Stablecoins, a new type of financial instrument combining the features of cryptocurrencies with the stability of fiat currencies, are rapidly emerging as a transformative force in the global monetary landscape. Driven by advancements in blockchain technology and the ongoing digitization of financial systems, these digital assets are influencing how value is stored, transferred, and utilized worldwide.
On June 17, the U.S. Senate passed the “Guiding and Establishing National Standards for U.S. Stablecoins Act” (GENIUS Act), marking a significant milestone in the development of a regulatory framework for stablecoins. This legislation not only impacts the domestic U.S. market but also has profound implications for the structure of the global monetary system.
Understanding Stablecoins and Their Advantages
Stablecoins are a form of digital currency built on blockchain technology, designed to maintain a stable value by pegging to specific assets such as fiat currencies or physical commodities. Their core mechanism relies on either collateral reserves or algorithmic adjustments to achieve price stability. This distinguishes them from highly volatile cryptocurrencies like Bitcoin, which are less suitable for everyday transactions due to their price fluctuations.
Compared to traditional fiat currencies, stablecoins leverage blockchain to eliminate the need for central intermediaries and complex infrastructure, resulting in higher efficiency and lower costs—especially in cross-border payments. While traditional bank transfers can take days and incur high fees, stablecoins enable near-instant settlements at a fraction of the cost. This efficiency positions stablecoins not only as a reliable store of value and medium of exchange but also as a bridge between traditional finance and the crypto economy.
The stablecoin market has experienced explosive growth since 2020, fueled largely by the rise of decentralized finance (DeFi). As of June 2025, the total market capitalization of stablecoins has exceeded $250 billion. USDT (issued by Tether) and USDC (issued by Circle) are the most widely used stablecoins, collectively accounting for approximately 86% of the market. According to Citigroup, the stablecoin market could reach $1.6 trillion by 2030, with optimistic projections as high as $3.7 trillion, indicating its potential to become a major complement to traditional fiat systems.
Stablecoins can be categorized into three types:
- Fiat-collateralized stablecoins
- Crypto-collateralized stablecoins
- Algorithmic stablecoins
Fiat-collateralized stablecoins currently dominate the market. These are backed by reserves of high-liquidity assets such as cash, short-term government securities, or commercial paper. For example, for every unit of stablecoin issued, the issuer holds an equivalent value in U.S. dollars or other assets. This抵押机制 ensures stability and trust, with USD-pegged stablecoins comprising about 95% of the market.
Why the U.S. Is Regulating Stablecoins
The introduction of the GENIUS Act is closely tied to current economic challenges facing the United States.
One major concern is the growing U.S. national debt, which exceeded $36 trillion in 2024—approximately 121.5% of GDP. As debt levels rise faster than economic growth, doubts about the creditworthiness of U.S. Treasury bonds have led to higher yields and reduced confidence among foreign investors. The new legislation requires stablecoin issuers to hold at least $1 in compliant reserves (such as cash or short-term Treasuries) for every stablecoin issued. This effectively channels stablecoin reserves into U.S. debt instruments. Currently, USDT and USDC hold 66% and 41% of their reserves in short-term Treasuries, respectively. By the first quarter of 2025, these two stablecoins together held $120 billion in U.S. debt, making them collectively the 19th largest holder of U.S. Treasuries globally. If the stablecoin market reaches $2 trillion as projected, it could generate an additional $1 trillion in demand for short-term U.S. debt.
Additionally, the U.S. aims to extend the dollar’s dominance into the Web3 era through stablecoins. The U.S. Treasury Secretary has stated that stablecoins will help maintain the dollar’s status as the world’s primary reserve currency. Although the dollar’s share in global reserves has declined to 57.8%, approximately 95% of stablecoins are pegged to the dollar, creating a de facto dollar-dominated digital currency system. By promoting the use of stablecoins in cross-border payments and on-chain finance, the U.S. is expanding the dollar’s influence from traditional markets to the crypto ecosystem.
Global Impact of Stablecoins
The U.S. stablecoin legislation reinforces the dollar’s leading role in the global financial system. The inherent trust in the U.S. dollar as a reserve currency provides a strong foundation for dollar-pegged stablecoins, enabling more efficient penetration into global markets—especially in cross-border payments and digital asset trading.
For non-dollar currencies, stablecoins present both risks and opportunities. In countries with volatile currencies or underdeveloped financial systems, dollar-backed stablecoins could replace local money as the preferred medium of exchange, weakening monetary sovereignty and potentially triggering capital flight. On the other hand, nations with strong currencies and robust financial systems could leverage stablecoins to advance their own currency internationalization strategies.
The Upcoming Hong Kong Stablecoin Regime
Hong Kong’s “Stablecoin Ordinance” is set to take effect on August 1, 2025, providing a regulatory foundation for issuing multi-currency stablecoins and accelerating the development of a diversified international stablecoin ecosystem. This creates an ideal testing ground for exploring a RMB-backed stablecoin. As a global financial hub with a mature offshore RMB clearing system and cross-border payment infrastructure, Hong Kong is well-positioned to integrate stablecoin technology with existing financial systems. Such integration could expand the use of RMB in cross-border trade settlements and international investments, supporting the broader goal of RMB internationalization.
However, the cross-border nature of stablecoins also introduces risks. Their ability to facilitate borderless asset transfers could bypass traditional foreign exchange controls, complicating the monitoring and management of cross-border capital flows. Moreover, the decentralized and partially anonymous nature of transactions could be exploited for money laundering or other illicit activities. Therefore, regulators must enhance anti-money laundering (AML) measures and enforce strict customer identification requirements to mitigate these risks.
From a global perspective, stablecoins are reshaping monetary power structures. While the U.S. is using legislation to incorporate stablecoins into the dollar system, Hong Kong can leverage its financial strengths to promote RMB-backed stablecoin pilots, complementing the digital yuan (e-CNY). The digital yuan, backed by the People’s Bank of China, ensures security in domestic payments, while stablecoins could help expand China’s reach in cross-border payments and the virtual economy. If coordinated effectively, these two initiatives could position China more prominently in the evolving global monetary system.
The rise of stablecoins represents both a technological revolution and a contest for monetary sovereignty. For China, this presents both challenges and opportunities. Hong Kong’s regulatory experience and the technological foundation of the digital yuan will play a crucial role in shaping China’s participation in global monetary rule-making.
👉 Explore advanced strategies in digital finance
Frequently Asked Questions
What is a stablecoin?
A stablecoin is a type of cryptocurrency designed to maintain a stable value by pegging to a reserve asset like a fiat currency or commodity. This makes it suitable for everyday transactions and value storage, unlike more volatile cryptocurrencies.
How do stablecoins maintain their value?
Most stablecoins use a collateralization mechanism where each coin is backed by real-world assets held in reserve. Others use algorithms to adjust supply and demand dynamically. The majority are pegged to the U.S. dollar and backed by cash or Treasury reserves.
Are stablecoins regulated?
Regulation is evolving rapidly. The U.S. recently passed the GENIUS Act to establish standards for stablecoin issuers. Hong Kong will implement its Stablecoin Ordinance in August 2025. These frameworks aim to ensure transparency, consumer protection, and financial stability.
What are the risks of using stablecoins?
Key risks include potential reserve inadequacy, regulatory uncertainty, and use in illicit activities due to partial anonymity. Users should choose well-established stablecoins from transparent issuers and be aware of evolving regulations.
Can stablecoins replace traditional currencies?
While stablecoins offer efficiency advantages, especially in cross-border payments, they are not likely to replace sovereign currencies entirely. Instead, they are becoming a complementary part of the financial ecosystem, bridging traditional and digital finance.
How might stablecoins affect global currency dynamics?
Stablecoins could extend the influence of reserve currencies like the U.S. dollar while also providing opportunities for other currencies to internationalize. However, they may also challenge monetary sovereignty in countries with unstable currencies.