Global tech giants JD.com and Ant Group aim to establish yuan-based digital currencies in a global competition for influence.
The GENIUS Act, aimed at regulating US dollar-pegged stablecoins, is now headed to the House for further consideration, as JD.com and Ant Group, two major Chinese companies, are pushing for yuan-backed stablecoins to boost the international role of the Chinese yuan and counter the dominance of US dollar-pegged stablecoins in global digital payments.
JD.com and Ant Group have proposed launching yuan-backed stablecoins in Hong Kong, with plans to expand the pilot to China's free trade zones. Both companies are preparing applications for stablecoin licenses in key financial hubs, including Hong Kong and Singapore.
The key reasoning behind their push includes the global share of the yuan in payments declining to below 3%, while the US dollar maintains nearly 50% dominance. US dollar stablecoins, such as USDT, currently account for over 99% of the global stablecoin supply and are widely favored by Chinese exporters and mainland clients for their flexibility and freedom from China's capital controls.
JD.com and Ant Group see an urgent need for yuan stablecoins to avoid losing ground in the emerging digital currency world, where programmable money and rapid cross-border payments are becoming standard. Mainland China’s crypto restrictions mean that stablecoin issuance would likely need to occur offshore—in places like Hong Kong or Singapore—where regulatory frameworks are evolving more flexibly.
If successful, yuan stablecoins could increase the yuan's usage in international trade and digital payments, potentially reversing its recent decline in global payment share. Introducing yuan stablecoins presents a direct challenge to the dominance of USD-backed tokens like USDT, potentially reducing dollar reliance in digital cross-border settlements.
The US may respond by leveraging USD stablecoins as a strategic tool to maintain dollar dominance, using their first-mover advantage and openness on public blockchains as a “defensive counterweight” to China’s state-backed digital currencies. Hong Kong's regulatory framework might serve as a key gateway for yuan stablecoins, helping circumvent mainland China's crypto restrictions and giving China a competitive footing in the digital currency arena.
In summary, JD.com and Ant Group’s push for yuan-backed stablecoins reflects China’s broader strategic goal of internationalizing the yuan and eroding US dollar dominance in global payments. The success of these yuan stablecoins depends on regulatory approval and market adoption mainly outside mainland China, especially in Hong Kong, which could reshape the competitive landscape between the yuan and the dollar in digital finance.
Last month, Wang Yongli, a seasoned industry expert and former deputy governor of the Bank of China, cautioned that China faces a strategic risk if cross-border yuan payments continue to lag behind the efficiency of U.S. dollar-pegged stablecoins. Regulators' initial feedback on the proposal has been described as positive, and JD.com and Ant Group have urged the People's Bank of China (PBOC) to introduce yuan-backed stablecoins.
Meanwhile, the U.S. Senate has passed the GENIUS Act, which sets clearer regulatory standards for US dollar-pegged stablecoins. Jeremy Allaire, CEO of Circle Internet Financial, has stated that stablecoins are near a breakout moment. Ripple Labs Inc. has announced it is applying for a US banking license from the Office of the Comptroller of the Currency (OCC), and Circle Internet Financial has made a similar application to manage its USDC stablecoin reserves under a national trust bank.
The push for yuan-backed stablecoins aims to offer an alternative to U.S. dollar-pegged tokens, potentially reshaping the global role of the yuan and US dollar-pegged tokens in digital finance.
Tokens such as USDT, which are US dollar-pegged stablecoins, currently dominate the global stablecoin market, accounting for over 99% of the supply. JD.com and Ant Group, however, are pushing for yuan-backed stablecoins, hoping to boost the international role of the Chinese yuan and challenge the dominance of US dollar-pegged stablecoins.
The success of these yuan stablecoins in international trade and digital payments could be contingent on regulatory approval and market adoption, particularly in financial hubs like Hong Kong. The regulatory framework in Hong Kong might provide a crucial gateway for the issuance of yuan stablecoins, helping China compete in the digital currency arena.
The competition between yuan stablecoins and US dollar-pegged tokens like USDT could reshape the competitive landscape in digital finance, potentially reversing the yuan's recent decline in global payment share. This development, in turn, may prompt the US to respond strategically, leveraging USD stablecoins to maintain dollar dominance.
