Liu Bin (Director of the Financial Research Office at the Pudong Reform and Development Institute)
The recent breakthrough in U.S. stablecoin legislation reflects multiple strategic considerations. Here's a detailed analysis:
Short-Term Motivations: Addressing Treasury Market Pressures
The GENIUS Act aims to alleviate short-term U.S. Treasury debt pressures by:
- Channeling stablecoin reserve assets into Treasury bills
- Providing liquidity to stabilize bill prices
- Projections suggest stablecoins could inject $1.6–$3.7 trillion into Treasury markets by 2030
Long-Term Strategy: Reinforcing Dollar Hegemony
Evolution of Dollar Dominance:
- Gold-backed → Oil-backed → Tokenized/Digital Dollar
Strategic Expansion:
- Dollar-pegged stablecoins expand USD's global reach
- Counter declining USD share in global reserves (currently ~59%)
Geopolitical Implications: Shaping Future Payment Systems
- Dual-System Landscape: Stablecoins may operate alongside SWIFT
- Current Market Dominance: USD-backed stablecoins hold 99% market share
- First-Mover Advantage: U.S. seeks to control emerging digital payment infrastructure
Global Impacts of Stablecoin Expansion
1. Crypto-Traditional Finance Convergence
- Market Growth: U.S. legislation accelerates crypto adoption
- Banking Disruption: Potential $6.6 trillion deposit migration from traditional banks
Institutional Adoption:
- BlackRock, Fidelity, PayPal integrating crypto services
2. Emerging Currency Competition
- Current Landscape: USD stablecoins dominate
Future Outlook:
- Euro, AUD, GBP, JPY, HKD-pegged stablecoins expected
- Regulatory arbitrage risks due to fragmented frameworks
3. Challenges for RMB Internationalization
New Competition:
- Tether's planned offshore RMB stablecoin
- Agora project (tokenized cross-border payments)
China's Response:
- Digital RMB international operations center (Lujiazui Forum initiative)
- Hong Kong's stablecoin legislation progress
Strategic Recommendations for China
Dual-Track Approach
Digital RMB Expansion
Focus areas:
- Cross-border payments
- Trade settlements
- Investment flows
Hong Kong-Shanghai Collaboration
Key initiatives:
- Offshore RMB stablecoin issuance
- Joint regulatory frameworks
- Technical standard harmonization
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FAQ Section
Q: How do stablecoins differ from cryptocurrencies?
A: Stablecoins are pegged to stable assets (e.g., USD), while cryptocurrencies like Bitcoin have volatile valuations.
Q: Why is the U.S. prioritizing stablecoin legislation now?
A: Immediate Treasury market needs combined with long-term digital currency strategy.
Q: What advantages do USD stablecoins offer?
A: Global reach, programmability, and U.S. credit backing for cross-border use cases.
Q: How might China respond to USD stablecoin dominance?
A: Through digital RMB internationalization and strategic Hong Kong partnerships.
Q: Are stablecoins regulated uniformly globally?
A: No—regulatory fragmentation creates arbitrage opportunities and stability risks.