What happened?
Li Xunlei, Chief Economist of Zhongtai Financial International, argues that China should pursue a yuan-pegged stablecoin strategy to counter U.S. dollar dominance in global finance. He emphasizes that over 80% of the world’s stablecoins are linked to the U.S. dollar, leading to excessive dollar liquidity while limiting the yuan’s international role. Li suggests that this strategy could include pilot programs in free trade zones and Belt and Road countries, backed by strong legal and regulatory frameworks.
Who does this affect?
This development mainly affects China’s financial system, policymakers, and regulators as they explore options to increase the yuan’s international influence. It also impacts businesses and countries involved in or considering engaging with China’s Belt and Road Initiative. Furthermore, global investors and the digital currency market could be influenced by changes in stablecoin regulations and the emergence of a yuan-pegged stablecoin.
Why does this matter?
The introduction of a yuan-pegged stablecoin could significantly impact the global market by enhancing the yuan’s liquidity and expanding its use in cross-border settlements and digital payments. If successful, it might reduce reliance on dollar-dominated systems and reshape global currency dynamics. This move could also encourage other countries to reconsider their positions on digital currencies and stablecoins, influencing future regulatory actions worldwide.