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What Is a “Stablecoin”?

A stablecoin is a type of cryptocurrency whose value is usually pegged to a fiat currency (such as the U.S. dollar or euro) or another measurable financial asset (like cash or government bonds). Unlike cryptocurrencies with dramatic price swings—such as Bitcoin or Ethereum—stablecoins use collateralized assets or algorithmic mechanisms to keep their value relatively stable. This blend gives them the programmability of crypto and the value stability of fiat.

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Based on their collateral model, stablecoins fall into three main categories:

  • Fiat-Collateralized
    The issuer holds reserves of fiat currency equal to the amount of stablecoins issued, allowing users to redeem them at a 1:1 ratio at any time. For example, USDC is backed by U.S. dollar reserves held by compliant U.S. banks and custodians.
  • Crypto-Collateralized
    Value stability is ensured by over-collateralizing with other cryptocurrencies (such as ETH), as in the case of DAI.
  • Algorithmic
    These don’t rely on physical assets. Instead, they automatically adjust supply in the market via algorithms to maintain price stability.

The core feature of stablecoins is maintaining a fixed exchange rate with fiat currencies like the U.S. dollar. Issuers must commit to redeeming them for the equivalent fiat or assets on demand. Stablecoins support instant, cross-border peer-to-peer transactions and are compatible with smart contracts and DeFi ecosystems.

The Significance of U.S. Issued Stablecoins

In June 2025, the U.S. Senate overwhelmingly approved the GENIUS Act (Guidance and Establishment of National Innovation for U.S. Stablecoins Act), establishing a federal regulatory framework specifically for payment stablecoins. The act strictly defines “Permitted Payment Stablecoin Issuers” (PPSIs), allowing only federally or state-chartered banks and approved nonbank entities to legally issue stablecoins.

This move clearly aims to preserve the dollar’s dominance. By extending the dollar onto blockchain (“on-chain dollars”) sharing the U.S. government’s credit, it cements the greenback’s status as the world’s primary reserve and settlement currency. The revised bill also specifically restricts large tech firms—like Meta, Apple, and Amazon—from issuing stablecoins without thorough review, reflecting Congress’s wariness of data monopolies and financial infrastructure control. At the same time, it provides a clear compliance path for smaller financial institutions and payment firms, fostering innovative payment products and pilots domestically, thus invigorating U.S. financial markets. Some observers believe the U.S. government hopes to use on-chain dollars to broaden debt financing channels and ease upward pressure on interest rates caused by heavy debt burdens.

The Geo-Political and Economic Impact of Stablecoins

The launch of U.S. dollar stablecoins will further expand the dollar’s influence in global payment and reserve systems, creating an “on-chain” financial map. This not only solidifies U.S. monetary hegemony but also exerts competitive pressure on other currency systems, forcing countries to reassess their own internationalization strategies. Stablecoins enable instant, low-cost cross-border transfers, significantly boosting remittance efficiency. As more international trade and financial transactions settle in stablecoins, the traditional SWIFT system and legacy clearing banks could face major challenges, reshuffling the global payments landscape.
In a multilateral race alongside the EU, digital euro, and China’s e-CNY, stablecoins have become the new battleground for governments and multinational corporations. If the U.S. leverages stablecoins to deeply integrate the global financial network, other nations may struggle to achieve equal footing in digital payments, shifting the international political-economic balance. The global stablecoin ecosystem is still nascent, and past “de-pegging” incidents—such as USDT’s 2022 de-peg and USDC’s 2023 de-peg—have sparked market panic, underlining the need for coordinated international regulation. Should the U.S. set a domestic precedent, it would push bodies like the G20 and FATF to accelerate rule-making and strengthen cross-border regulatory cooperation.

Opportunities and Impacts for China

Facing the challenge of U.S. dollar stablecoins, China can learn from the American regulatory framework and accelerate cross-border pilots and promotion of the digital yuan (e-CNY). By enhancing payment connectivity with Belt and Road countries, China can boost the yuan’s usage in global trade and finance. In terms of technical standards, regulatory compliance, and infrastructure, Chinese firms already have mature use cases (e.g., cross-border blockchain trade platforms). The U.S. “licensed issuance” model offers a blueprint for domestic fintech, aiding the rapid rollout of autonomous, secure stablecoin and digital asset solutions.
As the U.S. promotes its on-chain dollar rules internationally, China must raise its voice in global forums, contributing to stablecoin regulatory standards to safeguard digital sovereignty and financial security. Growing demand for compliant stablecoin payments in the U.S. market presents collaboration opportunities for Chinese payment institutions and digital asset service providers—such as partnering with licensed issuers to build cross-border payment networks and digital asset custody services.

Conclusion and Outlook

By issuing stablecoins and creating a federal regulatory framework, the U.S. has sent a major policy signal to the crypto industry and marked a watershed in global digital currency governance. From preserving dollar dominance and driving financial innovation to engaging in international regulatory cooperation, the U.S. is aiming to replicate its off-chain influence in the on-chain world.
Looking ahead, multipolar competition will intensify. The EU, UK, Japan, South Korea, and China will accelerate implementation of their digital currency and stablecoin policies, shaping a global financial system characterized by both innovation and challenge. Regulatory cooperation and technical standard convergence—covering AML, consumer protection, and reserve transparency—will be vital for enforceable cross-border oversight. A new financial ecosystem will emerge, blending stablecoins, central bank digital currencies (CBDCs), and traditional banking, spawning novel services like decentralized exchanges (DEXs) and smart contract-based lending.
For China, it is crucial to guard against competitive pressure from U.S. dollar stablecoins while seizing the historic opportunity to influence international rule-making and technological innovation, propelling China’s digital economy and financial governance to new heights.