RMB reserves drop to 1.93%! China's capital controls push USDT and Bitcoin to rise

IMF latest data shows that the RMB reserve share has dropped from 2.83% to 1.93%. USDT circulation exceeds $305 billion, with transactions reaching 56.7 trillion. Chinese exporters use USDT to evade capital controls, with settlement amounts increasing fivefold. The RMB’s share in SWIFT has fallen to 2.89%. USDT and Bitcoin absorb the demand that China’s restrictions cannot meet.

Deep Reasons Behind the Three-Year Halving of RMB Reserve Share

The latest foreign exchange reserve data from the International Monetary Fund shows that in Q3 2025, the RMB accounted for only 1.93% of global foreign exchange reserves, down from the peak of 2.83% at the beginning of 2022. This means that out of a reserve pool of $13 trillion, about $251 billion is denominated in RMB, with the US dollar still making up 56.92%, and the euro 20.33%. Over the past three years, despite China building faster payment channels and promoting digital currencies into cross-border settlement, the RMB’s share has continued to decline.

The RMB reserve share increased from $90.8 billion at the end of 2016 to $337.3 billion at the end of 2021, then declined again. This trend indicates that central banks are testing this asset class and then withdrawing investments when exchange restrictions become clearer. The purpose of holding foreign exchange reserves is to be able to deploy them immediately during crises, but China’s capital controls prevent RMB assets from being quickly converted into other currencies. This liquidity restriction is the fundamental reason why central banks are reluctant to hold large amounts of RMB.

The gap between what Beijing can control (infrastructure) and what it cannot (actual reserve demand) is where USDT and Bitcoin find their breakthrough. In 2024, China’s Cross-Border Interbank Payment System (CIPS) processed transactions worth 175.49 trillion RMB, a 43% increase from last year, with 8.2 million transactions. The network currently involves 190 direct participants and 1,567 indirect members, covering 189 countries, with 4,900 partner banks.

However, faster oil pipeline speeds do not automatically generate reserve demand. Central banks hold liquid, convertible assets that can be used without permission, which is prohibited by China’s capital account restrictions. Beijing can increase CIPS transaction volume and the adoption rate of mBridge without materially affecting reserve accumulation, because reserves depend on whether counterparties are willing to hold RMB-denominated securities on a large scale.

USDT Becomes a Shadow Offshore Dollar System

According to Artemis data, the circulation of USD-pegged stablecoins has exceeded $305 billion, accounting for over 99% of all stablecoin issuance. This figure already surpasses China’s total foreign exchange reserves in RMB ($251 billion), indicating that stablecoins like USDT have become a capital pool comparable to sovereign currency reserves.

Visa and blockchain analytics firm Allium tracked the total on-chain stablecoin transaction volume at $56.7 trillion. After removing high-frequency trading and arbitrage noise, the adjusted transaction volume is $11.1 trillion. The International Monetary Fund estimates that by 2024, the international stablecoin liquidity will reach $2 trillion, with cross-border flows captured by the adoption method, including $633 billion in North America and $519 billion in Asia-Pacific.

These numbers are significant because stablecoins can serve as offshore dollar wrappers, providing round-the-clock settlement without permission layers. According to Hong Kong OTC platform Crypto HK, Chinese exporters are increasingly using Tether’s USDT for payments to evade capital controls and currency exchange frictions. The platform reports that since 2021, Chinese clients’ monthly USDT settlement volume has increased fivefold.

Comparison of USDT and RMB Reserve Scale

Stablecoin stock: $305 billion vs. RMB reserves $251 billion (1.22x)

Adjusted transaction volume: $11.1 trillion vs. RMB reserves (44.2x)

Cross-border flows: $2 trillion vs. RMB reserves (8.0x)

Asia-Pacific volume: $519 billion vs. RMB reserves (2.1x)

Meanwhile, the RMB’s share in global payments tracked by SWIFT fell to 2.89% in May, a two-year low, while the US dollar accounted for 48.46%. The faster China builds its RMB payment infrastructure, the more these channels will compete with a liquidity-rich, globally used dollar alternative operating outside traditional banking systems and supported by stablecoin reserves to strengthen demand for short-term US assets.

Bitcoin as a Neutral Hedge Tool

Bitcoin, as a neutral, non-sovereign asset, is not controlled by China or the US, making it a hedge against RMB restrictions and the weaponization of the dollar. This unique positioning makes Bitcoin a beneficiary amid the obstacles to RMB internationalization. High-net-worth individuals and enterprises in China facing capital controls are turning not only to USDT for cross-border payments but also to Bitcoin as a long-term wealth preservation and transfer tool.

Bitcoin’s advantage lies in its complete decentralization and resistance to censorship. While USDT offers dollar stability and payment convenience, Tether could theoretically be pressured by regulators to freeze certain addresses. Bitcoin, on the other hand, carries no such risk; no centralized entity can freeze or confiscate Bitcoin, which provides irreplaceable value for users seeking ultimate financial sovereignty.

The IMF notes that in 2022, cross-border flows of stablecoins exceeded those of unsecured crypto assets, and the gap has continued to widen since, reflecting a market shifting from speculative tools to settlement infrastructure. Stablecoin net outflows are related to global dollar demand and tend to rise when the dollar strengthens, indicating that markets view stablecoins as a means to access dollars when traditional channels tighten. China’s restrictions have not eliminated the demand for dollar liquidity but have shifted it into tools beyond Beijing’s control.

By 2028, estimates of the stablecoin market size range from JPMorgan’s $500 billion to Standard Chartered’s approximately $2 trillion. The broader the range, the more stablecoins resemble offshore dollar money market fund wrappers, which, even with diversified official reserves, will reinforce the dollar’s dominance. This trend poses a fundamental challenge to China’s strategy of RMB internationalization.