The rise of stablecoins has reignited global conversations about the future of cross-border payments and international monetary systems. With recent regulatory milestones in the U.S. and Hong Kong, the public listing of Circle—the so-called “first stablecoin stock”—and China’s announcement to establish a digital RMB international operations center in Shanghai, stablecoins are once again at the forefront of financial innovation debates.
Some argue that stablecoins could revolutionize global finance by boosting payment efficiency, with claims that the currency backing a stablecoin may determine its issuer's dominance in the future monetary order. Others suggest that dollar-backed stablecoins, fully collateralized by cash or short-term U.S. Treasuries, could create a self-reinforcing loop—“dollar → dollar stablecoin → U.S. Treasury”—helping the U.S. finance its debt and solidify dollar hegemony.
However, while stablecoins bring technological innovation to the table, their monetary significance is often overstated. Emerging payment technologies like stablecoins can enhance cross-border transaction experiences, but they are unlikely to alter the multi-polar evolution of the international monetary system or accelerate the internationalization of emerging currencies in any transformative way.
Stablecoins: More Technology Than Currency
Stablecoins supported by legislation in jurisdictions like the U.S. and Hong Kong are tokenized, decentralized digital assets pegged 1:1 to fiat currencies. While distinct from centralized, account-based central bank digital currencies (CBDCs) such as China’s digital RMB, they share core functionalities.
As former People’s Bank of China (PBOC) Governor Zhou Xiaochuan noted, CBDC combines digital currency (DC) and electronic payment (EP). The same duality applies to stablecoins—underpinned by technology but dependent on traditional monetary value.
Much of the discourse around stablecoins emphasizes their blockchain-native features: programmability, peer-to-peer transfers, and instant settlement. There's an implicit assumption that rebranding fiat into a "token" is necessary to unlock these benefits. But once regulated and backed 100% by reserves—ensuring “possession equals ownership” on a distributed ledger—the functional advantage doesn’t hinge on renaming the currency.
A real-world example is the recently launched Cross-boundary Interoperability Payment Connect between mainland China and Hong Kong.
Case Study: The China-Hong Kong Payment Connect
This new service links China’s domestic fast payment system with Hong Kong’s equivalent, enabling seamless, low-cost cross-border transfers for individuals. Operated by six designated banks on each side, it supports hassle-free remittances for purposes like tuition, medical bills, salaries, and subsidies—all within set limits and without requiring extensive documentation.
Key improvements over traditional wire transfers include:
- Digital initiation via mobile or online banking using phone numbers or account details
- Near-instant settlement for small-value current-account transactions
- Direct infrastructure linkage, cutting out intermediaries and reducing costs
Launched on June 22, 2025—even on a weekend—the system demonstrated resilience through digital-only access. Notably, it runs entirely on existing account-based banking infrastructure, not blockchain or stablecoins.
This proves that efficiency gains in cross-border payments don’t require radical overhauls. China’s underlying fast payment system—the Online Payment Interbank Clearing System—has been operational since 2010 and predates widespread blockchain adoption.
That said, blockchain isn’t off the table. In 2018, the PBOC’s Digital Currency Research Institute helped launch the Guangdong-Hong Kong-Macao Greater Bay Area Trade Finance Blockchain Platform, showcasing how distributed ledger technology (DLT) can streamline supply chain financing.
Yet scalability remains a challenge. Blockchain networks can slow down under high transaction volume, limiting their applicability for mass retail payments.
Moreover, anonymity—a hallmark of early cryptocurrencies like Bitcoin—isn’t essential for most financial use cases. In regulated environments, traceability and compliance matter more than decentralization. Transitioning from account-based to value-based systems is technically feasible but should serve practical goals, not ideological ones.
Regulatory Alignment Matters More Than Technology Alone
The success of Payment Connect also underscores the importance of regulatory cooperation. Unlike decentralized stablecoins that must seek individual licenses and build local partnerships across borders, this system leverages existing banking relationships and compliance frameworks.
This synergy between traditional finance and new tech explains why stablecoin issuers are increasingly seeking integration with regulated institutions—not replacing them.
PBOC Governor Pan Gongsheng highlighted this trend at the 2025 Lujiazui Forum, noting that blockchain and DLT are reshaping payment architecture through “payment-versus-settlement” mechanisms. However, he also stressed the regulatory challenges posed by smart contracts and decentralized finance (DeFi).
Similarly, the Bank for International Settlements (BIS) adopts a nuanced stance. While acknowledging stablecoins’ potential in tokenization, BIS warns they fail key criteria for sound money: monetary unity (uniform acceptance at face value), elasticity (ability to meet obligations promptly), and integrity (resistance to financial crime). Without strong oversight, stablecoins pose risks to financial stability and national monetary sovereignty.
BIS advocates instead for a “unified ledger” model—integrating central bank reserves, commercial bank deposits, and government securities into a programmable platform for near-instant settlement of both payments and securities.
Stablecoins Won’t Reverse Monetary Multipolarity
Governor Pan also identified three inherent instabilities in systems dominated by a single sovereign currency:
- Domestic policy priorities conflicting with global responsibilities
- Spillover risks from fiscal and financial imbalances
- Weaponization of monetary tools
These structural issues persist regardless of whether transactions occur via traditional rails or stablecoins. A dollar-backed stablecoin merely extends the dollar’s reach—it doesn’t resolve U.S. fiscal overextension or restore confidence eroded by policy unpredictability.
The idea that stablecoins can rescue U.S. debt sustainability is overly optimistic. Tying stablecoin issuance to short-term Treasuries may marginally boost demand, but it doesn’t eliminate repayment obligations. History offers cautionary tales.
In the 1960s–70s, persistent U.S. balance-of-payments deficits led to gold reserve depletion. Attempts to stabilize the system—via the Gold Pool and SDRs—failed. In 1971, Nixon suspended dollar-gold convertibility, effectively defaulting on external liabilities and collapsing the Bretton Woods system.
Today’s “trilemma” echoes those times: expansive fiscal policy, rising debt, and political interference in central bank independence. Since April 2025, surging Treasury yields have coincided with stock market volatility and dollar weakness—a rare “triple sell-off” signaling eroding confidence in U.S. economic stewardship.
Even U.S. Treasuries—long seen as safe assets—are now viewed as risk-bearing instruments amid inflation uncertainty. The Silicon Valley Bank collapse illustrated how stress in short-duration bonds can destabilize institutions holding supposedly “safe” collateral.
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Thus, a Treasury-backed dollar stablecoin isn’t inherently stable—it inherits the vulnerabilities of its underlying assets.
Can Stablecoins Enable Currency Internationalization?
Some hope stablecoins offer emerging economies a shortcut to global monetary influence. But this overlooks key realities:
- Blockchain technology is open-source and non-exclusive—no single nation holds a monopoly.
- Adoption depends not on tech novelty but on economic strength, institutional credibility, and network effects.
- If a currency lacks international trust, its tokenized version won’t magically gain it.
While early movers may gain temporary advantages, others can catch up quickly. Technological parity levels the playing field—but fundamental economic power does not.
In a multi-polar world, competition among major currencies will continue. Advanced payment infrastructure can reinforce incumbency through network effects, but it cannot compensate for weak fundamentals.
FAQs: Addressing Key Concerns About Stablecoins
Q: Do stablecoins make cross-border payments faster?
A: They can, but so can upgraded traditional systems like Payment Connect. Speed depends more on infrastructure design than the use of tokens.
Q: Are dollar-backed stablecoins safer than others?
A: Not necessarily. Their stability relies on the credibility of U.S. fiscal policy and Treasury markets—both of which face growing scrutiny.
Q: Could stablecoins replace SWIFT or central banks?
A: Unlikely. They operate within existing financial frameworks and require regulatory approval—unlike decentralized visions of finance.
Q: Should countries ban stablecoins?
A: No—but they should regulate them strictly to prevent financial instability, money laundering, and erosion of monetary sovereignty.
Q: Is tokenized money the future?
A: Partially. Tokenization has promise for securities settlement and interbank transactions, but widespread retail use requires robust oversight.
Q: Can China’s digital RMB compete with dollar stablecoins?
A: Yes—but through policy credibility and international cooperation, not just technology.
Conclusion: Embrace Innovation, But Stay Grounded
Cross-border payments remain slow and costly—a problem driving global interest in CBDCs and stablecoins. We should welcome innovation with an open mind, testing new models through pilot programs and phased rollouts.
But we must also avoid overhyping stablecoins as panaceas for systemic issues rooted in economics and governance—not technology.
Stablecoins are tools, not saviors. They reflect the strength of the currencies they mirror and the integrity of the systems that regulate them.
Policymakers should focus on:
- Gradual integration of new tech into regulated finance
- Preventing financial disintermediation
- Monitoring foreign stablecoin penetration
- Educating consumers about risks
Above all: don’t mythologize stablecoins. Recognize their potential—but keep expectations realistic.
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