Monetary innovation has come full circle. The blockchain is bringing the U.S. again to the period of personal cash, when banks and firms may concern their very own currencies. This time, as a substitute of gold and silver cash, company America is keen to concern their very own stablecoins.
The U.S.’s resolution to embrace cryptocurrency by means of laws just like the GENIUS Act doesn’t simply matter domestically. Washington’s transfer is putting strain on international locations all over the world to sign their very own stance on stablecoins and cryptocurrency.
In latest months, monetary officers and lecturers inside China have spoken up on the necessity to no less than contemplate authorizing stablecoins, which Zhiguo He, a professor of finance at Stanford College, says is motivated by the “worry of lacking out.”
And on Friday, the autonomous Chinese language metropolis of Hong Kong—which is betting on cryptocurrencies to bolster its standing as a monetary heart—will begin accepting purposes for a Hong Kong-dollar backed stablecoin, doubtlessly opening the door for a renminbi-backed token too.
With the U.S. going all-in on crypto, Beijing now faces a troublesome resolution: Does it match the U.S.’s dangerous wager on a stablecoin-centric future? Or does it play it protected, and danger lacking out on cutting-edge monetary know-how?
A crypto-happy U.S.
Stablecoins, in contrast to their extra unstable counterparts within the cryptocurrency house, are supposed to be a bit boring. These digital belongings are pegged to the worth of a reference asset, reminiscent of a fiat foreign money. Virtually all stablecoins are pegged to the U.S. greenback, the world’s reserve foreign money. Customers can faucet stablecoins to simply switch funds between totally different cryptocurrencies without having to resort to real-world cash.
Customers belief stablecoin issuers to have sufficient liquid reserves to redeem cash for fiat foreign money at any time. However in contrast to banks, stablecoin issuers don’t have a lender of final resort to fall again on. The 2022 collapse of TerraUSD, a so-called algorithmic stablecoin, unfold considerations about different cryptocurrencies, together with extra well-established tokens.
The potential for stablecoins to spark the cryptocurrency model of a monetary panic has led governments to be cautious of stablecoins. However now U.S. president Donald Trump, in his second time period, desires to make the U.S. the “crypto capital of the planet.”
“Trump has carried out a 180 for america and simply stated, ‘decontrol, decontrol, decontrol,’” says Harvard professor and former IMF chief economist Kenneth Rogoff.
The U.S. Congress handed the GENIUS Act on July seventeenth, establishing the primary regulatory framework for dollar-pegged stablecoins. The Act requires issuers to take care of reserves, reminiscent of in money or U.S. Treasury payments, to again their stablecoins on no less than a 1:1 foundation.
China considers crypto
The U.S.’s sudden crypto-happy stance may fear different nations. Greenback-backed stablecoins can be interesting in “actually poor international locations the place folks don’t belief the foreign money and central financial institution,” says Paul Blustein, journalist and writer of King Greenback: The Previous and Way forward for the World’s Dominant Forex. However even international locations with robust native currencies may face a future the place “residents choose to transact with this kind of instrument.”
The Individuals’s Financial institution of China (PBOC) is now in a irritating place. China has banned all cryptocurrency transactions since 2021, citing the dangers they may publish to the nation’s monetary system.
However China doesn’t need to discover itself behind the curve—or behind the U.S.—if stablecoins and blockchain know-how actually are the way forward for finance.
Wang Yongli, former vice chairman of Financial institution of China, wrote to WeChat in June that it “can be a strategic danger if cross-border yuan cost will not be as environment friendly as greenback stablecoins.” Yongli really useful a “proactive response from different international locations, significantly China” to U.S. laws, in line with the Pekinology e-newsletter.
PBOC governor Pan Gongsheng equally famous the rising use of stablecoins for cross-border funds on the 2025 Lujiazui Discussion board in Shanghai on June 18.
Days later, the Securities Instances, a newspaper owned by state media outlet Individuals’s Every day, wrote that business insiders “usually imagine that, as an rising cost software, the distinctive benefits and potential dangers of stablecoins can’t be ignored, and that the event of [renminbi-pegged] stablecoins needs to be sooner relatively than later.”
The South China Morning Submit reported on July 14 that China was exploring the feasibility of permitting the launch of stablecoins. Two native officers informed the newspaper that state-owned entities together with the securities agency Guotai Haitong and information infrastructure agency Shanghai Knowledge Group had been wanting right into a trial run of renminbi-pegged tokens.
“It’s not the truth that the U.S. goes into crypto, per se, that issues,” Evan Auyang, group president of Hong Kong-based blockchain know-how firm Animoca Manufacturers, says. “It’s actually what began because of this variation…Stablecoins turned institutional” after gaining legitimacy from the U.S. (Animoca Manufacturers intends to use for a license to concern stablecoins in Hong Kong.)
De-dollarization
There’s a geopolitical ingredient to the stablecoin dialog. If adoption of U.S. greenback stablecoins grows, issuers might want to maintain extra {dollars} and dollar-based belongings to again the peg. Tether, which points the world’s largest stablecoin, was already the world’s seventh largest purchaser of U.S. debt in 2024.
After chipping away on the greenback’s international dominance for many years, China doesn’t need to give the U.S. a chance to regain floor.
“They’re very involved concerning the U.S. exercising energy, increasing using the greenback,” says Rogoff.
China has tried to advertise better use of the renminbi for cross-border commerce, with restricted success. Commerce with remoted international locations like Russia and Iran could also be carried out within the renminbi, however most international locations on the earth nonetheless choose utilizing the U.S. greenback. The recognition of greenback stablecoins may “smother” Beijing’s efforts to develop its personal monetary networks, Rogoff says.
Trump’s commerce struggle has spurred talks of “de-dollarization,” or lowering reliance on the U.S. greenback, as a consequence of considerations about the way forward for the U.S. economic system and fears of greenback weaponization. Even Trump himself is nervous about challengers to the greenback, threatening huge tariffs in opposition to the BRICS bloc if it thought-about creating an alternate foreign money.
U.S. Treasury Secretary Scott Bessent has stated that stablecoins might help hold the U.S. greenback because the dominant reserve foreign money.
Some Chinese language officers agree with Bessent: former vice minister of finance Zhu Guangyao argued in June that “the strategic goal behind america’ promotion of stablecoins—intently tied to U.S. greenback liquidity—is to protect greenback supremacy,” as translated by the East is Learn e-newsletter,
Can China launch a stablecoin?
However even when Beijing is open to launching a stablecoin, it should overcome one other hurdle: its closed capital account, which suggests officers can’t authorize a Chinese language yuan renminbi (CNY)-pegged stablecoin.
There are “nonetheless a variety of considerations over capital flight points” that make the liberalization of China’s capital account unlikely, Auyang says.
China may authorize a stablecoin pegged to the offshore renminbi (CNH). And since over 70% of offshore renminbi funds are processed in Hong Kong, Huang Yiping, an advisor for the PBOC, prompt utilizing the town as a testing floor for China’s stablecoin launch. Chinese language tech large JD.com reportedly proposed an analogous scheme in its discussions with the PBOC.
Hong Kong’s Stablecoin Ordinance, due to enter impact on August 1st, already establishes a authorized framework for leveraging the town’s offshore renminbi pool, if the PBOC chooses to go in that route and supply enough liquidity for offshore renminbi-pegged stablecoin issuers.
Though the legislation requires issuers to carry reserves of their stablecoin’s reference foreign money, because the Hong Kong greenback itself is pegged to the U.S. greenback, HKD-pegged stablecoin issuers can maintain U.S. greenback reserves.
“Hong Kong is pegging to the USD. So, in some sense, they’re principally serving to the U.S.,” He, from Stanford, defined. “That is maybe why Beijing [could say], while you do the HKD [stablecoin], I need you to do the CNH as effectively.”
‘Rein within the euphoria’
Forex consultants are nervous about how stablecoins may find yourself posing a menace to the economic system—whether or not within the U.S. or in China.
Blustein factors to the danger of “foreign money substitution.” If the enchantment of stablecoins outweighs the enchantment of the native foreign money, it “screws up the central financial institution’s means to manage the economic system,” he argues, as everyone seems to be partaking in transactions in an instrument outdoors the financial institution’s management.
And with no central financial institution or lender of final resort, stablecoins are susceptible to runs—customers speeding to redeem their tokens for fiat foreign money all of sudden. The opportunity of a stablecoin disaster is “very parallel to the U.S.’s free banking period within the 1800s,” says Rogoff.
“The danger of a monetary disaster is excessive,” he says.
Blustein, for his half, is much less nervous about stablecoins messing issues up—partially as a result of they make up “a tiny a part of worldwide funds.”
“Stablecoins can’t probably purchase that many short-term treasuries” to compete with central banks and multinational firms, he suggests.
One other particular person expressing some skepticism about stablecoins? Eddie Yue, the top of the Hong Kong Financial Authority and the town’s de facto central banker.
In a press convention final week, Yue informed the general public to “rein within the euphoria” over stablecoins, pointing to “overly idealistic” discussions on how they could “disrupt the mainstream monetary system.”
