China’s reported pivot to a yuan-backed stablecoin & Japan’s green light for yen-pegged stablecoins signal the intent to reduce reliance on the dollar in digital transactions, explains Anvitii Rai. India, meanwhile, has preferred to keep away from stablecoins and watch how its CBDC pilot plays out
l China & Japan’s renewed interest
CHINA IS MULLING a yuan-backed stablecoin — a sharp shift from its 2021 ban on crypto trading and mining, according to Reuters. The token may be piloted in Hong Kong and Shanghai. Hong Kong enacted its long-awaited stablecoin ordinance on August 1, while a Shanghai regulator recently urged “greater sensitivity to emerging technologies and enhanced research into digital currencies.”
Until now, Beijing has kept control of digital currency through eCNY (its domestic central bank digital currency, or CBDC) and the mBridge project (for cross-border CBDC settlements). A yuan stablecoin could complete China’s digital currency bouquet as an offshore instrument, serving as a counterweight to the dollar.
Japan is also advancing: Its regulator is set to approve a stablecoin by startup JPYC this year. Financial giant Monex Group has signalled interest, with chairman Oki Matsumoto noting, “Issuing a stablecoin requires significant scheming and capital, but if we don’t handle it, we won’t be able to keep up with the times.” A yen-pegged stablecoin could help Japan regain its leadership in Asia’s financial ecosystems.
ALSO READThe wonderful and crazy world of stablecoins l The stablecoin paradox
BOTH STABLECOINS AND CBDCs are pegged to fiat currencies, but they differ fundamentally in issuance. Stablecoins are created by private entities, whereas CBDCs are issued directly by central banks. Stablecoins rely on reserves to maintain their peg as opposed to CBDCs, which are sovereign legal tender.
The “stablecoin paradox” arises because private issuers must guarantee stability yet also pursue growth and profits — often through leverage or financial intermediation. This has prompted major economies such as China and the US to seek alternative models, each charting a different path to reconcile innovation with control. It must be noted that stablecoins cannot completely avoid this rift because unlike CBDCs, they do not have the backing of a central bank to weather external shocks. Former People’s Bank of China governor Zhou Xiaochuan has also stressed on this, saying stablecoins can be used for speculative asset trading.
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