Stablecoins have emerged as the latest arena in the growing financial rivalry between the United States and China. Unlike volatile cryptocurrencies such as Bitcoin, stablecoins maintain a fixed value by pegging themselves to an underlying asset — often the U.S. dollar or the Chinese yuan.
As regulators in Hong Kong and Washington move to implement new rules, both powers are signaling their intent to shape the next era of digital money. The competition is not just about technology; it is about who controls the future of global finance.
In May 2025, Hong Kong passed the Stablecoins Bill, creating one of the world’s first comprehensive frameworks for stablecoins pegged to traditional currencies. The move adds another dimension to Beijing’s long-term efforts to reduce reliance on the U.S. dollar. Alongside initiatives such as the Cross-Border Interbank Payment System (CIPS), BRICS Pay, and the digital yuan, Hong Kong’s stablecoin ecosystem could help China expand international trade outside of Washington’s reach.
The line is quite clear here: Hong Kong can pursue government-backed stablecoin innovation, but the mainland remains adamant on limiting private cryptocurrencies. The Chinese government views its CBDC (digital renminbi) much more favorably than any decentralized asset. This way, China has the opportunity to experiment with digital finance globally unrestricted while holding onto tight control within Chinese borders.
Deng Chao, CEO of HashKey Capital, remarked that Hong Kong’s progress provides a “valuable reference” for future regulatory models on the mainland. Eddie Yue, chief executive of the Hong Kong Monetary Authority (HKMA), noted that rules will be “stricter in the beginning” but will evolve as the sector matures. The broader goal is clear: restore Hong Kong’s role as a premier financial hub after years of unrest and position it as a gateway for China’s Web3 ambitions.
Across the Pacific, the U.S. has also taken decisive steps. Last month, President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) into law. The act requires stablecoins to be pegged to dollars or similarly low-risk assets, mandates registration with regulators, and enforces strict audit requirements. The legislation seeks to reinforce the dollar’s global supremacy in digital payments.
Yet questions linger about the motivations behind it. Trump’s political base includes a cohort of tech investors and executives — often called the “crypto bros” — who bankrolled his 2024 campaign in hopes of favorable policy. Their influence is evident in the GENIUS Act’s passage.
Skeptics also point to Trump’s personal involvement in launching a $TRUMP meme coin, which surged by 300 percent before collapsing, generating what critics described as a “rug pull” that enriched insiders at the expense of retail buyers. These controversies have fueled suspicion that U.S. stablecoin policy may serve political interests as much as economic strategy.
While Washington seeks to defend the dollar, Beijing is pushing for a multipolar currency order. The People’s Bank of China (PBOC) has launched an international operations center for the digital yuan in Shanghai, with plans to integrate it into cross-border payments and supply chain financing. Projected usage of the e-CNY between Hong Kong and the mainland is expected to reach $8 billion in 2025.
Still, analysts remain cautious. J.P. Morgan argued that despite progress, the yuan is unlikely to overtake the dollar soon. In 2022, the U.S. dollar accounted for 88 percent of global foreign exchange transactions, compared to just 7 percent for the yuan. Yet within the BRICS bloc and among emerging economies, China is gaining ground. At the 2025 BRICS summit in Rio de Janeiro, leaders reaffirmed their commitment to de-dollarization and called for alternative settlement systems.
China’s CIPS has expanded significantly, linking with Russia’s SPFS network to bypass the SWIFT system. Trade data shows momentum: China-Russia bilateral trade reached $218 billion in 2024, much of it settled in yuan and rubles. Similarly, India-Russia trade hit $66 billion, with local currency arrangements replacing the dollar in many deals.
There was talk about Beijing launching a yuan-backed stablecoin at the very end of August 2025, yet nothing concrete has happened on that front. This was precipitated by rising U.S. tariffs, slow domestic growth, and financial sanctions. A yuan-pegged stablecoin would be capable of bypassing banking restrictions, permit liquidity to flow, and offer China additional leverage in global trade.
Not to be outdone, the U.S. is experimenting with state-level innovation. Wyoming recently introduced the world’s first state-issued stablecoin. For some, this represents more than a regional experiment; it is a blueprint for a broader federal strategy. One expert noted that such initiatives could be “way more effective than tariffs,” explicitly challenging China’s tight currency controls.
The ripple effects of U.S. policy are already being felt abroad. Tether’s U.S. dollar-pegged USDT remains the world’s most dominant stablecoin, making up nearly 60 percent of the $270 billion global market. With the GENIUS Act accelerating the adoption of dollar-backed stablecoins, European regulators are sounding alarms.
Jürgen Schaaf, adviser at the European Central Bank (ECB), warned that widespread use of U.S. dollar stablecoins in Europe could undermine euro monetary policy. He cautioned that if these assets gain traction for “payments, savings, or settlement,” eurozone instruments might face direct competition. Schaaf emphasized that dollar dominance provides Washington with strategic advantages, from cheaper debt financing to greater geopolitical leverage — all at Europe’s expense.
The growing rivalry in the area of digital currencies between the U.S. and China reflects a greater change: the growing fragmentation of the global monetary system. Instead of there being one top reserve, there may well be several competing digital currencies, standing alongside different geopolitical blocks. On one level, such fragmentation raises transaction costs and complicates trade, but it is also an expression of a shift in the global economic power.
Trends are already visible. According to IMF data, the dollar’s share of global foreign exchange reserves fell from over 70% in the early 2000s to around 59% by 2021. Central banks in emerging markets have been diversifying into gold while purchasing 244 metric tons in just the first quarter of 2025, the highest quarterly volume in years.
The IMF has warned that while digital money may boost efficiency, it also poses risks if crises strike. One policy note cautioned that “a shift to a multipolar reserve configuration may require global reserve issuers to expand liquidity backstops.” Scholars echo this concern. Yash Kalash of the Center for International Governance Innovation warned that diverging financial systems could spark “fragmentation, capital flow volatility, and regulatory disjunctures.”
Researcher Antonis Ballis found that geopolitical sanctions and declining trust in Western payment systems are pushing countries toward alternative digital networks. He concluded that these systems are increasingly used not just for efficiency but also as shields against dollar exposure.
Harvard economist Kenneth Rogoff framed the current moment as the most significant turning point since the end of the gold standard, noting that while the dollar is likely to remain dominant in the near term, it faces mounting competition from the yuan and euro alike.
The race between the U.S. and China to dominate stablecoins is not merely a technological contest — it is a struggle for sovereignty and influence in the future of global finance. America is doubling down on dollar-backed assets, while China is leveraging Hong Kong and preparing yuan-based alternatives to chip away at Washington’s advantage. Europe, caught in the middle, fears deeper dependency on the U.S. monetary system.
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