The rapid rise of stablecoins is reshaping the landscape of global finance, offering both opportunities and challenges for the U.S. dollar’s long-standing dominance in international markets. With the recent surge in Circle’s stock price—from $31 at IPO to $180 by June 27—investor confidence in stablecoin technology has never been higher. As the second-largest issuer of dollar-backed stablecoins, Circle’s success underscores a broader trend: stablecoins are not just transforming cross-border payments but could also redefine the global monetary system.
This article explores how dollar-pegged stablecoins may reinforce the dollar's international role, examines emerging risks, and considers the strategic importance of alternative digital currencies—particularly offshore yuan-backed stablecoins—in an increasingly digitized financial world.
The Rise of Dollar-Backed Stablecoins
Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to a reserve asset, typically a fiat currency like the U.S. dollar or euro. The most common model involves issuing digital tokens backed one-to-one with reserves held in bank accounts or short-term securities. This hybrid structure combines the stability of traditional money with the efficiency of blockchain technology—offering transparency, decentralization, low transaction costs, and 24/7 global accessibility.
These advantages have fueled explosive growth in stablecoin adoption. According to World Bank data, traditional cross-border remittances take 3–5 days and carry an average cost of 6.35%. In contrast, stablecoin transactions on blockchains like Solana settle instantly and cost less than $1 per transfer. As infrastructure improves, stablecoins are expanding beyond crypto trading into real-world use cases: international trade settlements, payroll distribution, investment clearing, and even protection against local currency depreciation.
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Today, the total market capitalization of stablecoins exceeds $260 billion. Over the past year, more than 240 million unique addresses have actively held stablecoins, with over 1.4 billion adjusted payment transactions amounting to $6.7 trillion in volume. Notably, ARK Invest estimates that in 2024, stablecoin payment volumes surpassed the combined totals of Visa and Mastercard. The U.S. Treasury’s Borrowing Advisory Committee (TBAC) projects that the stablecoin market could reach $2 trillion by 2028.
How Dollar Stablecoins Reinforce U.S. Monetary Power
Currently, dollar-backed stablecoins dominate over 95% of the global stablecoin market—a share significantly larger than the dollar’s footprint in traditional financial metrics such as foreign exchange reserves (about 60%) or international payments (around 40%). This outsized presence amplifies the dollar’s network effects and strengthens its role as the world’s primary medium of exchange, unit of account, and store of value.
Several factors contribute to this dominance:
- Regulatory openness in the U.S.: Compared to cautious approaches in the EU and Asia, American regulators have increasingly embraced innovation in digital assets. In June 2025, the U.S. Senate passed the National Innovation Act to Guide and Establish Stablecoins, providing a clear legal framework for stablecoin issuance and usage.
- Political momentum: With renewed leadership emphasizing pro-innovation policies, regulatory sentiment has shifted from restriction to structured support for blockchain-based finance.
In contrast, jurisdictions like the European Union—despite enacting MiCA (Markets in Crypto-Assets Regulation) in 2024—impose stricter requirements on stablecoin issuers. These include tighter capital rules and restrictions on algorithmic models, discouraging large-scale euro stablecoin development. Even Binance was forced to delist USDT from its EU platform due to compliance hurdles.
As a result, dollar stablecoins are becoming a new vector for currency substitution, especially in countries facing high inflation or capital controls. Individuals and small businesses in nations like Argentina, Nigeria, and Turkey increasingly use USD-backed stablecoins to preserve wealth and conduct cross-border commerce—effectively deepening dollarization without formal policy adoption.
Former People’s Bank of China Governor Zhou Xiaochuan has warned that such trends could lead to "further dollarization" globally, particularly where dollar stablecoins benefit from existing trust in U.S. institutions and financial infrastructure.
U.S. Treasury Secretary Scott Bessent has echoed this view, stating that dollar stablecoins expand the reach of the greenback while supporting sustained demand for U.S. Treasury securities—thereby reinforcing the dollar’s status as the world’s leading reserve currency.
Challenges to the Dollar’s Stablecoin Advantage
Despite their current dominance, dollar stablecoins face structural limitations that prevent them from single-handedly preserving U.S. monetary hegemony in the long term.
Erosion of Foundational Pillars
The dollar’s global standing rests on three pillars: strong governance and rule of law, a large and resilient economy, and powerful network effects through systems like SWIFT. However, recent developments have weakened some of these foundations:
- Political instability and institutional erosion: Unpredictable trade policies and perceived threats to Federal Reserve independence under certain administrations have raised concerns about governance quality.
- Fiscal sustainability risks: Persistent budget deficits have led credit rating agencies like Moody’s to downgrade U.S. sovereign debt outlooks—citing deteriorating fiscal indicators as recently as May 2025.
- Overuse of financial sanctions: While intended as foreign policy tools, extensive sanctions have prompted countries like Russia, China, India, and Brazil to diversify away from dollar-denominated assets. Many are increasing gold reserves and promoting bilateral settlements in local currencies.
These trends suggest that no technological innovation—including stablecoins—can fully compensate for declining confidence in core economic and political institutions.
Global Regulatory Shifts May Level the Playing Field
While the U.S. leads today, many countries are now advancing their own regulatory frameworks for digital assets. Since 2025, nations including the UK, Japan, South Korea, Australia, Turkey, Argentina, Nigeria, Panama, and the Cayman Islands have announced or enacted stablecoin regulations.
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This wave of regulatory activity could enable non-dollar stablecoins—euro-, yen-, or yuan-pegged tokens—to gain traction. If successful, these alternatives would allow countries to conduct international transactions outside traditional Western-dominated systems like SWIFT, reducing reliance on the dollar.
In such a scenario, stablecoins might not strengthen dollar dominance but instead foster greater multipolarity in global finance—where multiple digital currencies compete on equal footing.
The Strategic Case for Offshore RMB Stablecoins
As digital finance evolves, China has an opportunity to leverage its growing economic influence through offshore yuan-backed stablecoins.
While the RMB ranks around fourth in global payment usage (per SWIFT data from 2024), its potential in digital form remains underutilized. Launching regulated offshore RMB stablecoins could accelerate yuan internationalization by combining the currency’s credibility with blockchain efficiency.
Such tokens would enable faster, cheaper cross-border transactions—bypassing legacy systems optimized for dollar flows—and enhance the yuan’s competitiveness in trade finance and investment.
Hong Kong stands out as the ideal launchpad. As the world’s leading offshore RMB hub, it has already begun establishing a robust regulatory environment for virtual assets and sees stablecoin development as key to maintaining its status as a global financial center.
Although unofficial RMB-pegged tokens like USDT’s CNH₮ (launched in 2019), TRON’s TCNH (2022), and Trust Reserve’s CNHC (2023) exist, they remain limited in scale and transparency. A formally endorsed offshore RMB stablecoin would offer greater legal clarity and liquidity support—boosting market confidence.
Time is critical: due to strong network effects in digital currencies, early movers gain lasting advantages. Delaying official RMB stablecoin issuance risks ceding ground permanently.
Frequently Asked Questions
Q: What are stablecoins?
A: Stablecoins are cryptocurrencies pegged to stable assets like the U.S. dollar or euro. They combine blockchain efficiency with price stability, making them ideal for payments and value storage.
Q: Why do most stablecoins use the U.S. dollar?
A: The dominance stems from favorable U.S. regulation, investor trust in American financial systems, and strong network effects that make dollar-based transactions more accessible globally.
Q: Can stablecoins replace traditional banking systems?
A: Not entirely yet—but they’re increasingly used for cross-border payments and remittances where traditional systems are slow or expensive.
Q: Do non-dollar stablecoins pose a threat to the U.S. dollar?
A: Potentially. If major economies issue scalable, trusted digital currencies backed by their fiat money, they could reduce global reliance on the dollar over time.
Q: Is Hong Kong likely to launch an official RMB stablecoin soon?
A: While no official launch has been confirmed, Hong Kong’s proactive regulatory stance suggests it may be among the first jurisdictions to support a compliant offshore RMB stablecoin.
Q: How do stablecoins affect monetary sovereignty?
A: Widespread adoption of foreign-backed stablecoins can undermine domestic monetary control—especially in countries with weak currencies—leading to de facto currency substitution.
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The rise of stablecoins represents a pivotal moment in global finance. While dollar-backed tokens currently reinforce U.S. monetary leadership, long-term dominance depends on more than technology—it requires sound governance, fiscal discipline, and strategic foresight. At the same time, the emergence of alternative digital currencies signals a shift toward a more balanced, multipolar financial order. For policymakers and investors alike, understanding this transition is essential for navigating the future of money.