Problems of the yuan in the fight for the status of a global reserve currency

zkProofInThePudding · 2026-02-12T16:10:16+00:00

China's efforts to establish the yuan as a primary reserve currency face significant challenges, including strict currency controls and limited convertibility, leading to a decline in its reserve share. Digital reforms are underway, but alternatives like crypto-assets are gaining preference among central banks.

zkProofInThePudding

2026-02-12 16:10:16

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China’s efforts to establish the yuan as the primary reserve currency face significant obstacles. Instead of strengthening its position, the currency is losing influence: according to NS3.AI analytics, the yuan’s share in central bank reserves decreased from 2.83% in 2022 to 1.93% by 2025. This trend reflects growing dissatisfaction with the global financial system’s handling of the convertibility of Chinese currency.

System of Restrictions: Barriers to Recognition

The currency control system creates a key barrier to expanding the yuan’s use abroad. Central banks prefer to work with currencies that can be easily exchanged without bureaucratic obstacles. These restrictions directly contradict Beijing’s goals and demonstrate how current limitations hinder the integration of the yuan into the global financial system.

Digital Reforms: Insufficient and Ineffective

China is making significant efforts to develop infrastructure supporting the yuan. The Cross-Border Interbank Payment System (CIPS) and the digital yuan program were designed specifically to overcome such barriers. However, these initiatives have yet to deliver the expected results—financial institutions worldwide remain loyal to more liquid and reliable assets, including the US dollar.

Crypto Assets Fill the Gap

The increasing preference of central banks for crypto assets, especially dollar stablecoins and Bitcoin, reflects a search for alternatives to traditional reserves. These instruments offer advantages that the yuan cannot guarantee: independence from Chinese regulatory restrictions, global accessibility, and transparency. If Beijing does not implement fundamental reforms in convertibility, reserve diversification will continue to shift toward decentralized and cryptographic assets.

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