China has expressed worries regarding the increasing prominence of stablecoins backed by the US dollar within the global financial landscape.
A leading economist from one of the nation’s research institutions has cautioned that the unrestrained growth of these stablecoins could potentially bolster the United States’ influence over the worldwide monetary framework.
### Concerns About Dollar-Backed Stablecoins
As noted by Zhang Ming, deputy director at the Institute of Finance and Economics alongside the National Finance and Development Laboratory, the current environment strongly favors US dollar-denominated stablecoins.
Zhang cautioned that should the US successfully integrate dollar-pegged stablecoins with global credit markets, this could enhance the dollar’s role in both physical and digital economies. He contends that such a scenario would significantly challenge the competitiveness of other currencies on a global scale.
He stated:
> “Once US dollar stablecoins become more closely linked to the international credit of the US dollar and the application scenarios in the virtual realm, it may greatly reinforce the dominance of the US dollar.”
Current data indicates that Tether (USDT) and USD Coin (USDC) now represent almost 90% of the stablecoin market. USDT alone boasts a market capitalization of $143 billion, while USDC holds around $60 billion. Collectively, they dominate the $236 billion stablecoin market.
These stablecoins are frequently utilized as trading pairs on cryptocurrency exchanges, providing liquidity and serving as intermediaries between fiat currencies and digital assets like Bitcoin and Ethereum. In various developing nations, they are favored as digital means of preserving value, helping users maintain their purchasing power amid economic instability.
### Expansion of the Digital Yuan
The report urges China to expedite its efforts to promote the international use of the digital yuan (CNY).
It suggests that China should enhance the application of digital tokens in both domestic and international contexts, connecting sovereign credit with global usage scenarios.
With careful planning and risk management, these initiatives could elevate the status of the renminbi and provide a counterbalance to the growing sway of dollar-linked stablecoins.
The report states:
> “With appropriate design and risk mitigation measures, broadening the use of digital tokens across these platforms can substantially boost the international currency status of the RMB, enabling a more composed response to the challenges posed by US dollar stablecoins.”
China’s apprehensions echo similar sentiments expressed in Europe. Recently, EU officials have voiced concerns that the US’s favorable stance toward cryptocurrencies may give dollar-backed stablecoins an advantage over euro-based alternatives.
Pierre Gramegna, managing director of the European Stability Mechanism, highlighted that this trend could jeopardize the EU’s financial independence.