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About the author:Deng Jianpeng is a professor and doctoral supervisor at the Law School of Central University of Finance and Economics, and the director of the Financial Technology Rule of Law Research Center.
The original article was published in “Financial Law” Issue 6, 2025.
summary
The introduction of the United States’ GENIUS Act marks that digital currency competition has entered a stage of reshaping rules.MiCA with EUCompared with the bill and my country’s Hong Kong Special Administrative Region’s “Stable Coin Ordinance”, the U.S. “GENIUS Act” passes the U.S. dollar-stable currency-U.S. debt closurering, realizing the digital extension of the U.S. dollar’s international dominance.The essence of the current mainstream stablecoins is that their prices are roughly one-to-one convertible with the U.S. dollar.U.S. dollar stable currency, and plays an important role in China’s financial security and monetary sovereignty in cross-border payments, capital flows, monetary policy transmission and other fields.potential challenges.In this regard, our country can adjust its regulatory concepts and adopt the measures of building a sovereign currency firewall, an offshore RMB stable currency system, and cross-borderSolutions with practical value such as transparent regulatory technology platforms and real-world asset tokenization collaborative ecology, with Hong Kong as the strategic fulcrum,Promote the pilot and practice of offshore RMB stablecoins in stages, build a multilateral stablecoin alliance with the countries involved in the Belt and Road Initiative, and simultaneouslyFurther improve on-chain fund monitoring and legislative protection, open up a new path for the internationalization of RMB in the digital era, and serve to maintain national financial security.Complete and monetary sovereignty.
Keywords:Stablecoin Monetary Sovereignty Digital Currency Financial Security Blockchain Finance
Table of contents
1. Financial changes and regulatory challenges under the rise of stablecoins
2. U.S. Stablecoin Regulatory Framework and Potential Impact
(1) The connotation, characteristics and shortcomings of the US bill from a comparative perspective
(2) Digital currency sovereignty game and the impact of stable coins
(3) Financial ecological reconstruction driven by compliance
3. The challenges of US dollar stable currency to China’s financial security and policy reconsideration
(1) Impact on China’s financial security
(2) Rethinking China’s repressive regulatory policies
4. Thoughts on China’s response strategies
(1) Adjustment from repressive supervision to collaborative governance concept
(2) Building a currency firewall and improving financial anti-sanction capabilities
(3) Promote international rules governance and technological empowerment
5. Conclusion
Stablecoins were born in the early days due to the demand for crypto-asset transactions. They maintain a relatively stable exchange ratio of 1:1 with the anchored legal currency. They are the pricing scale for on-chain transactions, the liquidity center, and an important tool to avoid huge fluctuations in the prices of other crypto-assets such as Bitcoin. In recent years, they have gradually developed into an important bridge linking blockchain finance and traditional finance.Stablecoins transform legal currencies into programmable digital currencies that can be settled anywhere and anytime around the world, reshaping the payment and settlement model.Stable currency traders all keep accounts on the same blockchain ledger (such as Ethereum, Tron or Solana). This kind of point-to-point transaction does not require intermediate links (such as banks or third-party payment institutions), and payment is settled.With the rapid development of blockchain technology and the continuous growth of the encrypted asset market, stablecoins have gradually become an important infrastructure in the global blockchain financial ecosystem.In the future, various asset classes such as securities, bonds, insurance and money market funds may be traded on the chain, and the importance of stablecoin payment functions will further emerge.However, as an important innovative financial form in recent years, the potential challenges and risks of stablecoins have not yet attracted sufficient attention from financial law and financial supervision researchers.
Based on the perspective of the game between national financial security and monetary sovereignty, this study analyzes the competition trends in stablecoin regulation, focusing on the new path for the digital extension of the U.S. dollar’s international monetary dominance in the context of the U.S. Guiding and Establishing National Innovation for U.S. Stablecoins Act (hereinafter referred to as the “GENIUS Act”). It reveals that the GENIUS Act upgrades the traditional U.S. dollar into a low-cost cross-border payment through a closed loop of U.S. dollar → stable currency → U.S. debt.digital system.This study will analyze the impact of U.S. dollar stablecoins on the monetary sovereignty of other countries, capital outflows and payment substitution risks, andBased on China’s position, design a promotion path for offshore RMB stablecoins, and propose to realize the digital dimension of RMB internationalization through Hong Kong pilot projectsdegree of breakthrough, using Real Asset Tokenization (RWA) as an important application scenario of RMB stable currency to maintain national financial securityand monetary sovereignty.
one,Financial changes and regulatory challenges under the rise of stablecoins
Stablecoins have appeared since 2014 and are mostly anchored to the US dollar.Scholars point out that legal currency-backed stablecoins account for the majority of the entire stablecoin market. Among them, the market value of U.S. dollar stablecoins accounts for about 95% of the stablecoin market.Therefore, the stablecoin discussed in the industry is actually a US dollar stablecoin.Stable currency issuers such as Tether or Circle provide issuance and redemption services for their stable coins (Tether (USDT) and USDC respectively) for institutional clients or users who have passed the verification process.Taking TEDA’s stablecoin as an example, its issuance process is as follows: (1) Authorized Participant (AP) remits U.S. dollars to TEDA’s bank account; (2) TEDA creates TEDA coins based on the standard of creating 1 TEDA coin for every 1 US dollar deposited and sends it to the authorized participant’s encrypted wallet; (3) TEDA purchases U.S. short-term treasury bonds and obtains an annualized net interest margin of approximately 4.25%.The stablecoin redemption process is as follows: (1) Authorized participants send TEDA coins to TEDA Company’s encrypted wallet; (2) TEDA Company sells corresponding short-term treasury bonds according to the USD amount corresponding to TEDA coins; (3) TEDA Company remits the USD cash corresponding to TEDA coins received to the authorized participant’s bank account; (4) TEDA Company destroys the corresponding TEDA coins and removes them from circulation.
Compared with central bank digital currencies (CBDC), stablecoins rely on blockchain ledgers to achieve decentralized circulation, break through national boundaries and jurisdictional restrictions, and achieve free global circulation.Compared with traditional payment tools, stablecoins achieve real-time payment via the shortest payment path and have low cross-border payment fees.US dollar stablecoins are widely used in some underdeveloped countries. In addition to the “strongness” of the US dollar itself, it is also due to its high convenience of acquisition and payment. Global payments can be achieved by simply downloading an encrypted asset wallet on a mobile phone, improving the accessibility and efficiency of payments.In terms of the prospects for artificial intelligence collaboration, the programmability of stablecoins is making it an ideal payment tool for artificial intelligence agents (AI Agents), which can automatically complete operations such as service purchase and settlement and splitting through smart contracts.Artificial intelligence entities will facilitate a large number of high-frequency economic activities, and stablecoins will be used as payment tools for mutual transactions.The combination of stable currency payment and artificial intelligence will reshape the rights and obligations and financial rules of the online world.However, this technology-driven restructuring of the financial ecosystem will lead to the coexistence of regulatory arbitrage and technological risks.The emergence of blockchain ledgers marks changes in traditional financial market infrastructure, and stablecoins mean the beginning of the digital twin trend, which is to introduce real assets into blockchain ledgers and tokenize them. This tokenization of real assets increases the global liquidity of assets.As of August 23, 2025, the global stablecoin market value was US$267.4 billion, of which USDT was approximately US$165 billion, USDC was approximately US$65 billion, and the total transaction volume in a single month was as high as US$3.53 trillion.Stablecoins have gradually assumed important financial functions, but have also partially escaped the traditional financial system and regulatory channels, posing huge global financial risks and regulatory challenges.According to authoritative reports or studies by the Financial Action Task Force (FATF), the Bank for International Settlements (BIS) and the Financial Stability Board (FSB) in recent years, its risks and challenges can be summarized into the following four aspects:
One is illegal activities and regulatory risk avoidance.Due to their low transaction costs, high liquidity and certain anonymity, stablecoins have increasingly become a tool for illegal activities such as money laundering, terrorist financing, and drug trading.Criminals often use technical means such as currency mixers and cross-chain bridges to enhance anonymity, and conduct fund operations without transaction background through dormant accounts to achieve layered money laundering.Its peer-to-peer transaction characteristics and the use of non-custodial wallets bypass regulated entities in the traditional anti-money laundering/anti-terrorist financing (AML/CFT) system, weakening the effectiveness of the existing regulatory framework. Especially when the regulatory standards for virtual asset service providers (VASPs) are unevenly implemented around the world, the risk is more prominent.
The second is the challenge to monetary sovereignty and monetary policy.The widespread cross-border use of U.S. dollar stablecoins will erode the monetary sovereignty of other countries.Especially in economies with high inflation or exchange rate fluctuations, residents are more likely to use U.S. dollar stable currencies, leading to the phenomenon of domestic currency substitution, weakening the transmission efficiency of monetary policy, and affecting the effective implementation of foreign exchange controls and capital flow management measures.Non-U.S. residents can use this to seamlessly hold U.S. dollar claims, further exacerbating the spillover effects of monetary policy.
The third is financial stability and systemic risks.Stablecoins are increasingly closely related to the traditional financial system, bringing new risk transmission channels.In reserve asset management, issuers may invest heavily in short-term financing instruments in pursuit of returns, which may trigger a liquidity crunch and affect the U.S. dollar financing market during periods of market stress.Part of the reserve funds of stable coins are deposited in the banking system in the form of uninsured wholesale deposits, which essentially forms a centralized reinvestment of retail funds and amplifies the maturity mismatch and risk exposure of the banking sector.In addition, stablecoins have repeatedly experienced unanchoring and even collapse events, and their promised stability has been questioned. Extreme periods may trigger market panic and chain reactions.
The fourth is the dilemma of cross-border regulatory coordination and compliance.Stablecoins rely on public chains to achieve seamless global circulation, and there is a fundamental contradiction between the traditional financial regulatory structure that is bounded by jurisdictions.The existing “same business, same risks, same supervision” principle is difficult to effectively adapt to the cross-domain and anonymous nature of stablecoins.Although some jurisdictions have implemented licensing systems and operational requirements, the global regulatory framework remains fragmented, which not only easily leads to regulatory arbitrage, but also makes law enforcement agencies face the dilemma of insufficient law enforcement resources and limited effectiveness when dealing with billions of anonymous transactions.
two,US Stablecoin Regulatory Framework and Potential Impact
With the rise of stablecoins in the financial market and the various risks and challenges it brings, the world’s major developed economies (such as the United States, the European Union, and Hong Kong, China, etc.) have initiated legislation and supervision on stablecoins.The European Union’s Markets in Crypto Assets (hereinafter referred to as MiCA) will take effect in 2024, the United States’ GENIUS Act will be formally legislated at the federal level in 2025, and my country’s Hong Kong Special Administrative Region passed the Stablecoin Regulations in May 2025.The latter two targeted bills represent a major breakthrough in the regulatory framework, revealing that digital currency competition has entered a new stage of rule reshaping and strategic preemption.Among them, the U.S. regulatory bill has a direct regulatory effect on the current mainstream stable currency-USD stable currency, and has the most far-reaching impact.
(1) The connotation, characteristics and shortcomings of the US bill from a comparative perspective
The key contents of the U.S. GENIUS Act include: (1) Reserve requirements. Stablecoin issuers must be 100% backed by reserves, and reserve assets must be highly liquid assets such as U.S. dollars and short-term U.S. Treasury bonds; (2) Supervision classification. Stablecoin issuers in the United States whose stablecoin market value exceeds $10 billion must be accepted by the Federal Reserve SystemOr the Office of the Comptroller of the Currency (OCC) directly regulates, small issuers can be regulated by states; (3) Transparency and compliance requirements, prohibiting misleading marketing, requiring issuers to comply with anti-money laundering (AML) and “know your customer” (KYC) regulations, and issuers with a market value of more than $50 billion are required to conduct annual financial statement audits to ensure transparency.The GENIUS Act attempts to use emerging technologies to prevent illegal financial risks.On the one hand, the bill regards issuers as the “first person responsible” for anti-money laundering and combating illegal financial activities. Stable currency issuers have the technical capabilities to combat illegal financial activities in accordance with regulatory requirements; on the other hand, the “GENIUS Act” requires the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) to formulate new anti-money laundering rules for crypto asset activities, while developing new tools to monitor illegal crypto activities and review issuer compliance plans.
The U.S. “GENIUS Act” establishes clear rules for stablecoin issuance, statutory reserves, transparency and supervision, stabilizes the mechanism for stablecoins to be pegged to the U.S. dollar, and builds a U.S. dollar-stablecoin-U.S. debt closed loop. This design will enable stablecoin issuers to become important long-term buyers of U.S. debt.The “GENIUS Act” uses stablecoins to strengthen the status of the U.S. dollar in the international monetary system and increase the global acceptance and demand for digital payments in the U.S. dollar.At the same time, the bill is exported through regulatory rules, requiring overseas issuers to comply with U.S. standards within a two-year transition period, turning U.S. dollar stablecoins into a global digital payment infrastructure. Stablecoins have in fact become a digital extension of the U.S. dollar and a global extension of the U.S. dollar’s influence.The GENIUS Act restricts the compliance of non-USD stablecoins in the United States, but does not restrict the compliance of US dollar stablecoins abroad.The U.S. bill clarifies at the federal level the definition of stablecoins, the compliance requirements of issuers, the responsible units for supervision, the scope within which stablecoins operate, etc., and provides a compliance institutional channel for blockchain financial activities with “larger scale and wider penetration”.
Since 2023, MiCA has provided classified supervision ideas for the EU crypto-asset market, pioneered the classified supervision of electronic currency tokens (EMT) and asset-referenced tokens (ART), and formulated differentiated regulatory rules to clearly limit the payment function of non-euro stablecoins in the euro zone.Among them, the electronic currency token category specifically refers to stablecoins anchored to a single legal currency and mainly used as payment instruments. Only compliant euro stablecoins can be used for payment of goods and services.According to MiCA regulations, electronic currency token issuers must have the qualifications of an EU electronic currency institution or credit institution, publish a white paper detailing the token structure and guarantee measures, ensure that token holders have the right to redeem the issuing institution, hold sufficient reserve funds and support free redemption.As a potentially influential subcategory of crypto-assets, stablecoins may pose risks to financial stability by virtue of their network effects and large cross-border transfer capabilities if they are applied on a large scale without supervision of global stablecoins.MiCA strives to strike a balance between innovation and stability by establishing clear guidelines on issuance, reserve management and transparency.These regulatory frameworks reflect a general consensus on the supervision of stablecoins and aim to enhance financial market stability while supporting technological innovation.
The Stablecoin Ordinance of the Hong Kong Special Administrative Region of China will officially come into effect on August 1, 2025, and the relevant detailed regulations “Supervisory Guidelines for Licensed Stablecoin Issuers” have been issued.Stable coins defined in the Stable Currency Ordinance can be anchored to any legal currency, including Hong Kong dollars, US dollars, and RMB, and only licensed institutions are authorized to sell stable coins to retail investors; any institution that issues legal currency stable coins in Hong Kong, or issues stable coins anchored to the value of the Hong Kong dollar overseas and promotes them in Hong Kong, must apply for a license from the Hong Kong Monetary Authority (HKMA).Issuers of stablecoins must hold 100% highly liquid assets (such as cash or short-term treasury bonds) as reserves and conduct independent custody and regular audits; they must ensure that stablecoin holders can redeem them in time at face value; non-bank institutions must meet the minimum equity requirement of HK$25 million; licensed institutions must comply with strict anti-money laundering/anti-terrorist financing (AML/CFT), risk management, network security and information disclosure regulations; all transactions must complete real-name authentication (KYC), and the entire flow of funds can be traced.
Hong Kong’s regulatory framework reserves an interface for offshore RMB stable coins, which is conducive to exploring the use of RMB-anchored stable coins in the “Belt and Road” project to solve cross-border payment bottlenecks.The MiCA Act creates barriers to financial security through high compliance costs.Affected by regulatory rules, well-known crypto-asset trading platforms such as Coinbase have delisted USDT for EU users, essentially forming a digital euro protected area, building a digital defense line for the euro’s monetary sovereignty, and paving the way for the future launch of a digital euro or compliant euro stablecoin.Hong Kong competes for the right to speak in global digital finance and crypto-assets through the Stable Coin Ordinance, and strengthens Hong Kong’s competitive position as an international financial center through the launch of local compliant stable coins and the successive introduction of cryptocurrency-friendly policies.To sum up, stablecoin supervision shows obvious regional differentiation characteristics. Currently, there are three typical models, namely the United States bonded U.S. debt model, the EU monetary sovereignty defense model, and the Hong Kong offshore hub model.Hong Kong’s relevant laws and regulations uphold monetary policy neutrality, the “GENIUS Act” strengthens the dominance of the US dollar in the global currency market, and the EU’s regulatory laws and regulations feature barrier strategies.In recent years, almost all asset transactions on the chain have used U.S. dollar stablecoins as payment tools.Traditional assets are put on the chain, and RWA is mostly denominated in US dollar stablecoins. The “GENIUS Act” will further consolidate the pricing power of the US dollar over on-chain assets.In the global stablecoin regulatory competition, the GENIUS Act, taking advantage of the huge first-mover advantage of the U.S. dollar stablecoin market, is most likely to impact the market of other legal currency stablecoins and strengthen the leading position of U.S. dollar stablecoins.
The regulatory frameworks of different developed economies have their own advantages, but they basically involve reserve transparency requirements, anti-money laundering and anti-terrorist financing, bankruptcy protection and consumer rights protection provisions. These core principles are also an important reference basis for China to introduce relevant regulations in the future.However, the GENIUS Act also has some shortcomings.First, it does not establish a lender of last resort or insurance mechanism for stablecoins.Once there is a risk in the banks where US dollar stablecoin issuers store cash or other assets, the impact on stablecoin prices and liquidity will be instantly amplified on the chain.Secondly, the stablecoin issuer’s verifiable reserve fund transparency, enforceable payment commitments, and rehearsed orderly disposal are the cornerstones of ensuring the health of stablecoins. These cornerstones do not seem to have received much attention from legislators at present.Thirdly, a good stablecoin regulatory structure requires real-time reporting of redemptions/liquidity and daily net asset value reporting, minimum short-term liquidity ratios and regular transparent internal audits, etc. These core contents have not yet been fully reflected in bills in various regions, including the United States.Finally, the public chain on which the stablecoin relies is similar to a surveillance network, and every financial transaction is public data, which brings the risk of user privacy and business secret exposure. This risk was not taken seriously in the bill.Once a user’s stablecoin wallet address is disclosed to the outside world, since the wallet address generally publicly stores the user’s stablecoin payment records over the years, third-party technology companies can analyze and reveal the user’s capital volume, capital transactions, financial strategies, business intelligence, salary data and the competitive advantages behind them.Therefore, enhancing privacy protection that is compatible with existing public chains and meets financial regulatory requirements will be an important content when the Stablecoin Act is revised in the future. It is also the technical development direction for stablecoin issuers to improve privacy protection.
(2) Digital currency sovereignty game and the impact of stable coins
Since 2017, financial security conflicts between China and the United States at the level of the international financial system have intensified.After the Russia-Ukraine conflict broke out in 2022, the United States imposed indiscriminate financial sanctions, and many countries around the world accelerated the pace of “de-dollarization” in order to avoid the political risks of being subject to U.S. financial sanctions or coercion.By conducting RMB trade settlement with many countries and continuing to improve the RMB internationalization system and infrastructure, China is steadily advancing the process of “de-dollarization” and improving its political autonomy by reducing its dependence on the U.S. dollar system.In view of the long-term trend of strategic competition between China and the United States, China’s demand and practice of “de-dollarization” and the financial security conflicts between China and the United States on this issue will also continue for a long time.Scholars believe that this conflict is likely to accelerate the decline of U.S. financial hegemony and the structural shift of international financial power in the long run.However, the US dollar stable currency is likely to bring new opportunities to the United States – the US dollar stable currency realizes the tokenization of the US dollar, ensuring that the US dollar token is created based on US assets and is in line with the core interests of the United States. Its rapid expansion may even reverse the “decline of US financial hegemony and the structural international financial power transfer.”
Specifically, the rapid growth and circulation use of stablecoins has continued to maintain and promote the dominance of the US dollar as an international currency, making stablecoin issuers the “takers” of US debt.For most countries, stablecoins have become a new area of monetary sovereignty competition.Researchers pointed out that stablecoins held US$128 billion in U.S. Treasury bonds in the past 12 months, making it the top 20 holders of U.S. debt, surpassing sovereign countries such as Germany and Saudi Arabia.Citibank predicts that U.S. debt held by stablecoins may soar to $3.7 trillion by 2030, becoming the world’s largest holder.Issuers of U.S. dollar stablecoins have become extremely important buyers of U.S. debt.According to the official website data of the stablecoin issuer in early August 2025, TEDA issued approximately US$160 billion in USDT, and approximately 81% of its reserve assets were U.S. short-term Treasury bonds.This design creates an automatic cycle of purchasing U.S. debt: global users purchase U.S. dollar stablecoins with U.S. dollar cash → issuers increase U.S. debt holdings with U.S. dollar cash → reduce U.S. fiscal financing costs.The astonishing growth rate of stablecoins has increased their influence in the global financial field.While U.S. dollar stablecoins make it inevitable for payments and settlements to bypass the Society for Worldwide Interbank Financial Telecommunication (SWIFT), stablecoin payments do not bypass the U.S. dollar.
The global popularity of U.S. dollar stablecoins has created widespread social demand for U.S. dollars.Stablecoins are driven by the market, and users tend to choose the stablecoins with the most stable, strongest, and widely accepted currency credit to which they are anchored. Therefore, U.S. dollar stablecoins have become the first choice for global users, which marginalizes fiat currencies with weaker credit in other countries (especially African and Latin American countries).US dollar stablecoins will be more accessible and liquid in cross-border transactions, thereby reshaping the international financial landscape.The US dollar stable currency will have a multi-dimensional impact on the legal currencies of other countries: on the one hand, the strong legal currency will have a significant competitive advantage over other less competitive legal currencies (low international acceptance and serious depreciation); on the other hand, the quasi-currency circulation model based on the blockchain ledger provides an efficient and low-cost way for the internationalization of the US dollar stable currency.Therefore, China needs to actively think about how to improve the competitiveness of its own currency and explore ways to enhance the internationalization of the RMB through technological empowerment.
The “GENIUS Act” has promoted the US dollar’s dominance as an international currency.The U.S. dollar stablecoin is a digital extension of the U.S. dollar’s international currency dominance, relying on blockchain ledgers to enhance the U.S. dollar’s international penetration.At the same time, the US bill essentially exports global regulatory standards and promotes overseas US dollar stable currency issuers to comply with US regulatory standards, otherwise they are prohibited from providing services to US users.This “long-arm jurisdiction” makes the USD stablecoin standard a de facto global standard.Although the European Union allows compliant stablecoins anchored to the euro, and the Hong Kong SAR allows stablecoins anchored to different currencies. Recently, Japan and South Korea are also discussing legislation on stablecoins anchored to their domestic legal currencies. However, US dollar stablecoins have the strongest liquidity and unparalleled first-mover advantages.At the same time, famous banks such as JPMorgan Chase and Citigroup in the United States are exploring the joint issuance of stable coins. Visa and MasterCard have supported the US dollar stable currency settlement network, expanding the US dollar payment system from SWIFT to the blockchain network, forming a dual-track US dollar clearing dominance.In short, the U.S. GENIUS Act has promoted the reconstruction of the global financial system with U.S. dollar stablecoins, including using stablecoins to absorb the huge U.S. dollar market in Europe. Through the marketization power of private issuers, stablecoins have been promoted to developing countries in Asia, Africa and Latin America, and some have even replaced local legal currencies on a large scale.
Generally, monetary forms are divided into base money (M0), narrow money (M1) and broad money (M2). M0 includes cash in circulation + cash on hand in commercial banks, M1 includes cash + demand deposits (directly used for payment), and M2 includes M1 + time deposits (which need to be converted into cash before payment can be made).In practice, stablecoin issuers (such as TEDA) receive one million US dollars in cash (M1) from authorized participants, buy the cash into U.S. short-term Treasury bonds or other investments, and at the same time pay one million USDT (equivalent to M2) to authorized participants.These USDT are essentially electronic certificates of the issuer’s liability to authorized participants, but this debt certificate is very different from conventional debt certificates – USDT has strong divisibility (divided down to one cent), liquidity and global acceptability. It continues to assume the function of payment and trading medium in the investment market (especially in the field of crypto assets), and can be lent and pledged through crypto asset exchanges to obtain investment and financial management income, which is basically equivalent to a highly liquid currency form such as M1.Therefore, the process appears to have functions similar to commercial banks’ money creation and credit expansion.Stablecoins play the role of a “USD shadow bank” on the chain. The issuer’s reserve asset pool is similar to an “on-chain money market fund”, investing the US dollars paid by users into short-term treasury bonds and other assets, challenging the central bank’s monopoly in currency issuance and commercial bank credit creation.The issuance and circulation of stablecoins will produce a multiplier effect on currency derivation, and regulations such as the GENIUS Act do not yet have relevant provisions to fully address this.Unregulated stablecoin issuers (such as TEDA) may create risks such as inflation, asset bubbles, excessive debt, bank runs, and resource misallocation in certain niche investment areas (such as crypto assets) due to large-scale currency creation. Their currency creation function has almost escaped the control scope of a country’s traditional monetary policy.
(3) Financial ecological reconstruction driven by compliance
The regulatory competition around stablecoins in developed economies reflects the reshaping of rules and strategic first moves in the context of international competition for crypto-assets. To a certain extent, it is also a competition for dominance in digital finance.Traditionally, only chartered banks could create immediately usable forms of money (such as demand deposits).The “GENIUS Act” defines stablecoins as payment instruments rather than securities, prohibits stablecoin issuers from paying interest, and gives them a status similar to M1 currency, which means that non-bank institutions obtain the right to issue legal currency tokens.The clarification of regulatory paths provides guidance on compliant stablecoins, which further promotes the increase in the market value of U.S. dollar stablecoins.This expansion has shifted the U.S. dollar clearing system to digital U.S. dollar tokens based on the blockchain and embedded in various distributed payment systems, achieving a paradigm shift.
The US dollar stablecoin provides digital payment and settlement media for ecosystems such as exchanges, decentralized finance (DeFi), and non-fungible tokens (NFT).In the future, U.S. dollar stablecoins have great potential to partially reconstruct the traditional financial system.For the vast number of poor people around the world who have mobile phones but no bank accounts, stablecoins directly bring efficient financial services, promote business development and optimize the efficiency of people’s capital allocation.People in less developed countries or regions can use stablecoins to exchange weak credit currencies for high-credit currencies, use stablecoins to complete the allocation of assets such as U.S. stocks, gold, or U.S. bonds, and obtain various financial management and investment returns.After the United States further promotes the compliance of stablecoins, many people outside the crypto-asset circle will start to use stablecoins due to the promotion, learn more about crypto-assets, increase the number of crypto-asset investors, and promote the development of the blockchain financial ecosystem.
The explosive growth of regulated U.S. dollar stablecoins also benefits from the deep integration of mature blockchain infrastructure and payment scenarios.In terms of technical support, high-throughput public chains (such as Tron) reduce stablecoin payment costs to one-tenth or even lower than traditional cross-border payment systems. The arrival confirmation time is short, and it is superior to traditional cross-border remittances in terms of payment cost and payment efficiency.Therefore, stablecoins have unique advantages in cross-border payments and international trade.In terms of innovation in payment application scenarios, international credit card giant Visa has cooperated with American stable currency issuer Circle to launch stable currency bank cards. The bottom layer of these Visa cards is settled through the U.S. dollar stable currency USDC.In addition, in recent years, crypto asset exchanges have developed multi-token networks with Mastercard, another international credit card giant, to integrate on-chain and off-chain assets.Mastercard cooperates to launch digital debit cards (such as USDT bank cards, referred to as “U Cards” in the industry). The core payment logic is to use USDT to recharge the U Card, providing users with a payment method that maintains a stable 1:1 exchange ratio with the anchored legal currency.By binding the U card to payment software (such as Apple Pay, PayPal, Alipay or WeChat Pay, etc.), consumption can be made in various offline physical scenarios.Unlike crypto-assets such as Bitcoin, whose prices often fluctuate greatly, U.S. dollar stablecoins make it feasible to use U-cards in daily payments.After the GENIUS Act takes effect, U-card may become one of the important payment cards.The above-mentioned international credit card giants allow the issuance of hybrid financial payment instruments that appear to be traditional bank cards but actually use stablecoins for payment. This change has allowed stablecoins to quickly penetrate from the blockchain financial ecosystem into mass international payment scenarios and have a profound impact on the traditional financial system.
three,Challenges of US dollar stable currency to China’s financial security and policy reconsideration
(1) Impact on China’s financial security
Building a financial power is an important foundation for achieving financial security.In 2023, national leaders proposed the construction of a financial power, one of the key elements of the “six strong” includes a strong currency.To build a strong currency, we must ensure the stability of the RMB value, safeguard the interests of monetary sovereignty externally, and enhance the international status of the RMB.China needs the ability to continue to defend against external financial shocks to ensure independent decision-making on its own monetary policy, stable operation of the financial system, and sustainable development of the financial industry.However, the cross-border and disintermediation characteristics of U.S. dollar stablecoins pose unprecedented challenges to the RMB monetary system.The first is the risk of the mainstream payment system being marginalized and the potential crisis of fiat currency substitution.The US dollar stable currency relies on blockchain technology to build an efficient cross-border payment network and bypasses the traditional payment and clearing system dominated by sovereign countries. This may partially lead to the marginalization of China’s payment infrastructure and threaten the currency sovereignty and financial security of the RMB.Stablecoins cooperate with well-known international credit card institutions to build global payment channels, expand China’s offline payment scenario applications, and have an impact on China’s existing bank payments, third-party payment channels and financial supervision.The penetration of U.S. dollar stablecoins in cross-border trade payments may overturn traditional payment systems.Taking China as an example, although the RMB Cross-border Payment System (CIPS) covers many countries and many foreign banks participate, it is vulnerable to geopolitical interference.If U.S. dollar stablecoins flow into China in large quantities through overseas crypto-asset trading platforms, over-the-counter (OTC) or decentralized finance and other channels, a digital U.S. dollar secret channel may be formed, and the widespread use of U-cards will divert the settlement demand of the RMB cross-border payment system. Its offline multi-channel application scenarios may partially lead to the substitution of domestic legal currency.In some Asian, African, and Latin American countries, some groups have converted their savings into USDT, which has led to the loss of some deposits in the national banking system. If this digital dollar token spreads along the “Belt and Road”, it may hinder the internationalization of the RMB.The aforementioned EU MiCA bill clearly restricts the use of non-euro stablecoins for commodity payments to protect the euro zone’s payment sovereignty, which can be used as a reference.
Secondly, the “trilemma” has intensified.Stablecoins rely on blockchain to achieve point-to-point cross-border transfers, impacting the impossible triangle of “free flow of capital – stable exchange rate – independent monetary policy”.When the state manages the economy, it is often difficult to achieve the three goals of free capital flow, exchange rate stability and independent monetary policy at the same time. It has to choose two of the three. This is called the “impossible triangle” in economics.The technical features of stablecoins are breaking all three limitations simultaneously.In terms of breaking capital controls, people can use their mobile phones to exchange their domestic legal currency for US dollar stable currency and directly realize cross-border payments; in terms of weakening exchange rate control, people can sell their domestic legal currency and hoard US dollar stable currency, which leads to a decrease in domestic currency demand and makes it more difficult for the central bank to stabilize the exchange rate; in terms of interfering with interest rate policy, when domestic interest rates are cut, funds may flow to US dollar stable currency and purchase stable currency financial products on some crypto-asset trading platforms to enjoy higher returns, which may cause the failure of domestic macroeconomic control policies.Stablecoins are like digital underground channels that allow funds to flow in and out freely bypassing the country’s financial regulatory walls, which may cause the country to lose control of capital controls, exchange rate stability, and interest rate regulation at the same time.
(2) Rethinking China’s repressive regulatory policies
In May 2021, the Financial Stability and Development Committee of the State Council held its 51st meeting to clearly crack down on Bitcoin mining and trading.In September 2021, the National Development and Reform Commission and other departments issued the “Notice on Regulating Virtual Currency “Mining” Activities”, which listed virtual currency “mining” activities as an eliminated industry.In September of the same year, the People’s Bank of China and other ministries and commissions issued the “Notice on Further Preventing and Dealing with Speculation Risks in Virtual Currency Transactions”, emphasizing the development of legal currency and virtual currency exchange business, exchange business between virtual currencies, buying and selling virtual currencies as a central counterparty, and providing services for virtual currency transactions.Virtual currency-related business activities such as information intermediary and pricing services, token issuance financing, and virtual currency derivatives trading are suspected of illegal sales of tokens, unauthorized public issuance of securities, illegal futures business, illegal fund-raising and other illegal financial activities, which are strictly prohibited and resolutely banned in accordance with the law.So far, China’s regulatory policies have negatively evaluated crypto-assets, including stablecoins, and the overall regulatory landscape has been repressive.Normative documents in the field of crypto assets are related to the behavioral boundaries of private entities, which can easily lead to adverse consequences such as diminishing rights and increasing obligations, and have a significant impact on citizens’ existing property rights and interests.Regulatory departments and judicial authorities tend to determine that civil acts such as entrusted investment in encrypted assets are invalid because they violate public order and good customs. They will not provide relief or protection for the losses of legal holders of encrypted assets. The relevant investment risks are borne by themselves and disputes are resolved by themselves.
Our country strictly prohibits on-site trading of cryptocurrencies and legal currencies, but the stablecoin ecology has been continuously developing in our country’s financial system.Therefore, my country’s overly simple and crude regulatory paradigm for stablecoins actually ignores the fact that stablecoins objectively exist in our country.This repressive supervision has created an institutional vacuum in the field of stablecoins. In the long run, this has failed to effectively protect the rights and interests of legal stablecoin holders at the private law level, causing cryptoassets including stablecoins to face the haze of “object illegality”, causing individuals, enterprises and even public authorities to face legality system obstacles in the process of holding, trading, pricing and disposing of such cryptoassets.Repressive regulatory policies fail to respond in detail at the public law level to a series of issues such as the impact of U.S. dollar stablecoins on China’s financial security, money laundering with the help of stablecoins, terrorist financing, capital flight, and the possible weakening of the status of the country’s legal currency.Repressive regulation has led to China’s insufficient participation in global stablecoin governance, resulting in the weakening of international rule-making power and other consequences.The institutional vacuum caused by this policy failed to effectively respond to the following trends: developed economies are scrambling to formulate regulatory rules and use legal frameworks to “discipline” stablecoins so that stablecoins can be used for their own purposes. For example, issuers of U.S. dollar stablecoins invest U.S. dollar cash paid by global users into U.S. Treasury bonds and other assets, becoming an important financing channel for the U.S. Treasury Department.
In addition, repressive regulatory policies have partly produced unintended “ripple effects.”In September 2017, the central bank and other ministries and commissions issued the “Announcement on Preventing Token Issuance Financing Risks”, which explicitly prohibited financial payment institutions from participating in the crypto-asset business and required the removal of domestic exchanges.For this reason, crypto-asset exchanges with Chinese background have canceled the service of directly providing legal currency transactions for crypto-assets, and replaced them with currency-to-crypto transactions (such as transactions between Bitcoin and Ethereum).However, this model cannot provide users with a way to realize cash or preserve value when the price of Bitcoin drops.Most exchanges began to integrate USDT in transactions as an alternative to legal currency and as a trading medium, which has gained popularity among users. The market value of USDT, which appeared in 2014, has grown rapidly since then. For a long time, the largest holders of USDT were users with Chinese backgrounds.Repressive regulatory policies “accidentally” promoted the explosive growth of USDT and the digitization of the US dollar.An ancient saying goes: “The system cannot be ignored, the law must be governed with caution, and state affairs cannot be ignored.” To effectively prevent risks in the blockchain financial field for a long time, what is needed may not be a “one size fits all” model, but a more flexible governance mechanism.
Four,Thoughts on China’s response strategy
(1) Adjustment from repressive supervision to collaborative governance concept
Throughout the development history of stablecoins for more than ten years, stablecoins are driven by market demand and financial technology companies, and have developed and grown in a relatively tolerant overseas regulatory environment.In 2025, it was reported that Stripe, a well-known American payment service provider, announced the launch of the Tempo blockchain, which is designed for stable currency payments and enterprise applications. The goal is to build a blockchain that Stripe can control and optimize cross-border settlements.The company plans to launch Arc Chain, using USDC as the gas token (the “fuel” when executing transactions on the blockchain), providing optional privacy features and a built-in foreign exchange engine.TEDA Corporation and crypto asset exchange Bitfinex announced the launch of Plasma blockchain to create settlement and financial infrastructure.These chains are compatible with the Ethereum Virtual Machine (EVM) architecture, connecting themselves to the Ethereum ecosystem.It can be seen that competition and technological development in the stablecoin industry are still extremely fierce and rapid, becoming a source of power to promote the rapid development of the industry, and once again proving that public chains such as Ethereum are the infrastructure of the new generation of financial systems.Therefore, China can shift from its past focus on consortium chain technology research and development to reconsidering the development of public chains. In the past, policy concepts such as “coin-chain separation” and “coinless blockchain” are far removed from some foreign inclusive policies, which are worthy of re-examination.
Scholars say that under a system of shared governance, the role of the government changes from controller to service provider and promoter, and law becomes a means of solving problems faced by all participating entities.Governance means that subjects change their thinking and achieve common goals.Central and local governments, industry associations, online trading platforms and enterprises are all governance participants in the policy formulation and implementation process.This collaborative and co-governance approach can promote the adjustment of expectations among partners through constant negotiation and develop the ability to embrace change to cope with uncertainty.The top-down repressive regulatory model of stablecoins has been transformed into collaborative governance. This flexible governance model will help our country better cope with the challenges of U.S. dollar stablecoins.Scholars believe that the relationship between financial innovation and financial supervision has transcended the traditional binary opposition model. The core goal of supervision is no longer a single regulation, but actively conforms to the development trend of financial innovation and provides long-term impetus for financial innovation through financial supervision.With the acceleration of the opening-up process of my country’s financial market, the network connectivity of financial institutions is increasingly deepening, whether in the domestic market or the international market.Systemic risks in my country’s financial market have entered a stage of multiple occurrences and are facing the dual test of internal changes and external challenges. The international and domestic markets and the two types of risks are intertwined and ever-changing.Simple suppression of various crypto-assets, including stablecoins, does not effectively isolate risks. At the same time, it may cause China to miss opportunities for the development of financial technology and affect financial innovation and financial efficiency.An inefficient financial system will have its foundation of security eroded.
Hong Kong regulatory rules require issuers to comply with the Financial Action Task Force’s “Travel Rule”. When virtual assets are transferred, the identity information of the initiator and beneficiary must be passed along with the transaction. The issuer is responsible for verifying who ultimately holds the stablecoin it issues.Since the beginning of 2025, US President Trump has promised to build the United States into the world’s “crypto-asset capital”, and Hong Kong has also been actively building a global Web3 and virtual asset center.In the global highly competitive stablecoin market, compared with other looser stablecoin projects that focus on decentralization and relative anonymity, excessively stringent compliance requirements in the early stages are likely to make the Hong Kong stablecoin industry lack an advantage in the competitive environment.The “GENIUS Act” has brought obvious “regulatory competition” pressure to Hong Kong.We believe that Hong Kong has the advantage of being backed by the mainland. Under the premise of controllable risks, Hong Kong can adopt a spirit of tolerance as the keynote, timely and appropriate adjustments to the regulatory details of stablecoins, and attract and retain high-quality stablecoin issuers.Financial regulatory authorities should gradually digest and absorb the experience and lessons learned in regulatory practice, and further improve regulatory rules and raise compliance thresholds in the future.In the context of the transformation of regulatory concepts, on the one hand, regulators must uphold financial security and maintain monetary sovereignty; on the other hand, they must carefully study and judge the development trend of global blockchain finance.Institutes, core R&D teams of decentralized exchanges, encrypted wallet service providers, payment service providers and cross-border trading companies as important authorized participants, etc.) negotiate and communicate to jointly reach the “bottom-line thinking” of stablecoin supervision and development, and explore a balance in the collaborative governance and supervision of stablecoin risks.
In the field of stablecoins, the concept of multiple collaborative governance is better than the top-down repressive regulatory model.Scholars say that financial risk governance is a long-term, systematic project. The financial system constructed through laws, regulations, and rules in the financial field not only punishes illegal behaviors that undermine financial security and financial order, but also accommodates financial innovation.In the process of financial risk governance, the cooperation of multiple subjects is required to form a collaborative governance concept.Collaborative governance theory is guided by the impact mechanisms of different types of risks, emphasizing the systematic connection between various governance models within the governance framework, emphasizing “polycentric governance subjects, the synergy of subsystems in dynamic systems, the synergy between self-organizations, and the stability of social order under common rules.”This concept is conducive to establishing a competitive open financial market, effectively responding to the risks and challenges of stable currencies, and gaining institutional advantages in global competition.
(2) Building a currency firewall and improving financial anti-sanction capabilities
China may consider adopting a step-by-step, hierarchical and sub-regional approach to gradually open up the issuance and circulation of stablecoins.In the early stages of the development of stablecoins, financial regulatory agencies can consider appropriately restricting stablecoins that are not authorized by my country, promulgate relevant financial regulatory rules, refer to the EU MiCA Act’s restrictions on non-euro stablecoins, give the People’s Bank of China real-time banning powers, and require domestic banks and payment institutions to restrict unauthorized stablecoin transaction interfaces. In particular, they require overseas issuers that promote stablecoins to Chinese citizens to accept the supervision of Chinese financial regulators to maintain monetary sovereignty.At the same time, regulators can establish an official exchange channel for digital renminbi and Hong Kong stablecoins in the Guangdong-Hong Kong-Macao Greater Bay Area to connect with the “Belt and Road” trade platform to achieve real-time settlement of small-amount trade.
The issuance of a stable currency anchored to the RMB based on a permissionless blockchain will not only help the internationalization of the RMB, but also help improve the anti-sanction capabilities of my country’s financial sector.Scholars say that the United States has imposed financial sanctions on sanctioned countries, and China must be prepared to deal with the possible adverse effects of future US financial sanctions.The expansion of the cryptocurrency market and its anti-sanctions capabilities in some countries deserve special attention and research.Scholars believe that the Digital Currency Research Institute of the People’s Bank of China, the Hong Kong Monetary Authority, the Central Bank of Thailand, and the Central Bank of the United Arab Emirates jointly launched the Multilateral Central Bank Digital Currency Bridge (mBridge) project to build a new cross-border payment infrastructure that can bypass the SWIFT system.mBridge may become the most effective alternative to the SWIFT system.This scenario may be overly optimistic.On the one hand, participating countries are susceptible to geopolitical influences, and under pressure from Europe and the United States in recent years, the effectiveness of the digital currency bridge remains to be seen; on the other hand, after the promotion of digital currencies by central banks in various countries, their market acceptance is very limited.Unlike central bank digital currencies, which are centrally issued and have limited flexibility, stablecoins rely on multiple permissionless blockchains for global issuance and circulation. These blockchains are characterized by security, decentralization and censorship resistance. It is difficult for other countries to impose sanctions and freeze. The application scenarios can theoretically be infinitely diversified (such as programmable, Payment combined with artificial intelligence), therefore, my country encourages qualified enterprises to issue stable coins anchored to offshore RMB at the right time, and promotes the parallel management of centralized account systems (traditional payment systems or central bank digital currencies) and blockchain distributed account systems, which is an important way to counter U.S. financial sanctions in the future.
In recent years, the United States has implemented restrictions or even bans on central bank digital currency (CBDC). In July 2025, the U.S. House of Representatives passed the Anti-CBDC Surveillance State Act.In August of the same year, the new version of the National Defense Authorization Act (NDAA) of the U.S. House of Representatives also added the “Anti-Central Bank Digital Currency Surveillance National Act” clause.The above-mentioned bills prohibit the Federal Reserve from directly issuing central bank digital currency to individuals to avoid individuals being monitored and endangering financial freedom.This bill will inevitably affect the development of China’s digital renminbi overseas in the future.After the “9·11″ incident, the United States took the lead in SWIFT and blocked cross-border payment channels for sanctioned objects through the SWIFT system, which became an important means of U.S. financial sanctions.Digital currency and alternative payment channels are weakening the status of the U.S. dollar in the global monetary system, becoming a channel and method to circumvent sanctions, affecting the effectiveness of U.S. financial sanctions, and becoming a new arena for the game of financial sanctions and counter-sanctions.Represented by the United States, national security measures have become an important regulatory means for many countries to implement economic policies, strengthen national supervision, defend against foreign investment, and protect domestic industries.On the grounds of national security, the United States uses financial sanctions as a tool of diplomatic power to serve U.S. foreign policy, national security and other purposes.”Financial security is an important component of national security.” In terms of improving the internationalization of the RMB and China’s financial anti-sanctions capabilities, regulatory authorities can encourage financial technology companies to prioritize the issuance of stable currencies anchored to the RMB in Hong Kong. This will be a good response strategy.
Given that U.S. dollar stablecoins have formed huge advantages in network and scale effects, China is at a stage where it must respond in a timely manner.At present, Hong Kong should be used as a “test field” to steadily promote the pilot of offshore RMB stable coins, support Hong Kong’s joint mainland free trade zone, encourage qualified financial technology companies to participate in the issuance of stable coins in Hong Kong, and start exploring offshore RMB stable coins.Accumulating experience through pilot projects will lay the foundation for the subsequent promotion of RMB stablecoins within and outside China, and explore its synergy mechanism with the central bank’s digital currency.Offshore RMB stablecoins have significant strategic value and can build a new cross-border RMB channel that is independent of the international fund clearing system and activate offshore RMB capital pools exceeding one trillion yuan.After Hong Kong’s successful pilot, financial regulatory authorities can promote multilateral stablecoin cooperation along the Belt and Road Initiative and jointly build national sovereign funds to issue stablecoins anchored to the RMB. These efforts will open up a new path for the internationalization of digital RMB and become a key pivot in the reconstruction of the future cross-border trade payment system. It is not only possible to supplement the constraints of the RMB cross-border payment system, but is also expected to build a channel independent of the international funds clearing system.
(3) Promote international rules governance and technological empowerment
Scholars say: On the one hand, the current financial regulatory system is built according to the centralized financial service model, and the decentralization of the cryptocurrency system means that regulating cryptocurrency entirely in accordance with the principle of “same activities, same risks, same rules” may ultimately not work; on the other hand, current financial regulation and governance are nationalized, while cryptocurrency and decentralized finance are global, requiring international regulatory organizations to pay more attention and focus on solving the problem of “business globalization, governance nationalization” and guard against the hegemony of the United States in the global cryptocurrency governance system.Therefore, given the natural characteristics of cross-border flow of stablecoins, cross-border supervision and collaborative governance are crucial.At the governance level, China’s financial regulators can consider the following strategies: First, advocate international rules for the sovereign licensing of stablecoins, and under the framework of the Bank for International Settlements, the International Monetary Fund (IMF) and the Basel Committee on Banking Supervision, promote the issuance of stablecoins to be approved by the financial regulatory agencies of the countries where the legal currencies are anchored, restrict stablecoins without issuance licenses/regulations, and reduce their market share; secondly, in terms of the formulation of specific international rules, the regulatory regulations proposed by national authorities and international organizations on the risks related to the issuance of stablecoinsSome consensus has been roughly formed, which covers licensing access, capital requirements, customer fund protection, risk management, network security, anti-money laundering/anti-terrorist financing (AML/CFT), and consumer and investor rights protection. Based on the above consensus and financial security demands, Chinese regulatory agencies can make appropriate additions and deletions, and actively participate in the formulation of international rules. The third is to improve the level of regulatory technology, build penetrating supervision of on-chain funds, establish a cross-border stablecoin monitoring platform, and use artificial intelligence to identify abnormal capital flows.The regulatory vacuum of decentralized finance and non-fungible tokens provides covert channels for money laundering.For example, criminal groups use cross-chain exchanges to conceal the flow of funds, highlighting the urgency of upgrading regulatory technology.Customizing governance strategies for stablecoins and technological upgrades can reduce stablecoin-related crimes, including advances in artificial intelligence and data integration that provide new ways to combat financial crime. These innovations can help reduce the mislabeling of legitimate transactions, improve the identification rate of fraudulent transactions, and use the transaction traceability information stored in the blockchain to track the flow of stablecoins in the wallet network. Especially when stablecoins interact with regulated financial systems, they can strengthen compliance supervision such as anti-money laundering.
The current relevant regulatory principles in Hong Kong are mostly derived from the traditional financial regulatory model. For example, Section 3.5.1 of Hong Kong’s “Supervisory Guidelines for Licensed Stable Coin Issuers” stipulates that licensees should establish adequate and effective customer account opening policies and procedures.Issuance or redemption services shall not be provided to Specified Stablecoin holders and/or potential Specified Stablecoin holders unless relevant customer due diligence has been completed.This type of traditional financial supervision model (such as KYC) is very common in the financial industry. For example, the credit reporting system alleviates information asymmetry by establishing a systematic information collection, processing and sharing mechanism.However, the effectiveness of traditional financial regulatory models is being partially challenged in the field of blockchain finance.In 2019, the Financial Action Task Force on Anti-Money Laundering expanded its global anti-money laundering and countering terrorist financing standards to the field of virtual assets (VAs) and virtual asset service providers (VASPs).According to this rule, the Financial Action Task Force on Anti-Money Laundering requires virtual asset service providers and financial institutions to obtain, save and transmit specific originator and beneficiary information when transferring virtual assets.In practice, on the one hand, this has increased huge compliance costs for regulated institutions. On the other hand, a large number of unregulated institutions (such as decentralized exchanges, decentralized coin mixers, and decentralized lending) ignore the rules. Cryptoasset exchanges and some well-known stablecoin issuers that provide services to global customers use the convenience of spanning different jurisdictions to conduct regulatory arbitrage and evade the rules.The stablecoin field cannot simply follow the regulatory rules of the traditional financial industry, but requires new regulatory wisdom and new technical means to assist supervision, such as on-chain data analysis capabilities, combined with artificial intelligence technology, to effectively identify suspicious transactions through on-chain behavioral analysis, and traditional identity recognition may not be necessary.
A report released by the Bank for International Settlements in August 2025 pointed out that public transaction history on the blockchain can provide support for anti-money laundering and foreign exchange control and other compliance efforts by tracking the source and flow records of any specific unit or balance of stablecoins.Anti-money laundering compliance scores generated based on the likelihood that specific crypto asset units or balances are involved in illegal activities can be used as a reference at key nodes connected to the banking system (i.e., “fiat currency exchange exits”). This can not only block the inflow of illegally obtained funds, but also help cultivate a “due diligence” culture among crypto market participants.The healthy development of stablecoins requires domestic reconstruction of a policy environment for governance mechanism innovation and technological independence.At the level of collaborative governance, regulatory agencies can encourage stablecoin stakeholders, especially blockchain technology companies, to develop technologies that are compatible with current mainstream blockchains, and at the same time embed regulatory nodes in the blockchain infrastructure.Regulators monitor on-chain asset mortgage rates in real time, track systemic risks of stablecoin issuers, and observe market dynamics without waiting for quarterly reports.
Stablecoins are the earliest and most mature application of tokenization of real assets.The popularity of stablecoins has accelerated the tokenization process of various assets, forming a symbiotic ecosystem of stablecoins and asset tokenization.In 2025, BlackRock and other world-renowned asset management companies launched the tokenized fund BUIDL to invest in U.S. Treasury bonds and other assets, with the total scale exceeding US$7 billion.This type of product allows investors to purchase U.S. debt shares on the chain through U.S. dollar stablecoins, providing continued application scenarios for stablecoins.Hong Kong has a multi-asset layout, and the Hong Kong Monetary Authority encourages the development of RWA business.China can further promote the synergy between offshore RWA and RMB stablecoins.Stablecoins and RWA represent on-chain funds and on-chain assets respectively. RWA is developed simultaneously to represent and trade assets in the real world through tokenization.The development of RWA is a direction that Hong Kong, China, can consider in the future, and it can be used together with international trade payments to expand application scenarios for RMB stable currencies.Hong Kong can rely on its advantages of being backed by the mainland and facing the world to build an RWA hub.Establishing a “RWA Sandbox” regulatory innovation in Hong Kong, giving priority to allowing mainland financial assets to be tokenized in Hong Kong after quota approval from the State Administration of Foreign Exchange, realizing automatic cash flow splitting on the chain, and smart contracts embedding compliance rules.The integration of stablecoins and RWA will reshape financial infrastructure. Relying on blockchain technology, RWA allows global investors to access such assets through the Internet without the need for cross-border intermediaries or local accounts. This will greatly increase the investor base, increase holding willingness, and ultimately open up space for the application scenarios of RMB stablecoins.
five,in conclusion
The regulatory competition for stablecoins essentially embodies the battle for dominance in digital finance.The United States passed the “GENIUS Act” to build a closed loop of U.S. dollars-stablecoins-U.S. debts, making U.S. dollar stablecoins the largest buyer of U.S. debts and a digital carrier for the global penetration of the U.S. dollar.The promotion of offshore RMB stablecoins is the first key to solving the problem of US dollar stablecoins.Relevant financial regulatory rules should restrict the circulation of unauthorized stable coins in mainland China, and an official exchange corridor for stable coins between digital renminbi and Hong Kong offshore renminbi should be built in the Guangdong-Hong Kong-Macao Greater Bay Area.China can promote international organizations such as the Bank for International Settlements to jointly formulate international standards for sovereign licensing of stablecoins and build an independent and controllable cross-border blockchain clearing network.In terms of specific implementation guarantees and risk response, China’s financial regulatory agencies can refer to the consensus principles and existing deficiencies of various current regulatory bills in the future to build a more complete stablecoin regulatory system and clarify the principle of sovereign licensing of stablecoins; the Supreme People’s Court can issue judicial interpretations of stablecoin-related cases to clarify the legal attributes of property in emerging fields such as stablecoins and protect the rights and interests of legal holders.Hong Kong’s Stable Currency Ordinance provides an institutional basis for RMB stable currency.RWA tokenization is an important application scenario for RMB stablecoins in the future.Assets that are easy to digitize, such as financial assets, can be tokenized first, providing a wide range of application scenarios for RMB stablecoins and avoiding “idling” of stablecoins.Facing the risks and challenges of stablecoins, regulatory technology needs to be deployed ahead of time. At the same time, regulatory agencies should focus on collaborative governance mechanisms with various market entities.New risks such as cross-chain money laundering and algorithmic stablecoins require penetrating supervision on the chain to deal with them, and use the on-chain data analysis tools of stablecoin market participants to identify abnormal transactions and jointly deal with the shortcomings of traditional regulatory rules and regulatory methods.Facing the current new trends in stablecoin development and supervision, my country should seize the strategic window period and build a new ecology and new approach to the internationalization of digital renminbi.Although some scholars believe that with the rapid development of cryptocurrency and mobile payments, the usage rate of cash continues to decline, and the “anchor” status of the central bank currency is subsequently threatened, triggering widespread concerns around the world about a series of core issues such as monetary sovereignty, payment system security, and financial stability. However, if the stable currency anchored to the RMB develops healthily through the expansion of a wide range of application scenarios, the international status of the RMB will be enhanced.The battle for financial sovereignty in the digital era requires China to turn external challenges into opportunities for the internationalization of the RMB, through legislative defense-offshore offense-global governance, and relying on the advantages of Hong Kong’s “one country, two systems” to build a Chinese plan that takes into account financial security and financial innovation.
