U.S., China's Stablecoin Arms Race Reshapes Global Finance

Source: [1] title1 (url1) [2] title2 (url2) [3] title3 (url3) [4] title4 (url4) [5] title5 (url5) [6] title6 (url6) [7] title7 (url7) [8] title8 (url8) [9] title9 (url9) [10] title10 (url10) [11] title11 (url11) [12] title12 (url12)

Stablecoin adoption is accelerating as the U.S. and China intensify efforts to shape the future of global finance. The U.S. has moved to formalize a regulatory framework for stablecoins through the GENIUS Act, which mandates that dollar-backed stablecoins be fully collateralized with short-term U.S. Treasuries and cash equivalents. This legislation aims to solidify the dollar’s dominance by positioning stablecoins as institutional buyers of Treasuries, potentially surpassing foreign holders like China in demand. Analysts project the stablecoin market could reach $2 trillion by 2028, with current reserves already exceeding $120 billion in Treasuries.

China, meanwhile, is recalibrating its strategy in response to the growing influence of U.S. stablecoins. While its digital yuan (e-CNY) initiative has struggled with adoption, the country is exploring state-controlled stablecoins to maintain financial sovereignty. Hong Kong’s recent Stablecoins Bill allows licensed entities to issue fiat-backed stablecoins, including those pegged to the offshore renminbi (CNH), signaling a cautious but strategic shift toward blockchain-enabled finance. Chinese officials and scholars warn that U.S. dollar stablecoins threaten Beijing’s ability to manage capital flows and enforce financial controls, prompting calls for a renminbi-backed stablecoin to counter dollarization.

The geopolitical stakes are high. U.S. Treasury Secretary Scott Bessent has framed stablecoins as a tool to strengthen dollar demand, arguing they could rival traditional foreign creditors in purchasing Treasuries. With China’s holdings of U.S. debt at $784 billion—down from $1.32 trillion in 2013—the U.S. sees stablecoins as a potential replacement for foreign capital in financing its debt. Conversely, China’s state media and researchers acknowledge the existential risk posed by unregulated stablecoins, which could circumvent capital controls and dilute the Communist Party’s grip on monetary policy.

China’s response includes a dual approach: tightening oversight of decentralized systems while advancing a centralized model. The e-CNY, launched in 2020, remains underused due to competition from Alipay and WeChat Pay. However, Beijing is now testing programmable stablecoins that embed transaction restrictions, such as geographic limits and real-time surveillance, to ensure compliance with state policies. These efforts align with China’s broader vision of blockchain as a tool for governance, not decentralization.

The global race for stablecoin dominance reflects broader shifts in financial architecture. While the U.S. promotes open, market-driven innovation, China prioritizes state-controlled infrastructure to preserve political and economic leverage. As stablecoins evolve from speculative assets to institutional-grade instruments, their role in reshaping trade, remittances, and reserve currencies will depend on regulatory frameworks and geopolitical strategies. For now, the U.S. and China are locked in a digital currency arms race, with stablecoins at the forefront.

[1] title9 (url9)

[2] title10 (url10)

[3] title11 (url11)

[4] title12 (url12)