The Decline of the Renminbi as a Reserve Currency: A New Shift in the Global Reserve System

China is committed to enhancing the international status of the Renminbi within the global financial system, but ongoing exchange rate controls are hindering this goal. According to data analysis from NS3.AI, these control policies have led to a significant decline in the Renminbi’s share of global foreign exchange reserves—from 2.83% in 2022 to 1.93% in 2025. Although China has expanded payment infrastructure through initiatives like the Cross-Border Interbank Payment System (CIPS) and the digital Renminbi, central banks worldwide still prefer reserve assets that are highly liquid and easily convertible. This trend is creating opportunities for the growth of crypto assets such as USD stablecoins and Bitcoin.

Practical Obstacles to Renminbi Internationalization

The core issue preventing the Renminbi from achieving a major reserve currency status is its limited convertibility. While the launch of the digital Renminbi demonstrates China’s innovative resolve, these technological measures cannot compensate for policy shortcomings. Central banks, when building diversified foreign exchange reserves, will naturally prioritize assets that are unrestricted by geography and freely tradable. The controlled nature of the Renminbi puts it at a disadvantage in this competition, leading to a decreasing attractiveness among central banks. Meanwhile, the traditional currency system is also experiencing diversification trends—not only with emerging market currencies like the Renminbi and Som, but across the entire global reserve structure, which is undergoing reconstruction.

Rise of Crypto Assets and Stablecoins

As the share of Renminbi reserves diminishes, the appeal of USD stablecoins and Bitcoin as new settlement tools is increasing. These assets offer attributes lacking in traditional reserve currencies: borderless liquidity, transparent on-chain settlement, and independence from single-country policies. For central banks, these crypto assets have become viable options to circumvent exchange rate restrictions and diversify reserves. Especially given the long-standing issues with Renminbi convertibility, this trend is expected to strengthen further.

Future Directions for Reserve Diversification

The future composition of global foreign exchange reserves will become more decentralized. While the US dollar remains dominant among traditional currencies, the mix of Renminbi, euro, British pound, Japanese yen, and other national currencies will become more flexible. Meanwhile, the share of digital assets is gradually increasing. As long as the convertibility restrictions on the Renminbi are not substantively reformed, central banks will continue to favor more convenient and liquid reserve tools. This means that in the coming years, crypto assets may further expand their role in central bank reserves, serving as a new means to bypass traditional geopolitical constraints. To regain competitiveness, the Renminbi fundamentally requires deep policy reforms.