The revelation by Reuters that "China may consider issuing a yuan-backed stablecoin" has sent ripples through global financial and cryptocurrency markets. The mere surfacing of this long-taboo policy topic is being interpreted as a significant shift in direction.

This sudden discussion is not without basis. From China National Petroleum Corporation (CNPC) exploring stablecoins for cross-border oil settlements to Hong Kong’s proactive push for a stablecoin regulatory sandbox, and even private-sector experiments with offshore yuan-pegged stablecoins—all suggest that the narrative around a yuan-backed stablecoin is entering a new and more complex phase.

Yet, reactions within China to this potential game-changer in global finance are far from uniform. The landscape is a complex mix of official caution, market enthusiasm, and public skepticism.

**Optimism and Expectations** Supporters see the yuan stablecoin as a major strategic opportunity. The most immediate driver is the challenge to the dominance of dollar-backed stablecoins, which currently account for over 99% of the global stablecoin market. As one analyst noted, "China’s move is clearly an attempt to break this monopoly."

This shift—from cracking down on cryptocurrencies in 2021 to reconsidering stablecoins—is seen as China’s realization that "the digital currency pie is too big to let the U.S. have it all."

On social media, some Chinese users have welcomed the idea, calling it a "positive development" that could benefit the crypto market and provide ordinary citizens with "a cleaner channel for money." Financial analyst "qinbafrank" pointed out that the breakthrough for a yuan stablecoin likely lies in offshore yuan (CNH), given Hong Kong’s nearly trillion-yuan offshore market and potential pilot zones like the Shanghai Free Trade Zone and Hainan Free Trade Port.

A concrete application is already emerging: CNPC’s research into using stablecoins for cross-border oil payments. Traditionally, oil settlements have been dominated by global reserve currencies. If the yuan can leverage stablecoins to enter this critical channel, it could significantly boost its share in global payments (currently just 2.88% in SWIFT). This "digital Silk Road," serving Belt and Road trade independently of SWIFT, is moving from grand vision to practical implementation.

**Caution and Warnings** Amid market excitement, former PBOC governor Zhou Xiaochuan’s warnings reflect official prudence. In a closed-door seminar, he outlined six key risks associated with stablecoins, injecting a dose of realism into the debate.

1. **Central Bank Perspective**: Preventing currency over-issuance and high leverage. Zhou warned that issuers might create excessive supply without adequate reserves, leading to high leverage through lending and collateral—risks far exceeding reserve capacity in a crisis. 2. **Financial Services Perspective**: Skepticism about tokenization and decentralization. He argued that not all financial services benefit from these features, noting China’s already efficient mobile and digital yuan payment systems. 3. **Payment System Perspective**: Compliance challenges. Stablecoins must meet strict KYC, AML, and CFT requirements, where current offerings fall short. 4. **Market Trading Perspective**: Risks of manipulation and weak investor protection. Existing regulations are insufficient to address fraud and could worsen if inexperienced investors enter. 5. **Micro-Behavior Perspective**: Balancing commercial interests with public service. Payment systems, as critical infrastructure, should not be entirely profit-driven. 6. **Circulation Perspective**: Real-world demand is key. Without viable use cases, stablecoins might rely on speculative trading, raising stability concerns.

Zhou’s remarks highlight regulators’ priority: safeguarding financial stability while embracing innovation.

**Skepticism and Distrust** Beyond optimism and caution, a third voice—public skepticism—echoes on overseas social media. User "Zhijiangjinyu" captured this sentiment: "A yuan stablecoin is like China’s domestic circulation—it’ll only exploit Chinese people." Concerns include potential misuse of reserves to address local government debt (e.g., via LGFV bonds) and doubts about true anonymity under capital controls. Some suspect the "yuan stablecoin" might just repackage the digital yuan (e-CNY) for international use, rather than being a freely circulating public-chain asset.

**Conclusion** The roadmap for a yuan stablecoin is taking shape—not as a binary "ban or allow" but as a nuanced strategy. Key elements include: - **Offshore-first, onshore-controlled**: Experiments will focus on CNH to isolate risks from mainland finance. - **Dual-track approach**: Hong Kong serves as a high-profile sandbox, while compliant projects (e.g., AnchorX in Kazakhstan) advance geopolitical goals in Belt and Road regions.

This discussion has moved beyond finance and technology, intertwining geopolitics, stability concerns, innovation, and public sentiment. As China navigates this path—balancing ambition with caution—the world watches closely.