China’s Stablecoin Strategy: Former Bank Official Warns of Limited Options Beyond USD
December 05, 2025 | Gudstory Org AI News
Thank you for reading this post, don't forget to subscribe!Beijing faces complex decision on digital currency policy as U.S. stablecoin dominance grows
In a striking commentary that highlights Beijing’s strategic dilemma in the digital currency arena, Wang Yongli, former Vice President of the Bank of China, has outlined why Chinese authorities maintain their firm opposition to stablecoins while acknowledging the limited prospects for developing alternatives to dollar-denominated digital currencies.
Strategic Calculations Behind China’s Ban
Wang’s analysis reveals that China’s prohibition on stablecoins stems from multiple interconnected concerns rather than a simple regulatory stance. The decision reflects deep-seated worries about capital flight, monetary sovereignty, and the nation’s ability to maintain control over cross-border financial flows.
The former banking executive, who also served as the first Chinese mainland member of SWIFT’s board, emphasized that current stablecoin infrastructure fails to meet China’s stringent requirements for customer identification and anti-money laundering protocols. This technical shortcoming creates vulnerabilities that Beijing considers unacceptable for its tightly controlled financial system.
The Dollar Stablecoin Challenge
Despite maintaining a ban on private digital currencies since 2021, Chinese officials are increasingly concerned about being left behind as dollar-backed stablecoins gain global traction. These digital tokens now process approximately $27 trillion in annual transactions, rivaling traditional payment networks in volume.
Wang has warned that allowing the United States to dominate the stablecoin ecosystem could pose significant strategic risks to China’s financial competitiveness. He noted that if yuan-based cross-border payments cannot match the efficiency and cost-effectiveness of dollar stablecoins, China’s decades-long push for yuan internationalization could face serious setbacks.
The concern extends beyond mere market share. Former Chinese Finance Vice Minister Zhu Guangyao has argued that Washington’s promotion of stablecoins serves a deliberate strategic purpose: preserving dollar supremacy in the emerging digital financial landscape.
Why Non-Dollar Alternatives Face Steep Obstacles
Wang’s commentary suggests pessimism about developing viable stablecoin alternatives that bypass the U.S. dollar. Several fundamental barriers complicate this path.
China’s closed capital account represents the primary obstacle. Unlike the United States, which allows relatively free capital movement, China maintains strict controls on foreign exchange to prevent destabilizing capital outflows. Authorizing a yuan-pegged stablecoin would require either relaxing these controls or creating complex workarounds that might undermine the token’s utility.
The offshore yuan presents a potential middle ground. Hong Kong, which handles over 70 percent of global offshore yuan transactions, recently passed legislation allowing licensed entities to issue stablecoins backed by the Hong Kong dollar and offshore yuan. Some Chinese experts view this as a possible testing ground.
However, the offshore yuan’s limited global adoption compared to the dollar suggests such stablecoins would struggle to achieve meaningful scale. According to SWIFT data, the yuan accounts for less than 3 percent of global payments by value, compared to the dollar’s dominant position.
Competing Priorities: Control vs. Innovation
Beijing finds itself caught between competing imperatives. On one hand, officials want to prevent the financial system risks they associate with decentralized digital currencies. On the other hand, there’s growing recognition that stablecoin technology might represent the future of cross-border payments.
This tension was evident at recent high-level meetings. The People’s Bank of China convened representatives from 12 government departments in late November to reaffirm the ban on cryptocurrency transactions while explicitly flagging stablecoins as a priority enforcement concern.
Yet simultaneously, PBOC Governor Pan Gongsheng acknowledged at the Lujiazui Forum that central bank digital currencies and stablecoins are fundamentally reshaping traditional payment systems. State media outlets have begun advocating for yuan stablecoin development, with the Securities Times declaring that progress “should be sooner rather than later.”
The Digital Yuan Alternative
China continues expanding its official central bank digital currency, the e-CNY, as its preferred alternative to private stablecoins. By mid-2024, the system had processed over 7 trillion yuan in transactions across 17 provinces, demonstrating both technical capability and user adoption.
Unlike privately issued stablecoins, the e-CNY operates under complete central bank control through a two-tier distribution system involving commercial banks. This architecture provides features like controllable anonymity, programmable spending restrictions, and offline transaction capabilities while maintaining government oversight.
However, the e-CNY has struggled to gain significant traction beyond China’s borders. International adoption remains limited, and the system’s centralized nature may actually hinder its appeal in global markets where users value the decentralization and neutrality associated with blockchain-based alternatives.
Global Implications
The stablecoin debate extends far beyond China’s borders. As the United States moves forward with legislation like the GENIUS Act to regulate and legitimize dollar-backed stablecoins, other nations face pressure to clarify their own positions.
The European Union has already implemented its Markets in Crypto-Assets framework, which brings stablecoins under a dedicated regulatory regime. In contrast, China’s approach of maintaining an outright ban while exploring state-controlled alternatives represents a fundamentally different model.
Wang’s assessment that non-dollar stablecoins face limited opportunities reflects a broader reality: network effects in payments systems create powerful advantages for incumbents. The dollar’s existing dominance in international trade and finance translates naturally into the digital realm, making it extremely difficult for alternatives to gain comparable scale.
For emerging markets seeking alternatives to dollar-based financial infrastructure, this creates a challenging landscape. While some nations might welcome yuan-backed stablecoins as a counterweight to American monetary influence, the practical difficulties of developing such systems at scale remain formidable.
Looking Ahead
China’s stablecoin dilemma illustrates the complex intersection of technology, finance, and geopolitics in the digital age. Beijing must balance its desire to maintain monetary sovereignty and capital controls against the risk of falling behind in financial innovation.
Wang’s candid assessment suggests Chinese policymakers understand these trade-offs clearly. The decision to maintain strict prohibitions while exploring state-controlled alternatives through vehicles like the e-CNY and potential Hong Kong-based offshore yuan stablecoins represents an attempt to thread this needle.
Whether this approach can succeed in countering dollar stablecoin dominance while maintaining the capital controls Beijing considers essential remains an open question. As global stablecoin adoption accelerates, the pressure on China to find workable solutions will only intensify.
The stakes extend beyond economic competition to fundamental questions about the future architecture of international finance. How nations navigate the stablecoin challenge in the coming years may help determine the balance of financial power for decades to come.