China’s yuan reshaping global order – but US-backed stablecoins seen as a threat
New study shows yuan’s influence growing, but Washington’s digital finance push seen as risk to international monetary order
The yuan internationalisation index, which tracks the currency’s global use, rose by about 11 per cent in 2024 to 6.06, according to the Renmin University report released at this year’s International Monetary Forum, co-hosted with Nankai University on Sunday.
By comparison, the US dollar scored 51.13 in 2024, down from 51.52 the previous year, while the euro slipped 3.8 per cent to 24.07 on the index.
Meanwhile, the yuan ranked ahead of the Japanese yen and British pound, which scored 4.47 and 3.69 respectively. The report predicted the Chinese currency would strengthen further and widen the gap with both.
“The spillover effects of geoeconomic shocks have not only weighed on China’s real economy and financial markets, but also disrupted global trade and investment systems, supply chains and international financial markets,” the report’s authors wrote.
“Promoting the yuan’s internationalisation and leveraging it to push for reform of the global monetary system is a key strategy to mitigate geoeconomic risks.”
The report added that the upwards trend remains unchanged and is “driving a gradual adjustment in the international monetary landscape”.
If the US fails to address its twin deficits, it could trigger a financial crisis
“In the past two years, certain countries have sought to push forward premature regulatory frameworks for stablecoins through legislation and long-arm jurisdiction, while also suppressing and excluding the development space for other nations’ digital currencies,” said Chen Yulu, former vice-governor of the People’s Bank of China, at the forum.
“If this trend is allowed to spread unchecked, it could pose significant systemic risks to the global economic and financial system.”
Chen, now president of Nankai University, warned the trend could “expose the global financial system to major risks from single-asset volatility” – with shocks to the US dollar and Treasury bonds potentially spreading from stablecoins to the broader crypto ecosystem and even global financial markets.
While stablecoins can be pegged to any fiat currency, more than 99 per cent are currently backed by the US dollar or dollar-denominated assets – far outstripping the greenback’s roughly 50 per cent share in global payments and 58 per cent share in global foreign exchange reserves.
At the forum, Li Lihui, former president of the Bank of China, said Washington’s moves aimed to anchor stablecoins to the dollar to “secure global monetary and financial hegemony in the digital era” and expand demand for US Treasury bonds.
This would effectively tie the risks of the crypto asset market to those of the traditional financial system, he added.
“If the US fails to address its twin deficits, it could trigger a financial crisis. An unstable US economy and dollar would inevitably undermine the stability of dollar-backed stablecoins.”