U.S. Passes Stablecoin Law to Strengthen Dollar as China Considers Shift

U.S. moves to regulate stablecoins with the passage of the GENIUS Act, which creates a framework for dollar-pegged stablecoin issuance, requiring issuers to maintain at least a 1:1 reserve of cash or U.S. Treasury bills [1]. The bill, passed on July 17, signals a shift in U.S. policy toward embracing crypto as part of a broader strategy to strengthen the dollar’s global dominance [2]. President Donald Trump, in a second term, has pushed for deregulation in the sector, positioning the U.S. as a potential global “crypto capital” [3].

China’s stance on stablecoins has long been cautious, with a national ban on all crypto transactions since 2021. However, recent developments suggest a softening in Beijing’s approach, driven by the “fear of missing out” on the next wave of financial innovation [4]. High-ranking officials and former policymakers, including former Bank of China vice president Wang Yongli and PBOC governor Pan Gongsheng, have acknowledged the potential risks and opportunities of stablecoins, particularly in cross-border payments [5]. The Securities Times, a state-affiliated publication, has echoed industry voices calling for the development of RMB-backed stablecoins to be prioritized [6].

Hong Kong is set to begin accepting applications for Hong Kong-dollar-backed stablecoins on August 1, following the passage of the Stablecoin Ordinance [7]. This move may pave the way for the eventual introduction of stablecoins pegged to the offshore yuan (CNH), leveraging Hong Kong’s existing offshore RMB infrastructure [8]. The PBOC has not yet given a green light for the yuan to be used in stablecoins, partly due to concerns over capital controls and the risk of capital outflows. However, discussions with state-owned institutions like Guotai Haitong and Shanghai Data Group suggest that a pilot program is being considered [9].

The geopolitical stakes are high. The U.S. dollar’s dominance in global finance is being reinforced by the rise of dollar-backed stablecoins, with Tether already among the world’s top seven purchasers of U.S. debt [10]. Chinese officials have expressed concerns over this trend, fearing it could undermine Beijing’s efforts to promote the use of the yuan in international trade [11]. Some analysts, including former Chinese finance minister Zhu Guangyao, have suggested that the U.S. strategy in promoting stablecoins is aimed at maintaining dollar supremacy [12].

Despite the enthusiasm, risks remain. Stablecoins, while designed to be stable, can still trigger financial instability if users lose confidence and rush to redeem their tokens, as seen in the 2022 collapse of TerraUSD [13]. Experts like Harvard’s Kenneth Rogoff warn that the rise of stablecoins parallels the risks of the 19th-century free banking era in the U.S., where the lack of centralized oversight led to frequent financial panics [14]. Hong Kong’s de facto central banker, Eddie Yue, has called for a more measured approach, urging officials to “rein in the euphoria” surrounding stablecoins [15].

As the U.S. and China navigate the challenges and opportunities of stablecoins, the global financial landscape is shifting. The question remains: will Beijing match Washington’s bold bet on a stablecoin-driven future, or will it play it safe and risk falling behind in the next era of financial technology?

Source:

[1] (https://fortune.com/asia/2025/07/31/china-us-hong-kong-stablecoins-dollar-yuan-genius-act/)