Introduction
Since the IPO of stablecoin issuer Circle earlier this month, its stock price has surged from $31 to $180 (as of June 27). As the world’s second-largest USD stablecoin company, Circle’s performance reflects global investor confidence in stablecoins. Beyond revolutionizing cross-border payments, stablecoins could reshape the global monetary system.
At the recent Lujiazui Forum, former People’s Bank of China Governor Zhou Xiaochuan noted that USD-backed stablecoins, supported by the dollar system, may exert global influence—potentially accelerating dollarization in many countries. Can stablecoins reinforce the dollar’s dominance amid growing skepticism about its reserve currency status? What challenges lie ahead?
USD Stablecoins Reinforce Dollar Dominance
Stablecoins are cryptocurrencies pegged to assets like fiat currencies (e.g., 1:1 to the USD). They combine blockchain advantages—transparency, decentralization, low-cost global transactions—with fiat currency stability.
Key Advantages:
- Cross-Border Payments: Traditional remittances take 3–5 days with ~6.35% fees. Stablecoin transactions settle in real-time for under $1 (e.g., via Solana blockchain).
- Diverse Use Cases: From crypto trading to trade payments, payroll, and hedging against local currency depreciation.
Market Growth:
- Current Size: Over $2.6 trillion in transactions annually, surpassing Visa and Mastercard combined (ARK Invest, 2024).
- USD Dominance: USD stablecoins comprise >95% of the market, bolstered by relaxed U.S. regulations vs. stricter EU MiCA rules.
Policy Support:
The U.S. recently passed the Innovation in Stablecoins Act, cementing legal clarity. This contrasts with the EU, where stringent rules have stifled euro stablecoin growth (e.g., Binance delisting USDT).
👉 Explore how stablecoins are reshaping finance
Challenges to Dollar Hegemony
Despite USD stablecoins’ dominance, they cannot offset broader risks to dollar credibility:
- Geopolitical Erosion: Trade policy volatility and fiscal deficits (e.g., Moody’s 2025 downgrade) undermine trust.
- Sanctions Backlash: Countries like Russia and China are diversifying reserves away from USD.
- Competition: Other nations (UK, Japan, etc.) are advancing stablecoin regulations, potentially leveling the playing field for non-USD stablecoins.
The Case for Offshore RMB Stablecoins
As China’s economic clout grows, a digital yuan stablecoin could:
- Bypass Traditional Systems: Compete fairly with USD by leveraging blockchain efficiency.
- Boost Adoption: Hong Kong, as the top offshore RMB hub, is ideal for piloting such initiatives.
👉 Learn about the future of digital currencies
FAQs
Q: Can stablecoins replace traditional currencies?
A: They complement rather than replace, enhancing efficiency but lacking sovereign backing.
Q: How do USD stablecoins affect emerging markets?
A: They offer inflation hedging but may exacerbate dollarization risks.
Q: Will China’s digital yuan challenge USD stablecoins?
A: Potentially, if integrated with offshore stablecoins to expand RMB’s global reach.
Conclusion
Stablecoins amplify the dollar’s strengths but cannot cure systemic weaknesses. For RMB internationalization, embracing digital innovation is urgent—starting with offshore stablecoins in Hong Kong.