China's AxCNH Stablecoin: A Threat to USD Dominance?

Key Takeaways

What is AxCNH?

AxCNH, launched by AnchorX in Hong Kong, marks the first stablecoin pegged to the offshore Chinese yuan (CNH).

Regional Stablecoin Competition Heats Up

South Korea's BDACS has introduced KRW1, a won-pegged stablecoin, indicating growing competition in the stablecoin sector.

China Enters the Stablecoin Arena

China, once known for its stringent crypto regulations, is making a strategic re-entry into the digital asset space via Hong Kong. AnchorX, a Central Asia-based issuer, unveiled AxCNH at the 10th Belt and Road Summit. This stablecoin is pegged to the offshore Chinese Yuan (CNH) and licensed by Kazakhstan’s Astana Financial Services Authority (AFSA).

AxCNH has already partnered with major entities like Lenovo, Zoomlion, and Conflux, signaling ambitions that span cross-border trade and real-world asset tokenization.

AxCNH and the Belt and Road Initiative

The primary goal of AxCNH is to streamline cross-border transactions within China’s Belt and Road Initiative (BRI). This infrastructure program aims to create trade routes connecting China with the Middle East, Europe, and other regions.

Zoomlion has already tested AxCNH on the Conflux blockchain to optimize payments with BRI partners.

Furthermore, AxCNH is listed on ATAIX Eurasia, trading in AxCNH:KZT and AxCNH:USDT pairs, currently limited to professional clients.

By positioning AxCNH as a key settlement tool, China aims to challenge the dominance of U.S. dollar-backed stablecoins in global commerce.

Stablecoin Market Dynamics

The stablecoin market is currently valued at nearly $300 billion, representing approximately 7.5% of the total crypto market. Analysts project this sector could reach $1 trillion by 2026.

While AxCNH offers diversification for investors beyond USDT and USDC, significant challenges remain.

Challenges and Competition

China's capital controls, limited offshore CNH liquidity, and regulatory skepticism could impede widespread adoption of AxCNH. Geopolitical tensions may further complicate its acceptance outside Asia.

South Korea's KRW1, overcollateralized and backed 1:1 by fiat deposits or government debt, also adds to the competition. This reflects a growing emphasis on stability and transparency in the stablecoin sector.

Regulators are actively shaping the stablecoin landscape. In Australia, ASIC recently introduced a licensing exemption for intermediaries distributing certain stablecoins, including AUDM.

Will the U.S. Dollar Lose Dominance?

Despite increasing competition, the U.S. dollar's established position in the stablecoin market is unlikely to disappear quickly. Stablecoins serve as vital tools in emerging markets to combat inflation and facilitate remittances. In developed economies, they are evolving into yield-bearing financial products, highlighting their dual utility and investment potential.