China Sees Dollar Stablecoins as Threat, Calls for Digital Yuan To Rival US

Key Takeaways

• China’s Communist Party sees U.S. dollar stablecoins as a growing global threat.
• A government report urges expanding digital yuan use beyond retail transactions.
• The U.S. is advancing stablecoin regulations to integrate them into global trade.

China is stepping up efforts to strengthen its digital yuan, aiming to challenge U.S. dollar stablecoins in global trade.

A recent report from a national media outlet highlights growing concerns within the Chinese Communist Party about America’s increasing focus on stablecoin development.

The report warns that stablecoins—particularly those pegged to the U.S. dollar—are poised to reshape international financial markets.

It calls for accelerating the adoption and capabilities of China’s central bank digital currency (CBDC) to compete more effectively.

Stablecoins Pose a Financial Challenge, China Warns

According to the report, digital assets can be categorized into three groups: cryptocurrencies like Bitcoin (BTC), altcoins, stablecoins and CBDCs.

Of these, stablecoins and CBDCs are expected to have the most significant impact on global finance.

The report argues that because stablecoins are tied to sovereign currencies, they inherit many of their financial properties.

Specifically, dollar-backed stablecoins benefit from the dollar’s stability and widespread acceptance, making them attractive to international investors.

The stablecoin market has grown rapidly, surpassing a $200 billion market cap in 2025.

With the U.S. moving toward regulatory clarity that could position stablecoins as a key tool in international trade, China’s leadership believes its digital yuan must evolve to remain competitive.

Expanding Digital Yuan’s Scope Beyond Retail Transactions

Despite being one of the first countries to launch a CBDC, China has so far restricted the digital yuan primarily to retail transactions.

The report argues that for the digital yuan to rival dollar-pegged stablecoins, its use must be expanded beyond small consumer purchases.

Specifically, it calls for broadening the digital yuan’s exchange range from M0 (physical cash) to M1 (cash plus demand deposits) and even M2 (cash plus all deposits).

This expansion, the report suggests, would allow the digital yuan to be used more widely in both domestic and international markets.

Additionally, the report pushes for China to develop its own stable digital currency, increase the use of digital tokens on online platforms, and integrate the digital yuan more seamlessly with global applications.

With the U.S. working to integrate stablecoins into the global trade system, China’s leadership sees an urgent need to strengthen the digital yuan—or risk falling behind in the evolving financial landscape.