Dollar-Pegged Tokens Beat Yuan 80:1 – Can China’s Stablecoin Strategy Close Gap?

Key Points

1. Over 80% of the world’s stablecoins are pegged to the U.S. dollar, contributing to excessive dollar liquidity.

2. The Chinese yuan’s market exchange rate is undervalued compared to its purchasing power parity (PPP), resulting in an elevated liquidity premium.

3. China has yet to introduce formal legislation for stablecoins, while other jurisdictions like the U.S. and Hong Kong are advancing regulatory frameworks.

4. Li suggests that the People’s Bank of China (PBOC) should explore issuing yuan-pegged stablecoins under a regulatory framework aligned with 'same activity, same risk, same regulation'.

5. A compliant yuan-pegged stablecoin could expand the yuan’s cross-border use in settlements, financing, and digital payments, enhancing its international role.