The Geopolitical Risks and Opportunities in the Stablecoin and CBDC Arms Race

The global race to dominate the future of digital money is intensifying, with stablecoins and central bank digital currencies (CBDCs) at the forefront. While the U.S. grapples with regulatory delays and policy inconsistencies, China's digital yuan and non-U.S. stablecoins are seizing strategic advantages. This divergence in regulatory approaches is reshaping the geopolitical landscape of finance, creating both risks and opportunities for investors.

U.S. Regulatory Delays: A Window for Competitors

The U.S. has long been a leader in financial innovation, but its approach to stablecoins and CBDCs has been marked by uncertainty. The passage of the GENIUS Act in July 2025 marked a turning point, establishing a federal framework for stablecoins backed by high-quality liquid assets. However, the 18-month implementation delay-pushing full enforcement to December 2026-has left a vacuum that competitors are exploiting.

Meanwhile, U.S. regulators like the SEC and CFTC have shifted toward a business-friendly stance, launching initiatives like Project Crypto and Crypto Sprint to modernize custody rules according to reports. Yet, these efforts have not fully addressed gaps in enforcement, particularly around the Travel Rule and cross-border compliance. The lack of clarity has created a "regulatory arbitrage" opportunity, where market participants seek jurisdictions with clearer frameworks.

China's Digital Yuan: A State-Driven Play

China's digital yuan (e-CNY) is advancing rapidly, with a revised regulatory framework set to take effect on January 1, 2026. Unlike the U.S., which treats stablecoins as a means of payment, China is redefining the e-CNY as a "digital deposit currency," allowing commercial banks to pay interest on digital yuan balances. This move aligns the e-CNY with traditional banking systems, enhancing its appeal amid competition from WeChat Pay and Alipay.

China's strategy extends beyond domestic adoption. The PBOC has launched the e-CNY International Operation Center in Shanghai and expanded cross-border pilots with ASEAN nations and the Gulf region. For example, ASEAN e-CNY transactions exceeded 500 billion yuan in the first three quarters of 2025, signaling its growing role in trade settlements. However, challenges remain, including data privacy concerns and resistance from ASEAN countries wary of ceding monetary sovereignty to Beijing.

Non-U.S. Stablecoins: Filling the Regulatory Vacuum

Non-U.S. stablecoins are capitalizing on the U.S. regulatory lull. The EU's Markets in Crypto-Assets (MiCA) regulation, which took effect in December 2024, has created a harmonized framework for stablecoin issuers, requiring 100% reserve backing and licensing. This clarity has attracted global players like Binance and Coinbase, while U.S. dollar-backed stablecoins like Tether struggle to meet MiCA's stringent standards according to industry analysis.

In Asia, Hong Kong and Singapore have introduced robust stablecoin frameworks, with Hong Kong finalizing its licensing regime in July 2025 and Singapore implementing the Single Currency Stablecoin (SCS) framework in August 2023. These developments have spurred adoption in cross-border trade, particularly in B2B sectors like ship brokering and steel trading. For instance, 71% of Latin American respondents used stablecoins for cross-border payments in 2025, leveraging their speed and cost efficiency.

Strategic Advantages and Geopolitical Implications

The U.S. regulatory delays have amplified the strategic advantages of non-U.S. stablecoins and China's e-CNY. In Asia, the shift toward euros and digital yuan is evident: euro-denominated bond issuance by Asian borrowers surged to 23% of total financing in 2025, driven by lower funding costs and U.S. trade policy uncertainty. Similarly, China's e-CNY is being integrated into ASEAN cross-border payment systems, offering faster transaction speeds than SWIFT.

However, these gains come with risks. The mBridge project, a cross-border initiative involving China, Hong Kong, Thailand, and the UAE, faced a setback when the Bank for International Settlements withdrew due to sanctions circumvention concerns. Such incidents highlight the geopolitical tensions inherent in the CBDC arms race.

Conclusion: Navigating the New Financial Order

The stablecoin and CBDC landscape is no longer a U.S.-centric story. As China's e-CNY and non-U.S. stablecoins gain traction, investors must weigh the risks of regulatory fragmentation against the opportunities in emerging markets. The U.S. may yet reclaim its lead with the GENIUS Act, but the window for competitors is wide open. For now, the geopolitical playing field is shifting-and those who adapt will find themselves at the forefront of the next financial revolution.