablecoin issuers to hold one-to-one reserves in high-quality liquid assets, such as cash or government treasuries. 

The act has helped to legitimize the stablecoin industry and solidify the dollar's dominance as a global currency, and it has provoked a response from Beijing.

Stablecoins enable fast, low-cost transactions on a global scale, operating 24/7. As they exist on the blockchain, stablecoins can be integrated into smart contracts which can lead to further cost savings by reducing the need for financial middlemen.

If the Chinese stablecoin roadmap goes ahead, Hong Kong and Shanghai will be fast-tracked for implementation. Both cities are already surging ahead when it comes to regulation and adoption of stablecoins.

However, the widespread adoption of the yuan-backed stablecoin will be hindered by China’s strict capital controls and huge trade surpluses.

The summit where the stablecoin roadmap will be discussed is to be held in Tianjin from the 31st August to the 1st September.