Is China Gearing Up for a New Stablecoin Race?

Reports suggest that the Chinese government might support using yuan-pegged stablecoins for cross-border trade and to compete with the US for monetary supremacy.

The US began its push for global monetary dominance through dollar-pegged stablecoins with the passage of the GENIUS Act in July. China’s entry into this competition could accelerate the growth of stablecoins.

A New Yuan-Pegged Stablecoin, AxCNH

China recently launched the world’s first regulated offshore yuan-pegged stablecoin, with approval from Kazakhstan’s financial authorities. On Monday, Yang Guang, CTO of the Layer-1 blockchain project Conflux, said his company participated in the launch.

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He added that the new stablecoin, AxCNH, aims to internationalize the yuan. Although the launch didn’t attract much international attention, it could create a “butterfly effect” that reshapes cross-border payments.

AxCNH is a cryptocurrency pegged to the offshore yuan. It was launched to improve the efficiency of cross-border payments among countries involved in China’s Belt and Road Initiative (BRI). The stablecoin also aims to mitigate the risk of dollar-based sanctions.

The Belt and Road Initiative (BRI), launched by China in 2013, is an ambitious strategy to strengthen global infrastructure, trade, and economic cooperation by connecting Asia, Europe, and Africa. Over 150 countries have signed on, and China has invested over $1.3 trillion to advance connectivity and development worldwide.

The investment spans global infrastructure, energy, technology, and other strategic sectors. While many view it as a route to economic growth, some countries and analysts express concerns over China’s expanding influence through the initiative.

Industry insiders suspect that the Chinese government heavily influences the stablecoin’s issuer, AnchorX, a Hong Kong fintech firm.

Conflux, which provides the technology for AxCNH, is one of the few public blockchains that have received official approval from the Chinese government. The network is reportedly capable of handling over 3,000 transactions per second.

This move is also raising interest in whether it will further accelerate the growth of the stablecoin market cap. The stablecoin market shows an upward trend whenever its market cap increases rapidly.

On July 18, when the US GENIUS Act was passed, the global stablecoin market cap was $267.2 billion. Since then, it has grown rapidly, reaching $309.4 billion as of Monday, a 15.8% increase in just over 70 days.