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Yuan vs. U.S Dollar – The race to dominate the $2 trillion stablecoin market
In a move that may have significant implications for the global financial landscape, tech giants JD.com and Ant Group are urging China’s central bank to approve the development of Yuan-based stablecoins, which would be pegged to the offshore Yuan. This push is aimed at increasing the global footprint of the Chinese currency while countering the growing influence of US dollar-pegged digital currencies.
China’s ambition to challenge the dominance of US-backed stablecoins is a daunting task, as Tether’s USDT and Circle’s USDC currently occupy more than 99% market share in an industry worth over $247 billion. However, Standard Chartered estimates that this space could surge to an enormous $2 trillion by 2028.
Executives from the digital financial sector have weighed in on the matter, with Wang Yongli, Co-chairman of Digital China Information Service Group and former Vice Head of Bank of China, remarking that “it would be a strategic risk if cross-border yuan payment is not as efficient as dollar stablecoins.” This sentiment was echoed by Xiao Feng, Chairman of crypto exchange operator HashKey, who added, “China can no longer avoid taking action.”
This sudden push to develop Yuan-backed stablecoins may seem like an unusual turn of events given China’s 2021 crypto ban. However, this could be the country’s comeback in the cryptocurrency space after its regulatory crackdown on digital assets.
The move is driven by a desire to elevate the Yuan as a global reserve currency and increase its international relevance through digital finance. Unfortunately, China’s aspiration to boost the Yuan’s standing faces significant obstacles due to the country’s tight capital controls. Data from SWIFT reveals that the Yuan’s participation in global payment systems has diminished, plummeting to a lowly 2.89% in May – its weakest level in almost two years.
Meanwhile, the US dollar remains dominant in international transactions, holding onto an impressive 48.46% share. As US dollar-pegged stablecoins continue to gain traction among Chinese exporters who now prefer USDT for cross-border settlements, JD.com and Ant Group are racing against time to issue their own stablecoins to reclaim monetary ground.
JD.com has plans to launch a Hong Kong dollar-pegged stablecoin by year-end, while Ant Group is actively pursuing licenses in Hong Kong, Singapore, and Luxembourg to broaden its blockchain-based payment infrastructure. These developments align with a broader push to counter the digital dollar’s growing dominance.
It’s worth noting that these updates coincide with renewed US-China trade talks, which briefly propelled Bitcoin above $110k before sentiment shifted amid a lack of tangible progress – underscoring the volatile backdrop for stablecoin geopolitics.
The article explores the sudden surge in Yuan-backed stablecoins and whether China can successfully counter the dominance of the U.S dollar.
Source: ambcrypto.com
