China considers launching a renminbi stablecoin: can it shake the dollar's hegemony or is it fraught with trust issues?

China is considering the issuance of a RMB-backed stablecoin and plans to pilot it first in Hong Kong and Shanghai. This initiative means that China may officially join the global stablecoin race, attempting to strengthen the role of the RMB in the international financial system. However, experts point out that the overwhelming dominance of the US dollar in the stablecoin market, along with its liquidity advantages and trust barriers, will be the biggest challenges for the advancement of China's stablecoin.

China Stablecoin Initiative: From CBDC to Cross-Border Payments

For many years, China has maintained strict regulation in the cryptocurrency field and has strongly promoted Central Bank Digital Currency (CBDC) - the digital renminbi. However, the monopoly of Alipay and WeChat Pay in the domestic payment market has limited the space for the digital renminbi in daily transactions.

New Positioning: Martin Chorzempa, a senior researcher at the Peterson Institute for International Economics, believes that the greatest potential of the renminbi stablecoin lies in cross-border payments, especially in situations where banking channels are restricted.

Key question: Will this stablecoin continue the existing capital controls and monitoring of the renminbi? If so, its attractiveness will be significantly reduced compared to US dollar stablecoins.

The Overwhelming Advantage of the Dollar: 98% Market Share

According to data from ChainArgos CEO Patrick Tan:

1. 98% of stablecoins and trading volume are currently based on the US dollar.

2. Although major global cryptocurrency exchanges have connections with China, the preferred trading currency remains the US dollar-backed stablecoin.

Core challenge: To make the digital yuan or yuan stablecoin attractive, it is necessary to first enhance the international acceptance and liquidity of the yuan itself.

Trust and Liquidity: The Dual Challenge of China's Stablecoin

1. Trust Issues

China is known for its strict capital controls and anti-crypto policies.

The international market is concerned that stablecoins will be subjected to the same monitoring and restrictions as the Renminbi.

2. Liquidity Disadvantage

The US dollar stablecoins (USDT, USDC) dominate the global trading pairs.

To change market habits, substantial market-making support and an international settlement network are needed.

Geopolitical Significance: Stablecoins Become the New Battlefield for Currency Competition

Regardless of the ultimate success or failure of China's stablecoin plan, this move has sent a clear signal:

Stablecoins are no longer just the infrastructure of the cryptocurrency market; they are also tools for currency internationalization and geopolitical games.

If the Renminbi stablecoin can be adopted in the countries along the "Belt and Road" or in markets with close trade ties to China, it will pose a challenge to the US dollar settlement system.

However, the deep foundation of the US dollar in global trade, reserves, and the cryptocurrency market means that this competition will be a long-term battle.

Conclusion

China's consideration of launching a renminbi stablecoin is undoubtedly an important signal on the global financial map. It could become a new tool to promote the internationalization of the renminbi, but the overwhelming advantage of the US dollar in the stablecoin market, the gap in international trust, and the disadvantage in liquidity will be three major thresholds that China must overcome. In the future, the competition for stablecoins will not only be a contest of technology and market, but also a game of monetary discourse power and international trust.