China has the opportunity to weaken the hegemony of the US dollar in the development of stablecoins and build a new position for Chinese assets and the RMB in the global economy. Hong Kong stands at the forefront of this change.
History will remember this moment: On June 17, 2025, the US stablecoin "Genius Act" (GENIUS Act) was passed by the Senate.
On June 19, US Treasury Secretary Bessant said that the stablecoin ecosystem will promote private sector demand for US Treasury bonds, which is expected to reduce borrowing costs, help control national debt, and attract global users to join the US dollar-based digital asset economy. He believes that cryptocurrencies will not pose a threat to the US dollar, and stablecoins can consolidate the hegemony of the US dollar. The US government is committed to making the United States a center for digital asset innovation, and the "Genius Act" will help achieve this goal.
Besent and others thought they had just installed the rocket propeller of the digital age for the dollar hegemony, but they may have also ignited the prairie fire that quickly weakened the dollar hegemony.
The dollar hegemony is not a simple monetary phenomenon - it is a huge power matrix constructed by international institutions such as the IMF and the World Bank, the global financial network, the credit rating system, the financial sanctions stick, and the neoliberal ideology. As economist Li Xiao said, this is a system with "comprehensive, systematic and powerful hard power and soft power". (Li Xiao "Double Impact")
Stablecoin is a paradox for the dollar hegemony: it may increase the market demand for dollars and US Treasury bonds, but at the same time open source the "code" that makes the dollar out of control.
It is undeniable that stablecoins are a super stimulant for the hegemony of the US dollar in the short term: every African farmer who downloads a crypto wallet, every Asian businessman who uses USDT transactions, and every European programmer who holds USDC may inadvertently become a digital citizen of the US dollar empire.
The power of network effects may be fueling the hegemony of the US dollar in the era of stablecoins. When the first financial experience of the younger generation around the world is a US dollar stablecoin wallet, and when their value perception is forever anchored at "1 USDC = 1 USD", the US dollar has completed the sublimation from currency to measurement. This is no longer a simple use of currency, but a colonization of the mind - thinking in US dollars, pricing in US dollars, and dreaming in US dollars.
According to the requirements of the "Genius Act", each stablecoin needs to be supported by US debt, and Japan's status as the largest holder of US debt will soon become a submerged historical footnote.
Stablecoins are creating new history. However, at this new historical intersection, stablecoins will inevitably weaken the hegemonic power of the traditional dollar system and cut off its hands and feet; at the same time, the new intersection also provides new possibilities. In fact, stablecoins face greater uncertainty in extending their hegemony in the new era.
Stablecoins are a double-edged sword for the dollar hegemony, and the edge facing it is also very sharp.
Those "dollar weapons" that are about to lose their place
Technology has its own logic, and this logic is ruthless to power. The most deterrent aspect of the traditional dollar hegemony is that the United States weaponizes the dollar for economic sanctions. Stablecoins operate outside this traditional dollar system, making these weapons useless.
SWIFT and CHIPS, which are dominated by the United States, can be said to be its financial nuclear weapons. The former connects with more than 11,000 financial institutions around the world, covers more than 200 countries, and handles 80% of cross-border payment information; the latter monopolizes 95% of global dollar transaction settlement. In the past 20 years, Washington has been able to cut off the financial blood vessels of any country at any time, just like manipulating a puppet.
But stablecoins make this set of "dollar weapons" scrapped: users only need a string of alphanumeric wallet addresses to complete cross-border transfers in a few seconds. There can be no banks, no SWIFT, and even no compliance review - only cryptographically guaranteed point-to-point value transmission (in the development of cryptocurrency, decentralized markets outside of compliance reviews will always exist).
It's like inventing a portal, but finding that you can't control who is using it. The U.S. Treasury can sanction bank accounts, but how to sanction the vast number of anonymous wallets and blockchain addresses around the world? Although the United States and other economies will strengthen supervision of stablecoins, compared with the government's control in the traditional monetary system, in the cryptocurrency ecosystem where stablecoins are located, the government's control will no longer be the same as it was in the past, and can only decline helplessly. It's like the ultimate version of the whack-a-mole game - the mole has unlimited lives, but there's only one hammer.
It's not just the hard weapons that are failing to exert their power, the soft power pillar of the US dollar hegemony will also gradually lose its power in the stablecoin system.
For example, in the traditional financial market, S&P, Moody's, and Fitch monopolize 96% of the world's rating business, and the Big Four accounting firms guard the door to the financial system - but on the blockchain ledger, their role is minimal. When every transaction is recorded in a public ledger, when smart contracts are automatically executed without trust, and when algorithms replace human judgment, how much value do rating agencies have? And the gatekeepers of traditional finance have found that the door has disappeared.
Global financial rules are being rewritten, and Washington's original "financial weapons" are failing. And the new starting line is not just the United States.
From "fear of system collapse" to "fear of system backwardness"
The dollar hegemony has created a "fear of system collapse" - the cost of overthrowing the system is much higher than the cost of enduring exploitation. On the one hand, countries within the system cannot change the rules alone, and this situation is unlikely to change fundamentally in the short term; on the other hand, although countries within the system face increasing costs such as fluctuations in the US dollar exchange rate, contradictions between monetary policy and economic cycles, and often face various monetary and financial risks, the cost of overthrowing the system is greater. (Li Xiao, "Double Shock")
This "fear of system collapse" has been almost indestructible for decades, making the traditional dollar system the most successful case of Stockholm syndrome in history: countries know that they are being kidnapped, but they "love" the kidnapper because they will die more miserably if they leave him.
But stablecoins have created a new opportunity for the global monetary system. Stablecoins are not completely within the traditional US dollar system. As mentioned earlier, many tools and facilities of the traditional US dollar system are useless for stablecoins.
Moreover, in this newly emerging new system, all economies have the opportunity to start again. European institutions such as Societe Generale are planning to launch euro stablecoins, JD.com and other institutions are testing Hong Kong dollar stablecoins, StraitsX just launched the Singapore dollar stablecoin in May this year, and many small and medium-sized economies in the third world are preparing their own stablecoins.
More importantly, stablecoins are mostly issued by commercial institutions, and their credit basis has changed from "national sovereignty" to "corporate credit" and "asset credit". Therefore, the era of blooming flowers is bound to come.
In April 2023, the European Union issued the "Markets in Cryptoassets Regulation Act" (MiCA), in August 2023, Singapore announced the stablecoin regulatory framework, and on May 21, 2025, the Hong Kong "Stablecoin Ordinance" was passed. The competition of major economies on the rules of stablecoins has also been put on the agenda. The release, revision and promotion of regulatory laws, regulations and rules in various countries will become the key to the future competition of stablecoins.
Although the "fear" brought by the traditional dollar system still exists, the balance has tilted. The cost of staying in the old system is rising every day - the Federal Reserve raises interest rates at will, the United States imposes sanctions at will, and the weaponization of the dollar is getting worse. And the threshold for joining the new system is lowering every day - open source code is free to download, technical solutions are ready to use, and regulatory frameworks are copied from each other. When jailbreaking becomes safer than being in prison, "system collapse fear" will become "system backward fear".
Historical Mirror: Enlightenment of the Eurodollar
History will not repeat itself, but it will rhyme - and this time it is a fast-paced version.
After World War II, the US dollars of the Marshall Plan poured into Europe like a tide. In the 1950s, the Soviet Union was worried that the escalation of the Cold War would lead to the freezing of US dollar assets, so they decisively transferred their money to banks in London and Paris.
This defensive move made European bankers suddenly realize an astonishing fact: these dollars are not subject to US law, nor are they regulated by the US reserve system. Thus, a parallel dollar universe was born - the Eurodollar market, a shadow dollar empire that the Federal Reserve cannot control.
The oil crisis in the 1970s brought a torrent to this market. Middle Eastern petrodollars poured into London, and then flowed from London to Latin America, forming a "dollar circulation system" that completely bypassed the United States. On the one hand, this system strengthened the global status of the US dollar - from London to Singapore, from Cayman to Hong Kong, the whole world is using the US dollar - on the other hand, it made the Federal Reserve's monetary policy transmission weak.
In a few decades, the Eurodollar has grown from a trickle to an ocean, reaching tens of trillions of dollars.
If the Eurodollar is a "civilized" rebel - it still needs a banking license, SWIFT messages, and some form of financial infrastructure; transactions are conducted in bankers' conference rooms, and settlements are completed through polite telexes; even if it is out of the control of the Federal Reserve, it still operates within the framework of the traditional financial system. - Stablecoins are almost starting from scratch.
First, there is a speed difference. Eurodollars are settled in days, and stablecoins are confirmed in seconds. Eurodollars require bank business hours, and stablecoins never stop 7×24. If the Eurodollar is a chronic disease of the Federal Reserve, stablecoins may cause acute myocardial infarction - coming too fast, blocking too hard, and too difficult to save.
The second is the world of difference in entry barriers. What does it take to participate in the Eurodollar market? Bank relationships, credit lines, compliance departments, and back-end systems. Creating a stablecoin only requires one button, and everyone has the opportunity to obtain a stablecoin. When the threshold for creating money drops from skyscrapers to basements, the rules of the game change completely.
The most fatal difference lies in the degree of decentralization. Although the Eurodollar has separated from the Federal Reserve, it still circulates within the traditional financial system. Stablecoins have both regulated issuers and operators, as well as unregulated issuers and operators; there are both centralized issuers and decentralized issuance platforms; its infrastructure is a public chain with countless nodes throughout the world. The entire Internet has become a huge "offshore financial center" that is everywhere and nowhere to be found.
Stablecoins may create a huge, globalized, but uncontrolled US dollar liquidity. The global effect of the US monetary policy may be greatly weakened as a result. When the US dollar stablecoin can be collateralized by non-US dollar assets, and when each country can create "dollars" with its own assets, there will be more and more stablecoins, but the "belief" in US debt will be weaker and weaker.
Future battlefield: the battle of "synthetic currency"
The gear of innovation is turning in one direction: towards more functions and less control. And this gear is now turbocharged.
The "Genius Act" stipulates "standard stablecoins" - highly liquid US dollar asset reserves, US dollar denominated, and US regulated. Washington bureaucrats thought they could monopolize the rules of the game in this way. However, in the world of code, fork is easier than follow.
In addition to the stablecoins stipulated in the US "Genius Act", at least three types of stablecoins are constantly generated and circulated:
First, stablecoins that are not based on US dollar assets but denominated in US dollars. The stablecoin DAI is collateralized by crypto assets and still maintains a $1 anchor, and has become a widely accepted stablecoin in the cryptocurrency market. Similarly, it is not difficult to predict that there will be US dollar stablecoins issued with RMB assets, US dollar tokens backed by Japanese government bonds, and so on, as long as there are market-convincing assets and issuance mechanisms.
Second, stablecoins with US dollar assets as reserves but not denominated in US dollars. For example, China has nearly 800 billion US dollars in government bonds. Why can't it use it as a reserve asset to issue stablecoins denominated in RMB or Hong Kong dollars? Japan, Saudi Arabia, and Singapore all have large US dollar reserves and can play this game. US dollar assets have become ammunition depots, and the United States cannot stop others from firing.
Third, stablecoins that are neither based on US dollar assets as reserves nor denominated in US dollars. RMB stablecoins, euro stablecoins, yen stablecoins, and various versions of stablecoins supported by fiat assets are flourishing.
What is even more uncontrollable is that RWA (real world asset tokenization) has opened Pandora's box - real estate coins, commodity coins, carbon credit coins... "everything can be tokenized." These tokens may be used as collateral assets to issue stablecoins. In the cryptocurrency market, there are already many cases of such stablecoins. Although this type of stablecoin is not supported by mainstream supervision and has a small market share, innovation often sprouts from blank markets and marginal markets. With the development of the RWA market and the further prosperity of the Web3.0 ecosystem, as well as the continuous integration of the market and supervision, this type of stablecoin is very likely to flourish.
So a large number of "synthetic currencies" will appear on the market. In the traditional financial field, synthetic currency, also known as composite currency, refers to an artificially created monetary unit of account, and the value of each unit of account is a mixture of several currencies in a certain proportion. Typical synthetic currencies are IMF Special Drawing Rights and European Currency Units.
The development of stablecoins will give rise to a large number of synthetic currencies, which may be synthetic dollars or synthetic currencies denominated in other currencies. What is certain is that, following market demand, various stablecoin issuers around the world will provide the most attractive synthetic dollars or other synthetic currencies: better support, faster settlement, lower fees, and fewer problems. Regulatory arbitrage based on stablecoins is an important issue facing global regulation, and it is also a huge challenge facing the hegemony of the US dollar.
Scenario that is about to happen: Dependence on the US dollar is greatly reduced
People's dependence on the US dollar itself is weakening forever, and many people may not even know that there is another "dollar" besides stablecoins in the future. Because the rapid promotion of stablecoins, especially in real economic transactions, will reduce the frequency of people using the US dollar.
First, even if the US dollar stablecoin has the highest market share, it will reduce the usage rate of the US dollar. Although each US dollar stablecoin is purchased by users from the issuer with US dollars, as the application scenarios of stablecoins increase, people use stablecoins conveniently and frequently, and the necessity of exchanging stablecoins for US dollars is greatly reduced, and the market demand for US dollars is actually weakened.
Currently, the main trading scenarios of stablecoins are in the field of cryptocurrency, such as cryptocurrency exchanges and decentralized finance (DeFi). The proportion of transactions actually used in production and life scenarios such as trade and consumption is very low. As Walmart, Amazon, JD.com, Ant Group and others have issued stablecoins, the proportion of stablecoins used in trade and consumption scenarios is increasing. Stablecoins will replace traditional currencies and become the main carrier of circulation. This means that a large number of stablecoins will not be redeemed after issuance, but will enter the circulation field, reducing the demand for real currency. From the current structure of currency circulation, the US dollar, as the main currency in circulation, will be replaced in greater quantities.
Second, with the diversification of stablecoin issuers and denominated currencies, the differentiation of supervision between economic entities, and the continuous innovation of decentralized markets that are difficult to include in supervision, the stablecoins that users can choose are becoming increasingly abundant. Whether the proportion of US dollar stablecoins in the entire stablecoin market can still maintain its current absolute advantage is still very uncertain, after all, everything has just begun. Competition from other currencies may also reduce the market's dependence on the US dollar.
Conclusion: Still can't underestimate the "US dollar stablecoin hegemony"
We remind you that the backlash of stablecoins on the US dollar hegemony does not mean to underestimate the value of US dollar stablecoins to the US dollar hegemony, and we must not underestimate the United States' advantages in stablecoins and its ambition to create a stronger US dollar hegemony.
In fact, the current US dollar stablecoins do dominate the world, with a market share of more than 90%, which is much higher than the share of the US dollar in the traditional financial system.
As mentioned at the beginning of this article, US dollar stablecoins will expand the market demand for the US dollar and support US debt. The US government has also made no secret of its "ambition". Bessant said, "This administration is committed to maintaining and strengthening the reserve currency status of the US dollar." "Stablecoin legislation backed by US Treasury bonds or short-term Treasury bills will create a market to expand the use of the US dollar around the world through these stablecoins."
However, the development of stablecoins has just begun, and the formulation of stablecoin game rules has just begun. In this upcoming new world, who will be the rule maker and who is destined to be the rule taker? The answer lies in who can better meet market demand - the answer is in every line of code written, in every wallet created, and in every transaction across borders.
As the world's second largest economy, one of the largest creditors of the United States, and a leader in the digital economy, China has the resources, technology, and market to reshape the global monetary landscape. The RMB has become the world's second largest trade financing currency; calculated on a full-caliber basis, the RMB has become the world's third largest payment currency.
China's rapid economic development over the past 40 years has been developed under the global economy under the US dollar system. The US dollar hegemony is fully reflected in this system. China is working hard to reduce the constraints of the US dollar hegemony on China's development in the traditional system; and stablecoins provide a new track, in which China's huge high-quality assets, market credit and national credit accumulated over the past 40 years will be reflected as China's stablecoin competitiveness.
China has the opportunity to weaken the US dollar hegemony in the development of stablecoins and build a new position for Chinese assets and the RMB in the global economy. The key lies in determination and speed. The rules of the game of stablecoins are being written in real time, and every day of hesitation is an opportunity cost. It is not to fight against the US dollar, but to redefine the rules of currency.
In this process, Hong Kong stands at the forefront of this change. Not only because it is an international financial center, but also because it is the intersection of the East and the West, and the testing ground for the old and new systems-a hub connecting tradition and innovation, the East and the West, and regulation and freedom. In the new world of stablecoins, this is the biggest advantage.
Hong Kong should promote the development of stablecoins with a larger pattern, a higher position, more open policies, and more efficient supervision.
Kikyo
Weatherly
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Weiliang