Introduction
In a recent confidential seminar organized by the New Economists Think Tank, Zhu Guangyao, a former Deputy Finance Minister of China, emphasized the need for integrating yuan-backed stablecoins into the country’s strategic financial framework. He highlighted the evolving global landscape influenced by changes in U.S. policy and advancements in stablecoin infrastructure worldwide.
Focus on Fiat-Backed Stablecoins
During his address, Zhu concentrated solely on fiat-backed stablecoins, deliberately omitting discussion of other digital currencies while underscoring their increasing significance in the realm of international finance. He pointed to dollar-pegged stablecoins as a continuation of U.S. monetary policies, suggesting they may represent what he called the “third phase of the Bretton Woods system.” The original Bretton Woods agreement, established in 1944, linked the majority of global currencies to the U.S. dollar, which at that time was convertible to gold. Following the suspension of this gold standard in 1971, the U.S. sustained its monetary influence predominantly through oil sales priced in dollars. Zhu posits that today’s dollar-backed stablecoins have emerged as a contemporary instrument for preserving this power.
Transaction Volumes and Regulatory Developments
Recent figures presented by Zhu revealed astonishing transaction volumes for stablecoins, which totaled a staggering $27.6 trillion in 2024, surpassing those reported by major payment networks like Visa and Mastercard. Additionally, the total for cross-border payments exceeded $250 trillion, with the U.S. dollar retaining its position as the dominant settlement currency, responsible for nearly half of all transactions processed through SWIFT in May.
Zhu noted that recent regulatory developments in the U.S., most notably the passage of the Lummis–Gillibrand Payment Stablecoin Act in June, suggest a strategic move to reinforce dollar-denominated stablecoins under regulated conditions. This legislation mandates that all such stablecoins be fully backed by liquid U.S. assets and issued only by licensed entities, cementing dollar liquidity and expanding America’s regulatory reach.
Concerns and Policy Recommendations
In light of these observations, Zhu expressed concerns about ongoing discussions within the U.S. Treasury regarding the revaluation of gold and updates to the Federal Reserve’s capital reserve requirements, suggesting these measures could be indicative of a broader recalibration of fiscal policies to facilitate stablecoin proliferation.
Zhu outlined three potential policy paths for China moving forward:
- The first involves treating Hong Kong as a testing ground for a new regulatory framework concerning stablecoins;
- The second encourages the development of both domestic and offshore CNY stablecoins;
- Lastly, he recommended a close observation of U.S. regulatory practices, particularly those surrounding fiat-backed stablecoins and limitations placed on foreign issuers.
Conclusion
He concluded by asserting the necessity of incorporating this stablecoin initiative into the national financial strategy of China. By doing so, China could widen its payment settlement options beyond established networks like SWIFT and CHIPS, especially in regions where it has cultivated trade or infrastructure connections. If these stablecoins are designed for interoperability with foreign systems while adhering to international reserve and auditing standards, they could facilitate a gradual internationalization of the Chinese currency without necessitating an overhaul of capital account regulations.
This strategic move to engage with stablecoins could have profound implications for China’s financial landscape, positioning it to better navigate the complexities of the global payments market.
