Someone has explained the stablecoin clearly

Liu Yuhui (Deputy Director of the Shanghai Chief Economist Financial Development Center and Director of the China Chief Economist Forum) recently delivered a speech on stablecoins at the 2025 NetEase Economist Annual Meeting Summer Forum, with clear and sharp views.

The following is a summary of the key points of the speech:

1. The United States launched a stablecoin solution to deal with the dollar/U.S. debt crisis, which has been effective in the short term: U.S. debt risks have converged, U.S. stocks have hit new highs, and Bitcoin has exceeded $120,000.

2. The essence of the Sino-US game: the imbalance between China's industrial power and the U.S. dollar's financial power

• China's manufacturing output accounts for 35% of the world's total (or 45% in 2030)

• The United States is trying to reshape financial power through the expansion of blockchain assets (such as Bitcoin) and the legal tenderization of stablecoins, binding blockchain assets to the legal currency system, and driving demand for U.S. debt through the expansion of stablecoin demand.

III. Important Predictions:

• Cryptocurrency assets may have entered a time window of exponential and rapid expansion

• In the next five years, it is predicted that Bitcoin will reach 1.5 million US dollars per coin, and the scale of blockchain assets may jump to the top two of the world's major asset classes, competing with the legal currency system.  

Fourth, China needs a two-track response:

Renminbi trade payments are second in the world, but its share of reserve currencies ranks only fifth. Crypto assets may become a new breakthrough

① Promote central bank digital currency and improve cross-border payment and clearing networks ② Accelerate the construction of the RMB crypto asset market and promote RDA to resolve the fiscal dilemma.

Full text of the speech:

The most important event in the past two months has been the stablecoin bill.

The stablecoin bill is a self-salvation for the United States in the face of a deep crisis in the dollar and U.S. debt.

This matter will take time to test. But in the short term, global capital markets have already accepted this logic of self-salvation. After the Stability Act was introduced on May 16th, the precarious, highly volatile dollar asset market rapidly shifted, with US Treasury risks rapidly converging and buying and selling pressures gradually balancing. US stocks quickly returned from the high volatility seen in April to the familiar low volatility and have recently reached new highs, demonstrating remarkable strength. Cryptocurrencies, represented by Bitcoin, have recently reached a peak of $120,000, demonstrating that global capital markets are beginning to accept this logic. In this era, the underlying scenario is nothing more than a clash of two powers. This is the final showdown between the immense industrial power represented by China, a giant in the East, and the financial power represented by the US dollar. The trade and tariff wars we're witnessing are merely superficial. Twenty years ago, these two powers were well-matched. That's why globalization, 20 years ago, was known as the Chimerica-China relationship. Over the past 20 years, a unique G2 has emerged. The sharp conflict today stems from the gradual shift from alignment to a serious mismatch over the past 20 years. What is the fundamental reason for this mismatch? Over the past 20 years, the dominance of the manufacturing sector, represented by China, a giant in the East, has been rapidly increasing, while the financial power represented by the US dollar has remained stagnant and steadily declining, creating a significant gap between the two. By the end of last year, China's manufacturing output in 2024 had already reached 35% of the global market. What a remarkable achievement! The second to tenth largest economies combined are still smaller than China's. Crucially, this trend is accelerating. International organizations predict that in 2030, just five years from now, this proportion could rise to 45%, and then by another 10 percentage points. From the recent tariff war, we can see the strength of China's industrial power. After two rounds of tariffs between the United States and China, the average tariff rate on China has reached 50%. After one round of reciprocal tariffs imposed by other countries, the average tariff rate is now 20%. There are two scenarios for how these two powers will achieve a long-term equilibrium. The first scenario, from the perspective of American interests, is that since China's industrial power is so strong, how will the two countries align in the future? He's trying every possible means to dethrone China's industrial power. In fact, this is exactly what Trump did in the 2018 trade war. He sought to dismantle the globalized industrial, supply, and value chains centered around China, establishing near-shore trade and promoting ABC, thereby eliminating China from the new global supply chain system. However, the results have been far from ideal. Over the past five or six years, China's manufacturing industry's share of total output value has not decreased, but has actually increased by five percentage points. From the perspective of the Chinese, there is undoubtedly a deep yearning for the great cause of national rejuvenation. The Chinese have only one option: to significantly increase the weight of the RMB and RMB-denominated assets in the future global financial landscape, elevating it to a position commensurate with China's current preeminent industrial power. This means that the future discourse power of the global financial and monetary order faces a significant restructuring. The RMB has already taken center stage, reaching a historic juncture where it will compete with the US dollar's financial power. The second scenario. Americans will never easily surrender their crown to China, nor will they easily sign a surrender agreement. They will undoubtedly put up a fierce fight, struggle, resist, and pursue self-redemption. The United States has essentially made a decision: since there is already a huge mismatch between the two countries, how will we balance them in the future? The goal is to allow America's financial power to rise again, becoming stronger again and standing up to match the formidable industrial power of the Eastern powers. The stablecoin bill emerged against this backdrop. He attempted to leverage the executive power already secured by the Trump administration to forcefully promote blockchain-based assets, leading to a rapid expansion of the digital asset market. It connects the rapidly expanding blockchain-based cryptoasset market with the precarious fiat currency system represented by the US dollar and US Treasury bonds. The connecting link is the stablecoin. One unit of a stablecoin must be backed by a reserve of fiat currency or a legally recognized fiat currency asset. For example, consider the technology known as stem cells, where a body destitute of hope is suddenly injected with stem cells. Stem cells are living cells outside the body. If injected, they can rejuvenate a weakened body in a short period of time. The foundations of today's fiat currency system, represented by the US dollar and US Treasury bonds, are rotten and even facing collapse. I connect this to the booming and rapidly expanding market for blockchain assets. Why is the blockchain asset market expanding so rapidly? Advances in human technology and breakthroughs in AI supercomputing power have enabled the distributed computing rules built on blockchain to form a new trust mechanism. This trust mechanism can replace the traditional fiat currency system backed by government credit. The Americans are able to push this forward thanks to breakthroughs in AI computing power, which have enabled the rapid advancement of blockchain technology. Faced with this scenario, we in China must strive for the best outcome. For the benefit of the Chinese people, we must pursue scenario one, but we must also pay close attention to our strategic rivals, so we must proactively address scenario two. From a realistic perspective, I believe cryptocurrency assets may be entering a window of exponential growth. A prominent American investment fund recently released a major report with approximately 10 predictions, one of which is truly astonishing. By 2030, the price of Bitcoin will reach $1.5 million. It's currently $120,000, meaning a 13-fold increase. Imagine what that will entail. Bitcoin alone is already the fifth-largest asset class globally, valued at $2.4 trillion, second only to gold. Five years from now, crypto assets will be in the top two positions, behind only US Treasuries, rivaling the top two assets in global markets. It stands in stark contrast to the fiat currency system. This is a key prediction for the next five years. Judging by the surge in Bitcoin prices over the past two or three years, if blockchain assets and the US Treasury bond market, the largest fiat currency market, become a rival market in five years, it's hard to imagine what the future monetary and financial landscape will look like. I'm afraid the time for disruptive change may have already arrived. Why has the global capital market so quickly recognized and embraced this logic? Because the logic behind stablecoins is very clear. As long as the asset market on the blockchain continues to expand rapidly, demand for stablecoins will continue to rise, and the stablecoin market will rapidly expand. This is because stablecoins serve as cash in the on-chain asset market. By aligning stablecoins with fiat currencies or fiat assets designated as fiat currencies, the rapid expansion of stablecoin demand will also mean a rapid expansion of demand for U.S. Treasury bonds. The logic behind these two connections is easy to understand. The expansion of stablecoins stems not only from the expansion of the virtual or crypto asset world, but also from the real world economy and trade. By tying stablecoins to U.S. dollars and Treasury bonds, the ultimate goal is to reshape the foundation of the dollar's power, re-strengthening the dollar's position as the world's strongest financial power and further consolidating it. The effect is to curb the internationalization of the RMB and the industrial power of the Eastern powers, so that the two forces can regain a stalemate. I think Trump's current second round of tariffs is likely to be coordinated with the GENIUS Act. It is an integrated whole, so for China, we must actively respond. As for China, my view is that it should walk on two legs. On the one hand, China has also made great efforts in the past few years to promote digital currency with the central bank as the main body, that is, the digitization of legal currency. This effort, while certainly beneficial for promoting the RMB's cross-border payment system through the central bank's digital currency and improving the RMB's global clearing service network, aligns with our goal of strengthening China's dominance in the supply chain for manufacturing. However, this is far from enough. With the release of the GENIUS Act, China needs to quickly take the second step. We must accelerate the development of the RMB-denominated cryptocurrency market and proactively respond to challenges. The RMB-denominated cryptocurrency market, while still illegal in the onshore RMB market. We must quickly shift from a state of rejection to one of active embrace and integration. Today, the RMB's share of global trade payments ranks second, but its global share as a reserve currency is only fifth. This disparity is significant. Whether or not a currency can become an international currency hinges on its ability to accumulate assets denominated in it. To gain trust in the RMB, we must create sufficiently attractive RMB-denominated assets. Now that the cryptoasset market has opened up this space, it has entered a window of rapid expansion. China must embrace this trend; there's no other choice. Musk made an important speech, stating that in today's AI era, currency has essentially transformed into a data and information structure used to transfer value across time and space. Humanity may have truly returned to the philosophical understanding of ancient times, as expressed by Greek philosophers 3,000 years ago, such as Peter Glass, who argued that everything is number and that the origin of the world is number. Because human technology has reached this level, the concept of everything being number has become possible. This fundamental philosophical proposition may now be a reality. The window for rapid global cryptoasset expansion has opened. Whether the RMB can gain influence in the international monetary system, its potential leap in performance, and its ability to retain assets largely depend on this. From another perspective, today's major Western powers are actively embracing RWAs, RDAs, financial disintermediation, DeFi, and NFTs. These practical demands, in a sense, all serve the same purpose: to reduce debt and resolve the global debt crisis accumulated by the traditional fiat currency system. Today, China also faces profound challenges to its fiscal foundations. Real estate has entered the fifth year of a clear Kondratieff cycle since 2021. This means that the fiscal structure we established during the era of industrialization and urbanization, based on land premiums and land-based income, faces profound challenges. Consider the magnitude of the future challenges facing the real estate market. Therefore, a very practical need is to quickly find a new source of income from alternative production factors to serve as a new fiscal foundation and escape our current fiscal predicament. In today's technological age, the only path to new sources of income is data. Data must be monetized and assetized quickly, securely, and legally. And there's only one technological path to assetization: blockchain. Only through encryption through blockchain technology can data become a secure asset, acceptable in the real world, and on the balance sheet. Therefore, China has found a window of hope to escape its fiscal predicament. This window of hope is RDA. We acted very quickly. The Shanghai Data Exchange quickly launched the RDA standard last week. RDA is essentially the soul of RWA. China is vigorously promoting the future of RWA assets on the blockchain. The most important step is to do a good job of RDA. The rapid assetization of data element income will reshape the balance sheet of the entire macroeconomy. This is probably an important direction for China to escape the current deflationary cycle challenge.