21st Century Business Herald: Demystifying stablecoins

This article is from: 21st Century Business Herald

Author: Zhang Xin Guo Congcong

Editor: Zhou Yanyan

Reprint Note: The performance of Circle after its listing has been exaggerated (see “Crypto Bull Market, All in US Stocks: Circle from $31 to $165 in Ten Days”), and the wave of stablecoins is prompting global listed companies to jump on the bandwagon, leading to a short-term surge in stock prices. Even in the domestic market, which has seen years of strict crackdowns on cryptocurrency-related businesses, a large number of enterprises are officially announcing their exploration, development, and embrace of stablecoins, virtual assets, and RWA under the banner of their international or Hong Kong entities, further amplifying the FOMO sentiment. The media “21st Century Business Herald,” which frequently published articles on the blockchain industry (now known as Crypto Web3) between 2020 and 2021, published another article last night, warning of the risks behind stablecoins. Its perspective is quite representative, and the article’s statement that “a report by Huatai Securities shows that in Yiwu, the world’s small commodity center, local stablecoins have become one of the important tools for cross-border payments; blockchain analysis company Chainalysis estimates that as early as 2023, the on-chain stablecoin flow in the Yiwu market has exceeded $10 billion” has also sparked discussions.

As a recent focus of the global financial markets, stablecoins have sparked a frenzy in the capital markets.

Wind data shows that since Circle, known as the “first stock of stablecoins,” landed on the New York Stock Exchange on June 5, its stock price has surged nearly 10 times in just over ten days, skyrocketing from an issue price of $31 per share to $298.99; on June 24, Guotai Junan International received approval from the Hong Kong Securities and Futures Commission to upgrade its virtual asset trading service license, and on the same day, its stock price soared nearly 200%. On June 27, Tonghuashun indicated that its digital currency concept sector has been on the list for 22 consecutive days, ranking first in popularity that day.

“Sometimes nothing happens for decades, and sometimes decades’ worth of events happen in just a few weeks.” This sentence accurately reflects the impact of stablecoins on the global monetary system. From the controversies surrounding the impact on sovereign currencies sparked by the Libra project led by Facebook in 2019, to the stablecoin market potentially surpassing a market value of $250 billion by 2025, this blockchain-driven payment revolution has evolved from a technical experiment into a new battleground for great power competition.

As USDT (Tether, a type of stablecoin) occupies over 60% of the market share, and as the United States anchors stablecoins to the US dollar or US Treasury bonds through the “Guidance and Establishment of the U.S. Stablecoin National Innovation Act” (hereinafter referred to as the “GENIUS Act”), and as Hong Kong, China, implements the “Stablecoin Regulation”, a profound impact on monetary sovereignty, financial regulation, and global governance is quietly brewing.

In the face of the wave of stablecoins, the regulatory authorities in the mainland and Hong Kong, along with the Bank for International Settlements (BIS), have spoken out successively, sending an important signal: the impact of stablecoins should be approached with rationality, acknowledging their innovative value while also being vigilant about potential risks.

On June 18, at the Lujiazui Forum, Central Bank Governor Pan Gongsheng mentioned that emerging technologies such as blockchain and distributed ledgers are driving the vigorous development of central bank digital currencies and stablecoins, achieving “payment upon settlement,” fundamentally reshaping the traditional payment system, significantly shortening cross-border payment chains, while also posing huge challenges to financial regulation; HashKey Group Chairman Xiao Feng recently stated bluntly that if stablecoins occupy 30% - 40% of the trading share in the traditional financial market, it will have a disruptive impact on the traditional payment system.

However, there has been much discussion recently about whether the impact of stablecoins has been overestimated by the capital markets. On June 23, the President of the Hong Kong Monetary Authority, Yu Weilun, wrote an article calling for a “cooling off” period, stating, “As part of the regulator’s responsibilities, I also want to cool things down so that everyone can view stablecoins more objectively and calmly.” The BIS report also clearly pointed out that stablecoins have structural defects in three key dimensions: singularity, elasticity, and integrity, and therefore cannot serve as a pillar of the monetary system, but can only play a supporting role.

Rise: From Cryptocurrency Trading to Penetrating Cross-Border Payments

Stablecoins are a type of cryptocurrency that maintain their value stability by being pegged to specific assets (such as the US dollar) or a combination of assets, serving as a payment tool and a means of value storage. Compared to other cryptocurrencies like Bitcoin, stablecoins are considered by the industry as a “bridge” between fiat currencies and cryptocurrencies due to their relatively stable value and ability to overcome the pricing difficulties caused by the price volatility of other cryptocurrencies.

According to BIS, stablecoins are mainly divided into three categories:

• Fiat-backed stablecoins (such as Tether, USD Coin) are backed by short-term USD-denominated assets, dominate the market, and have an asset structure similar to money market funds;
• Cryptocurrency-backed stablecoins (such as Dai) are backed by cryptocurrencies, where “decentralized stablecoins” rely on smart contracts to manage the collateral;
• Algorithmic Stablecoins (such as the collapsed TerraUSD) adjust supply to peg their price through algorithms, but are susceptible to systemic risks influenced by market confidence.

Hashkey Tokenisation’s assistant partner, Yao Qing, told the 21st Century Business Herald that fiat stablecoins backed by the US dollar were initially used to solve the deposit and withdrawal issues of cryptocurrency exchanges. Most cryptocurrency exchanges, due to their low compliance levels, do not receive support from the commercial banking system and cannot use fiat currency for deposits and withdrawals, so they can only use US dollar stablecoins.

The earliest issued stablecoin appeared in 2014, issued by Tether, called USDT, which is pegged to 1 US dollar. Since then, USD stablecoins have accumulated a large number of users in cryptocurrency trading, gradually penetrating into other application scenarios, including cross-border trade settlement, inter-company payments, consumer payments, employee salary payments, and corporate investment and financing, with the types gradually diversifying. As of the end of May 2025, the global stablecoin scale is about 250 billion US dollars, compared to 20 billion US dollars in 2020, achieving an 11-fold increase over five years.

It is important to note that many people confuse our country’s central bank digital currency with stablecoins. In fact, central bank digital currency is a digital representation of legal tender, with its credit support coming from national sovereignty; whereas stablecoins are issued by private institutions, relying on pegging to fiat currency or other assets to stabilize their value, but there may still be anchoring deviations in actual operation. There is a certain degree of substitutive relationship between central bank digital currency and stablecoins, and they can also create some complementary effects, both of which can jointly promote the efficiency of financial infrastructure.

In fact, stablecoins are highly attractive for high-frequency, small-value international payment scenarios (such as cross-border e-commerce settlements and labor remittances) due to their lower cross-border payment costs, and are gradually penetrating into the daily landscape of cross-border payments.

According to a research report by Huatai Securities, in Yiwu, China, the world’s small commodity center, local stablecoins have become one of the important tools for cross-border payments. Blockchain analysis company Chainalysis estimates that as early as 2023, the on-chain stablecoin flow in the Yiwu market has already exceeded 10 billion US dollars.

In Manila, Philippines, the queues at traditional remittance centers are gradually dwindling, as over 40% of remittances have switched to stablecoin channels. According to statistics from the Central Bank of the Philippines in 2023, the scale of stablecoin remittances has accounted for 18% of the total remittances in the country, becoming a new pillar of the economy.

In Seoul, South Korea, stablecoin trading accounts for over 70% of the daily average trading volume of the cryptocurrency exchange Bithumb. According to a report by the Korea Financial Research Institute in 2024, 32% of individuals aged 18 to 35 hold stablecoins, not only for investment and risk hedging but also gradually replacing bank transfers for daily consumption.

Zeng Gang, the chief expert and director of the Shanghai Financial and Development Laboratory, summarized that the rise of stablecoins is rooted in four core characteristics.

• First is price stability. By pegging to fiat currencies like the US dollar at a 1:1 ratio, the volatility is usually less than 0.1%, making it a “value benchmark” in the crypto market.
• Cross-border liquidity. Relying on blockchain’s peer-to-peer transactions, USDT cross-border transfers take only 2 minutes, with costs as low as 1 dollar, crushing the traditional wire transfer’s 2 — 3 day cycle and 1% — 3% fees.
• Third is the diversified endorsement mechanism. From fiat currency collateral to algorithmic adjustments, it meets the needs of different scenarios. For example, PAXG is linked to physical gold, becoming a new choice for a safe-haven asset.
• Fourth is the digital economy hub. In exchanges like Binance, 90% of transactions are mediated by stablecoins; in DeFi (decentralized finance) platforms, over 70% of lending protocols are denominated in stablecoins, establishing the underlying infrastructure of DeFi.

According to reports, the proportion of stablecoins as intermediaries in currency trading in the virtual asset market has risen sharply over the past four to five years, currently exceeding 90%. According to Citigroup’s predictions, under a scenario of clearer regulatory pathways, the total circulating supply of stablecoins may grow to $1.6 trillion by 2030; in an optimistic scenario, it could reach $3.7 trillion.

Competing Legislation: Stablecoins Seek to Integrate into the Mainstream Financial System

From the emergence of decentralized cross-border payments with the issuance of USDT by Tether in 2014, to the “crypto Lehman moment” in 2021 triggered by the price collapse of the algorithmic stablecoin TITAN that caused panic selling in the market, and now to the stablecoin market size surpassing $250 billion, the stablecoin industry has undergone a transformation from wild growth to risk exposure. This has prompted major economies such as the United States, the European Union, and Hong Kong to accelerate regulatory actions. Behind the rush of countries to legislate is not only a competition for regulatory power over digital finance but also signifies that stablecoins are seeking to integrate into the mainstream of the traditional financial system in a compliant manner.

On June 17, U.S. time, the U.S. Senate passed the “GENIUS Act (also known as the ‘Guiding and Establishing American Stablecoin National Innovation Act’, referred to as the ‘GENIUS Act’ or ‘Genius Act’)”. This act provides a clearer regulatory framework for the development of the U.S. stablecoin market, marking a shift in U.S. stablecoin regulatory policy from restrictive development to active support.

The “GENIUS Act” places a “dollar shackles” on stablecoins. On one hand, it imposes strict registration location restrictions on the issuance of stablecoins, allowing only U.S. entities to issue compliant stablecoins, while foreign institutions must meet stringent cross-border regulatory requirements. On the other hand, it requires stablecoins to be tied to reserves, meaning that stablecoins must be backed by core assets such as U.S. dollar cash and U.S. Treasury securities within 93 days, directly injecting liquidity into the U.S. Treasury market.

“The stablecoin mechanism cleverly transforms the expansion of the crypto market into an extension of the dollar’s influence on-chain.” Li Yang, a member of the Chinese Academy of Social Sciences and chairman of the National Finance and Development Laboratory, believes that the U.S. is promoting stablecoin legislation with a clear legislative purpose of serving the interests of the dollar. It aims to modernize dollar payments, consolidate and strengthen the international status of the dollar, and create trillions in new demand for U.S. Treasury bonds.

In South Korea, the newly elected president Lee Jae-myung is actively fulfilling his campaign promises. The ruling party he leads, the Democratic Party of Korea, has proposed the “Digital Asset Basic Law”, which stipulates that companies with a capital of 500 million KRW or more can issue stablecoins, backed by reserve funds for refunds. Meanwhile, the roadmap for approving local spot cryptocurrency ETFs submitted by the Financial Services Commission of Korea indicates that an implementation plan will be developed in the second half of 2025, and preparations are underway to relax regulations on KRW-based stablecoins. Lee Jae-myung emphasized the importance of establishing a KRW stablecoin market to prevent capital outflows, aiming to promote financial innovation and enhance the stability of the financial system through the legalization and regulation of stablecoins, thereby participating in the global competition for digital assets.

As one of the international financial centers, the “Stablecoin Regulation” in the Hong Kong region of China provides an experimental sample for the “gradual breakthrough” of offshore RMB stablecoins:

As early as 2024, the Hong Kong Monetary Authority launched the stablecoin issuer “sandbox program,” selecting 3 groups of participating institutions from over 40 applications: JD Coin Chain Technology (Hong Kong), Yuan Coin Innovation Technology, and an entity formed by Standard Chartered Bank, ANZ Group, and Hong Kong Telecom. These institutions have begun testing the stablecoin issuance process and business models in a controlled environment.

On May 21, 2025, the Legislative Council of the Hong Kong Special Administrative Region of China passed the “Stablecoin Draft Regulation”; on May 30, 2025, the Hong Kong Special Administrative Region government published the “Stablecoin Regulation” in the Gazette, marking the official implementation of the regulation. The “Stablecoin Regulation” will officially take effect on August 1, marking the formal establishment of the world’s first systematic regulatory framework for fiat-backed stablecoins.

The “Stablecoin Regulation” requires any entity issuing fiat-backed stablecoins or stablecoins pegged to the Hong Kong dollar in Hong Kong to apply for a license from the Hong Kong Monetary Authority, and only licensed institutions can sell stablecoins to retail investors. Yu Weiwen mentioned that considering the characteristics of stablecoins as an emerging phenomenon, the risks involved in issuance, the need for user rights protection, as well as market capacity and long-term development planning, the license application has set high standards, and initially only “a small number of licenses” will be issued.

However, stablecoins still have a long way to go to truly integrate into the mainstream financial system. Zhao Binghao, director of the Fintech and Law Research Institute at China University of Political Science and Law, told reporters from the 21st Century Business Herald that the legislative regulation of stablecoins in various countries marks their formal entry into the financial regulatory landscape, but this does not mean that stablecoins have become mainstream currencies.

Zhao Binghao believes that regulatory policies have a double-edged sword effect: on one hand, they promote industry development, attract institutional capital, and drive the integration of stablecoins with fiat currencies in scenarios such as payments and cross-border settlements; on the other hand, they also raise the entry barriers and compliance costs for the industry. Taking Tether, the issuer of USDT, as an example, its extremely high profit margin (in 2024, Tether had no more than 200 employees but achieved a net profit of 13.7 billion USD, creating over 68 million USD in profit per person) is largely attributable to its lower compliance costs. In contrast, Circle, the issuer of USDC, has invested a significant amount of resources in compliance, resulting in higher operational costs and relatively limited market share. Similarly, the high compliance costs also confine the stablecoin market to a “big player competition” game, making it difficult for new players to find opportunities.

Ye Ningyao, a director of the Beijing Bank Law Research Association, also acknowledged the rise in compliance costs, stating that the “mainstreaming” process of stablecoins will inevitably be accompanied by a structural increase in compliance costs. Under the Hong Kong framework, issuers not only face high capital requirements but also need to bear technical investments in reserve asset custody, independent auditing, and real-time redemption systems. According to industry estimates, the annual operating costs of a compliant stablecoin issuing institution could reach HKD 50 million to 80 million. Although the U.S. “GENIUS Act” does not have a unified capital threshold, requirements such as anti-money laundering (AML) compliance and regular reporting also drive up operating costs, potentially driving small issuers out of the market. This “compliance premium” will lead to an increase in industry concentration, with traditional financial institutions (such as Standard Chartered Bank in Hong Kong and Fidelity in the U.S.) gaining a competitive advantage through their existing compliance infrastructure, while crypto-native enterprises face transformation pressures.

Zhao Binghao pointed out that the asset reserves of stablecoins are mainly verified through audits. USDT has not yet adopted the Big Four audits, which indirectly reflects the mainstream financial sector’s doubts about its transparency. This difference in auditing mechanisms highlights the core regulatory issue: how to ensure that the issuers of stablecoins actually hold reserve assets equivalent to their issuance volume.

Four Dimensions to “De-Mystify” Stablecoins, Experts: The Value of Stablecoins Could Even Drop to Zero

Stablecoins have rapidly risen due to technological innovation, sparking enthusiastic discussions globally about the transformation of currency systems, with some even viewing them as a “new Bretton Woods system” that could reshape the international monetary order. However, it is still necessary to examine the essence and impact of stablecoins from a rational perspective. A reporter from the 21st Century Business Herald will demystify stablecoins from four dimensions, restoring their true position in the global monetary system.

First of all, stablecoins are a shadow of fiat currency, not a monetary revolution.

Zou Chuanwei, Director of the Frontier Financial Research Center at the Shanghai Financial and Development Laboratory and Chief Economist at Wanxiang Blockchain, pointed out that the mainstream model of stablecoins does not create new currency; it merely tokenizes bank deposits and invests reserve assets in low-risk assets such as U.S. Treasury bonds. Essentially, it is a “blockchain translation” of the existing monetary system.

The aforementioned BIS report pointed out that stablecoins have defects in terms of singularity and elasticity, which also proves that stablecoins are not a “currency revolution.” Specifically, stablecoins lack the settlement functions provided by central banks, have fluctuating exchange rates, and cannot fulfill the relevant principles of currency issued by banks, nor do they possess the ability of the banking system to create money through lending activities. This indicates that stablecoins have not fundamentally changed the basic mechanisms of currency issuance and circulation, nor have they brought about a revolutionary transformation of the traditional currency system; they are merely an innovative attempt based on technologies such as blockchain within the existing monetary system framework. Therefore, it is difficult for them to become the pillar of the monetary system.

Taking the flexibility of currency as an example, Zhao Binghao stated that fiat currency relies on the solid backing of central bank credit, while the stability of stablecoins depends on the reserve assets of the issuer. In extreme market conditions, the value of stablecoins may even drop to zero, and the collapse of UST is a typical example.

Secondly, stablecoins do not exist beyond sovereign currencies.

In other words, the moat of sovereign currency is very strong, and stablecoins cannot penetrate this system, but it is still necessary to guard against their potential impact on the sovereign currency system.

“As long as sovereign states exist, the sovereign nature of currency will not change.” Li Yang stated that currency sovereignty is an important component of national sovereignty, representing the highest authority of each country to issue and manage its own currency domestically, as well as the fundamental right to independently implement its foreign monetary policy and equally participate in handling international monetary and financial affairs. Therefore, the introduction of various digital assets, including stablecoins, does not imply the emergence of a new international monetary system that transcends sovereignty.

The “integrity” flaw of stablecoins mentioned in the BIS report is proof that they are difficult to surpass sovereign currencies. As a digital bearer instrument on a borderless public blockchain, stablecoins lack “Know Your Customer” (KYC) standards, making them prone to illegal activities, and thus unable to possess the solid trust base and comprehensive guarantee mechanisms like sovereign currencies. In contrast, sovereign currencies benefit from national credit backing and a robust regulatory system, giving them an advantage in preventing financial crimes.

Yao Qingyi also believes that USD stablecoins will support the international status of the dollar together with the SWIFT messaging system, Visa, and Mastercard for quite a long time in the future, rather than replacing the existing system. Essentially, USD stablecoins are still issued by private institutions based on dollar reserves, lacking national credit backing, formal international recognition, and a complete governance structure.

However, Li Yang pointed out that regardless of how stablecoins develop, when they are used for international payments, it is impossible to bypass the “exchange” regulations between sovereign currencies. Nevertheless, given that payment and clearing are fundamental functions that cannot be replaced by currency, the stablecoin payment system continues to grow. While it cannot create new international currencies, it effectively erodes the functions of existing sovereign currencies. This has a significant impact on the monetary systems of various countries and even the international monetary system, which warrants close attention and prevention.

Third, the digestion effect of stablecoins on U.S. Treasury bonds is relatively limited.

After the introduction of relevant legislation in the United States, some viewpoints suggest that the U.S. is trying to use stablecoins to alleviate pressure on U.S. debt. Zou Chuanwei explained that, although public reports indicate that the scale of U.S. Treasury bonds in USDT’s reserve assets exceeds 120 billion dollars, even higher than Germany’s holdings, the demand for U.S. Treasury bonds created through dollar stablecoins is difficult to effectively relieve the U.S. debt problem.

Firstly, according to the U.S. “GENIUS Act”, the reserve assets of the U.S. dollar stablecoin can only be invested in short-term government bonds maturing within 93 days, while long-term government bonds are key to solving the U.S. debt problem;

Secondly, compared to the total amount of over 36 trillion U.S. dollars in U.S. Treasury bonds, even if all dollar stablecoin reserve assets were used to purchase U.S. Treasuries, the total would only be 245.2 billion dollars, which is a very small proportion;

Thirdly, if the issuer of the US dollar stablecoin holds a large amount of US Treasury bonds and allows users to redeem flexibly , once faced with a large-scale redemption wave, the issuer may be forced to sell US Treasury bonds, which could impact the stability of the US Treasury bond market.

It can be seen that the US dollar stablecoin faces the “impossible triangle” dilemma - the three goals of large-scale issuance, a significant allocation of reserve assets to long-term US Treasury bonds, and flexible redemption for users cannot be achieved simultaneously.

Fourth, the hedging function and investment attributes of stablecoins have not been fully validated.

Although touted as a “cross-border payment miracle,” the BIS research has poured a bucket of “cold water” on this claim. The study points out that actual stablecoins are more of an entry tool into the DeFi and crypto markets. Moreover, there is no conclusive evidence to support their function as a “safe-haven asset.” Recent research indicates that over 90% of fiat-backed stablecoins also experience capital outflows in the face of shocks from the crypto market and U.S. monetary policy, showing their inability to provide effective risk mitigation during market turbulence.

In addition, Yao Qing stated that although there have been forms such as algorithmic stablecoins and over-collateralized stablecoins in the development of stablecoins, their essence still lies in being a medium of exchange based on the characteristics of value storage and circulation convenience. This is fundamentally different from virtual currencies that have investment attributes, and their functional positioning should be viewed rationally without over-exaggerating and mythologizing.

Impact and Reconstruction: Possibilities and Challenges of a Multi-Currency System

Under the wave of blockchain technology, stablecoins have jumped from a niche application in the realm of crypto assets to a key variable that stirs the global monetary system. When USDT circulates with a daily trading volume of hundreds of billions of dollars in cross-border payment scenarios, and as countries engage in a new round of games around stablecoin legislation, the future form of currency is undergoing unprecedented shocks and reconstruction.

Ye Ningyao stated that the global stablecoin market is currently showing a trend of multipolar development: the EU has strengthened regulatory restrictions on non-euro stablecoins through the MiCA legislation (the Markets in Crypto-Assets Regulation); Russia has innovatively launched the RUBC stablecoin, which is backed by a mix of gold and US dollars. In the de-dollarization process, BRICS countries are exploring the establishment of a “common currency” mechanism, while some emerging economies are attempting to issue stablecoins backed by gold or commodities, all of which aim to reduce traditional reliance on the dollar system.

However, the rapid development of stablecoins has also brought a series of risks and regulatory challenges that cannot be ignored.

On June 25, during the Summer Davos, Li Bo, Vice President of the International Monetary Fund (IMF) and former Deputy Governor of the Central Bank, stated that despite multiple countries actively conducting regulatory experiments with digital currencies and stablecoins, striving to build an appropriate legal framework, this is just the starting point, and further consensus is needed. He noted that currently the attributes of stablecoins are vaguely defined—whether they belong to currency or financial assets is still unclear, which directly affects the corresponding legal and regulatory requirements; moreover, if recognized as currency, issues such as how to delineate the layers of currency and how to establish supporting anti-money laundering mechanisms are still under intense discussion.

Zhao Binghao pointed out to this reporter that currently, global stablecoins are issued by private institutions, and there have been no cases of direct central bank involvement. Taking the US market as an example, the vigorous development of private dollar stablecoins such as USDT and USDC has objectively strengthened the international status of the dollar, which also explains why the Trump administration did not actively promote the construction of Central Bank Digital Currency (CBDC). However, this market-oriented issuance model has significant regulatory blind spots— the Federal Reserve lacks effective control measures over the on-chain circulation of dollar stablecoins, and this lack of control may brew huge financial risks.

Zhao Binghao particularly emphasized the two prominent challenges currently faced by stablecoin regulation:

First, there is a serious imbalance in the cross-border and cross-chain regulatory mechanisms. Although major financial markets such as the United States and Hong Kong have established regulatory frameworks, the lack of uniform standards among countries creates opportunities for regulatory arbitrage.

Second, the technical regulatory capacity is clearly insufficient. In the face of a stablecoin system supported by blockchain technology, regulatory agencies are still using traditional regulatory tools, leading to a serious lack of technical penetration. A typical manifestation of this problem is that for mainstream stablecoins like USDT, the issuer can only implement technical freezes (i.e., “address blacklisting”) on a portion of on-chain assets, while most regulatory operations still rely on the cooperation of public chain infrastructure to be completed.

Yu Weiwen wrote that the anonymity of stablecoins and their convenience for cross-border transactions give rise to anti-money laundering challenges, while also posing risks such as bank runs, deposit migration, systemic risk transmission, and technical security issues. Lin Yingqi, deputy general manager of the research department at CICC and a banking analyst, also told our reporter that the regulatory difficulties of stablecoins mainly lie in customer identity verification (KYC) and anti-money laundering (AML): currently, regulation mainly involves reviewing customer information at the platform level and identifying customer information during the exchange of digital currencies for fiat currencies. However, the blockchain technology used by cryptocurrencies makes it difficult to trace the mapping of on-chain data to real customer information once funds enter the blockchain, making it challenging to monitor fund flows on-chain and increasing regulatory difficulties.

From a regulatory perspective, Yu Weiwen stated that internationally, represented by the Hong Kong Monetary Authority, there is active participation in the FSB’s “Global Regulatory Framework for Crypto Asset Activities” to promote cross-border regulatory cooperation; locally in Hong Kong, the principle of “same activity, same risk, same regulation” is followed, clarifying issuer qualification requirements through the “Stablecoin Ordinance” and using a “sandbox” mechanism to verify business models in advance. Yu Weiwen also emphasized that the approval of stablecoin licenses must strictly control the number, focus on real application scenarios and market trust, while imposing strict requirements on compliance capabilities such as reserve management and anti-money laundering, as well as business sustainability.

Li Bo also revealed at the 2025 Summer Davos Forum that the IMF, Financial Stability Board, Basel Committee, and other institutions will collaborate to develop relevant standards and guidelines to assist countries in better implementing central bank digital currencies and stablecoin initiatives.

Moreover, due to the impact of stablecoins, emerging markets must also be wary of the risk of “digital dollarization.” Yao Qing told reporters from the 21st Century Economic Report that USD stablecoins, with their advantages of speed, low cost, and disintermediation, have become an important tool for cross-border payments and fund transfers, highly favored by individual and institutional users. In regions such as Latin America, Africa, and Southeast Asia, a large number of residents hold and use USD stablecoins to avoid the risks of domestic economic instability and depreciation of their local currencies, which essentially forms a digital “dollarization” process. This trend not only strengthens the international dominant position of the dollar but also poses a certain substitutive impact on the fiat currencies of countries where the value of the local currency is not stable, subjecting their monetary sovereignty to severe challenges.

Looking to the future, Li Yang believes that in the face of the stablecoin wave, China needs to advance comprehensively along two lines. The first is to firmly promote the internationalization of the Renminbi. Given that stablecoins inherently rely on sovereign currency systems, continuously strengthening the international status of the Renminbi remains a core task. Past efforts to expand local currency swap agreements, optimize the Renminbi cross-border payment system, improve the global clearing network, and increase the usage rate of the Renminbi in the “Belt and Road” economic and trade initiatives must be steadfastly deepened and implemented.

Ye Ningyao also pointed out that offshore RMB stablecoins are demonstrating unique development potential: relying on the regulatory framework established by Hong Kong’s “Stablecoin Regulation”, technology giants such as Ant Group and Tencent are actively exploring the application of RMB stablecoins in cross-border trade scenarios, providing an innovative path for the internationalization of the RMB.

Regarding another line, Li Yang mentioned that we must face the trend of the integration and development of stablecoins, cryptocurrencies, and the traditional financial system, which will be difficult to reverse. In recent years, the EU, Japan, the UAE, Singapore, and Hong Kong have shifted towards a model that supports the integration and development of central bank digital currency experiments, stablecoins, and cryptocurrencies. This integration model helps achieve complementary development among the three, significantly improving payment efficiency and reducing payment costs, reconstructing the global payment system, and promoting the development of DeFi. However, it is important to note that while advancing the development of stablecoins, we must also address issues such as the replacement of sovereign currencies, money laundering, user rights protection, and the loss of control over monetary policy.

The rise of stablecoins is a continuous tug-of-war between technological innovation and institutional constraints. It is neither a “currency revolution” that disrupts sovereign currencies nor a tool for reconstructing monetary hegemony, but rather a technological revolution that reconfigures the payment system—rewriting the rules of value transfer with blockchain while being constrained by national currency sovereignty.

In this technological revolution, the United States attempts to incorporate stablecoins into the “dollar system” through legislation, while China explores the offshore pilot of the renminbi stablecoin, and emerging markets must be wary of the risks of “digital dollarization.” Looking ahead, the global financial monetary system may not be dominated by the dollar or a pattern of multiple equal currencies, but rather a complex ecology where sovereign currencies, central bank digital currencies, and compliant stablecoins coexist.