The Ascendancy of the Renminbi: An Analysis of Current Reserve Dynamics
Introduction: The Quest for Reserve Currency Status
China has embarked on a strategic initiative to elevate the renminbi (RMB) to the status of a global reserve currency. However, empirical data illustrates a complex narrative where Beijing’s stringent capital controls inadvertently foster the proliferation of Bitcoin and dollar-denominated stablecoins as viable alternatives rather than direct competitors to the RMB.
Current Standing of the Renminbi in Global Reserves
According to the International Monetary Fund (IMF), the RMB constituted a mere 1.93% of global foreign exchange reserves in the third quarter of 2025, a decline from its zenith of 2.83% in early 2022. This translates to approximately $251 billion out of a comprehensive reserve pool valued at $13 trillion. In stark contrast, the US dollar dominates with 56.92%, while the euro claims 20.33% of this market.
- The RMB’s share has been on a downward trajectory for three consecutive years, despite China’s advancements in payment infrastructures and efforts to integrate its digital currency into international transactions.
- The disparity between Beijing’s control over payment systems and its inability to influence reserve demand is where cryptocurrency finds fertile ground.
The renminbi’s global reserve share fell from a 2.83% peak in early 2022 to 1.93% by 2025’s third quarter.
Rails Without Reserves: An Examination of China’s Payment Systems
China’s Cross-Border Interbank Payment System (CIPS) processed an impressive 175.49 trillion yuan in 2024, marking a year-over-year increase of 43% across 8.2 million transactions. The system has successfully expanded its reach to nearly 4,900 banks spanning 189 countries through both direct and indirect participants.
- The People’s Bank of China (PBoC) frames this expansion as a safeguard against potential disruptions from Western financial systems, bolstered by the introduction of the digital yuan.
- Domestic transactions using e-CNY surged to 3.4 billion, facilitating payments amounting to 16.7 trillion yuan, marking an extraordinary increase of 800% compared to 2023.
Despite these advancements, enhanced transaction capabilities do not inherently translate into increased reserve demand. Central banks typically maintain reserves in liquid, convertible assets that are free from external restrictions—an attribute that China’s capital controls obstruct.
- The RMB’s journey as a reserve asset has exhibited fluctuations, initially rising from $90.8 billion at the end of 2016 to $337.3 billion by late 2021 before experiencing a decline, indicating that while central banks may explore diversification, they ultimately retreat when faced with constraints on convertibility.
- Recent methodological adjustments by the IMF complicate historical comparisons but underscore an unmistakable trend: while the dollar’s share may be diminishing, the RMB fails to capitalize on this opportunity.
The Emergence of Shadow Dollar Infrastructure
The proliferation of dollar-denominated stablecoins has reached approximately $305 billion, accounting for over 99% of all stablecoin issuance as per data from Artemis. Moreover, Visa and blockchain analytics firm Allium have tracked an astounding total on-chain stablecoin volume exceeding $56.7 trillion, with an adjusted volume of about $11.1 trillion, once high-frequency trading and arbitrage activities are filtered out.
- The IMF projects international stablecoin flows to reach roughly $2 trillion in 2024, with North America and the Asia-Pacific leading regional distributions at $633 billion and $519 billion, respectively.
- Stablecoins act as offshore dollar equivalents with continuous settlement capabilities devoid of bureaucratic constraints.
Chinese exporters have increasingly opted for Tether’s USDT to navigate capital controls and mitigate currency conversion challenges. Reports from over-the-counter desk Crypto HK indicate that monthly USDT settlements by Chinese clients have surged fivefold since 2021.
Notably, the RMB’s share of global payments tracked by SWIFT dipped to 2.89%—its lowest point in two years—while the dollar maintained dominance at 48.46%.
The rapid development of Chinese payment infrastructures does not diminish demand for dollars; instead, it reroutes such demand towards instruments beyond Beijing’s purview.
Two Futures: A Trade-off Between Control and Convertibility
If global reserves expand to $15 trillion within this decade, achieving a modest 5% share for the RMB would necessitate an additional accumulation of approximately $500 billion, effectively doubling current holdings. An ambitious target of 8% would require nearly $950 billion in net new reserves.
- Historical data reveals that from late 2016 to late 2021, the RMB successfully added $246 billion, demonstrating that central banks will consider diversification when external conditions are conducive.
The pivotal question remains whether China will liberalize capital flows sufficiently to foster sustained demand or continue its approach centered on controlled rails.
Recent lobbying efforts by major Chinese enterprises such as JD.com and Ant Group aim to establish offshore yuan stablecoins in Hong Kong, which anticipates issuing its first stablecoin licenses by March 2026.
This strategy enables China to directly compete with dollar-denominated stablecoins by introducing a tokenized version of the RMB that remains partially convertible while operating within a regulated framework.
Should this initiative succeed, it could erode dollar dominance in stablecoin markets without necessitating a complete relinquishment of control over domestic capital flows.
Conversely, should China focus solely on enhancing CIPS and mBridge while failing to significantly bolster RMB reserves, it would likely amplify reliance on dollar stablecoins and Bitcoin as default alternatives.
Conclusion: What’s at Stake
The core issue is not whether China can establish faster payment rails—it is abundantly clear that it can—but rather whether it can persuade central banks and market participants to hold RMB assets at scale without compromising domestic financial control.
As each quarter passes without addressing this gap, dollar-denominated stablecoins and Bitcoin solidify their status as preferred mechanisms for entities requiring rapid settlement capabilities and cross-border functionality without regulatory hindrances.
While there is potential for incremental increases in the RMB’s reserve share, unless China resolves its convertibility limitations, the predominant beneficiaries will be those assets that effectively navigate around these constraints.
