Would Anyone Use a Chinese Stablecoin?

Digital currency has long posed a challenge for the government of China. Beijing has strict rules on how money flows, but digital currencies can help people move money instantly outside of the traditional banking system.

Yet China is also one of the most digital countries on the planet. Almost all payment transactions take place on apps that the government can keep close tabs on.

Now, Beijing’s relationship with digital currency is being further complicated by the growing global popularity of stablecoins, a digital currency designed to maintain a constant value of a traditional currency. Their backers believe stablecoins will replace credit cards and bank accounts.

Adding to the urgency for China is the newfound legitimacy for stablecoins conferred by a law President Trump signed in July. For the first time, the federal government will regulate how stablecoins are marketed and how much money stablecoin companies must hold in reserve.

Stablecoins could shift a significant share of global payments away from traditional banks and toward a new breed of corporate interests, including Mr. Trump’s own family businesses.

The vast majority of them are tied to the U.S. dollar. Some economists in China have warned that wider use of stablecoins could deepen the dollar’s dominance. China’s leaders do not want to miss an opportunity to influence the next generation of global payments.