China Advances Digital Yuan Amid Concerns Over US Stablecoin Dominance

By: Eva Baxter

China is raising significant concerns about the increasing prevalence and dominance of US dollar-backed stablecoins within the global financial ecosystem. According to Zhang Ming, deputy director at the Institute of Finance and Economics and the National Finance and Development Laboratory, the unchecked rise of these stablecoins could potentially strengthen US control over international monetary systems.

Currently, stablecoins such as Tether (USDT) and USD Coin (USDC) are leading players in the market, holding a significant majority share. Collectively, these stablecoins now constitute nearly 90% of the stablecoin market, contributing to a combined market cap exceeding $236 billion. Their widespread use as trading pairs on cryptocurrency exchanges underscores their importance as intermediaries between fiat currencies and digital assets such as Bitcoin and Ethereum.

To counterbalance this dominance, China is urged to advance the internationalization of its digital currency, the digital yuan (CNY). By expanding its use on both domestic and international platforms, China seeks to align its sovereign credit with global market demands. Zhang suggests that with well-designed risk control measures, China’s digital yuan can bolster the international standing of the renminbi, providing a strong alternative in the face of rising US stablecoin influence.

These concerns echo across the globe, with European Union officials also wary of the United States’ advancing crypto stance, which they fear may threaten the financial autonomy of the Eurozone. Emphasized by Pierre Gramegna of the European Stability Mechanism, this trend highlights a need for heightened attention to the growing influence of US-backed stablecoins and stresses the importance of alternative currency strategies.