Chinese investors shift to real-world asset tokenization as the appeal of USD stablecoins declines

In recent years, Chinese crypto investors have long relied on USDT and other USD stablecoins to hedge against market volatility, but recent currency movements have prompted them to reassess the risks. Over the past six months, the offshore yuan has appreciated against the US dollar from 7.4 to 7.06, the highest level in a year, meaning that investors holding USD stablecoins have seen the value of their assets quietly shrink when calculated in RMB. For example, if you exchanged 100,000 RMB for USDT in April, exchanging back now would yield only about 95,400 RMB, a loss of about 4.6%, without touching any volatile crypto assets.

The dual pressure of a weakening dollar and a strengthening yuan is at play. This year, the US Dollar Index has fallen nearly 10%, with weak US employment data and Federal Reserve rate cuts triggering widespread unwinding of arbitrage trades. At the same time, a rebound in the Shanghai stock market has attracted foreign capital, further supporting the yuan’s appreciation. RMB settlements between enterprises are also increasing, and growing financial hedging needs have pushed demand for RMB beyond speculative levels. According to Goldman Sachs research, for every 1% appreciation of the yuan, Chinese stock market returns rise by about 3%, creating a self-reinforcing cycle.

Against this backdrop, USD stablecoins are no longer a reliable safe-haven tool. Yuan appreciation has weakened the local purchasing power of USDT, while the People’s Bank of China and 13 other ministries have included stablecoins under anti-money laundering and foreign exchange regulatory scrutiny, warning of their lack of legal status and potential use for illicit financing or cross-border capital flows. In the peer-to-peer market, the USDT to RMB exchange rate has fallen below 7, accompanied by increased transaction fees and spreads.

To cope with asset shrinkage and regulatory pressure, Chinese investors are turning to on-chain, USD-denominated tokenized real-world assets such as tokenized US stocks and gold. These assets not only offer potential returns but can also partially offset currency risk, enabling diversification while maintaining US dollar exposure.

This shift indicates that USD stablecoins are transitioning from a safe haven to a potential risk asset. Chinese investors’ reliance on stablecoins is declining, signaling the profound impact of yuan appreciation and the global trend of asset tokenization on the structure of the crypto market. (BeinCrypto)