Stablecoin Legislation Booms Globally, Why Is China Taking the Opposite Approach? An Article to Understand the Real National Strategic Choices

Since May 2025, the United States and Hong Kong have been racing to advance stablecoin legislation, sparking a global surge in legislation for stablecoins and crypto assets (also referred to as "cryptocurrencies" or "virtual currencies"). Numerous institutions and capital are flocking to issue stablecoins and invest in crypto assets. This has also triggered heated debate in China over whether the country should vigorously promote stablecoin legislation and the development of a RMB stablecoin (including offshore versions). Furthermore, after the US legislated to prohibit the Federal Reserve from issuing a digital dollar, whether China should continue to push forward with the digital RMB has become a hot topic of contention.

For China, this concerns the direction and path of national currency development. In the context of the global proliferation of USD stablecoins, increasingly sharp and complex international relations, and intensified international currency competition, how the RMB innovates and develops while safeguarding national security and achieving the strategic goal of a strong currency and financial power will have a profound and far-reaching impact. It is essential to calmly analyze, accurately grasp, and make early decisions—neither remaining indifferent or hesitant, nor blindly following trends and making fundamentally disruptive mistakes.

Subsequently, the People’s Bank of China announced that it would optimize the positioning of the digital RMB within the monetary hierarchy (adjusting the previously determined M0 positioning—something the author has repeatedly advocated from the beginning; see Wang Yongli’s WeChat public account, January 6, 2021: “The Digital RMB Should Not Be Positioned as M0”), and would further optimize the digital RMB management system (establishing an international digital RMB operations center in Shanghai, responsible for cross-border cooperation and usage of the digital RMB; and an operations management center in Beijing, responsible for the construction, operation, and maintenance of the digital RMB system), to promote and accelerate the development of the digital RMB.

On November 28, the People’s Bank of China and 13 other departments jointly held a meeting of the coordination mechanism for cracking down on virtual currency trading and speculation. The meeting pointed out that, due to various factors, speculation in virtual currencies has recently resurged, with related illegal and criminal activities occurring from time to time, presenting new situations and challenges for risk prevention and control. The meeting emphasized that all units should deepen coordination and cooperation, continue to adhere to the prohibitive policy on virtual currencies, and persistently crack down on illegal financial activities related to virtual currencies. It was clearly stated that stablecoins are a form of virtual currency, and their issuance, trading, and other business activities are likewise illegal and subject to crackdown. This has greatly disappointed those who believed China would promote the development of RMB stablecoins and correspondingly lift the ban on virtual currency (crypto asset) trading.

Thus, China’s policy orientation of accelerating the development of the digital RMB while resolutely curbing virtual currencies, including stablecoins, has become completely clear. Of course, this policy orientation is still the subject of intense debate both domestically and internationally, and there is no unified understanding among the public.

So, how should we view this major policy orientation of China?

Here, we will first answer why China is resolutely halting stablecoins; the issue of how to accelerate the innovative development of the digital RMB will be discussed in a separate article.

There Is Little Room or Opportunity for Non-USD Stablecoin Development

Since Tether launched the USD-pegged stablecoin USDT in 2014, USD stablecoins have been operating for over a decade, forming a complete international operating system and essentially dominating the entire crypto asset trading market, with their share of global fiat stablecoin market capitalization and trading volume both exceeding 99%.

This situation has arisen, on the one hand, because the US dollar is the world’s most liquid and best-supported international central currency, making USD-pegged stablecoins the easiest to accept globally. On the other hand, it is also the result of the US long-term tolerant policy towards bitcoin and other crypto assets and USD stablecoins, rather than leading the international community in strengthening necessary regulation to safeguard the fundamental interests of humanity. Even as the US pushes for legislation on stablecoins and crypto assets this year, it is mainly because USD stablecoins are believed to increase global demand for the dollar and US assets such as US Treasuries, reduce the financing costs of the US government and society, and strengthen the dollar’s international dominance. The US supports and controls USD stablecoins to maximize its own interests, with little consideration for managing the international risks of stablecoins.

With the US vigorously promoting USD stablecoins, other countries or regions seeking to launch non-USD fiat stablecoins may find some market space or opportunity within their own sovereign currency areas or on their own e-commerce platforms, but at the international level, it is already very difficult to compete with USD stablecoins, and the room for development and practical significance are minimal. Lacking a strong ecosystem and application scenario support, and without clear advantages over USD stablecoins in attracting traders and trading volume, the input-output ratio for issuing non-USD fiat stablecoins is unlikely to meet expectations, and they will struggle to survive as countries tighten legislative and regulatory oversight.

US Stablecoin Legislation Still Faces Many Issues and Challenges

After US President Trump’s second successful election campaign, his strong advocacy for bitcoin and other crypto assets fueled a new international boom in crypto asset trading and speculation, driving rapid growth in USD stablecoin trading and a swift expansion of stablecoin market capitalization. This not only increased demand for the dollar and US Treasuries, strengthening the dollar’s international status, but also brought huge profits to the Trump family and its crypto circle associates. However, it also brought new shocks to global dollar circulation monitoring and the stability of the US traditional financial system. At the same time, crypto asset trading and transfers supported by USD stablecoins have become a new, harder-to-defend tool for the US to harvest global wealth, posing serious threats to other countries’ monetary sovereignty and wealth security.

For this reason, the US has accelerated legislation on USD stablecoins, but the legislation is still primarily focused on America First, maximizing US or group interests, even at the expense of other countries’ and the world’s common interests.

After the USD stablecoin legislation takes effect, institutions not approved by US regulators and without an operating license will find it difficult to issue and operate USD stablecoins in the US (this is why Tether has announced it will apply to issue USDT for the US market). Stablecoin issuers subject to US regulation must meet requirements such as Know Your Customer (KYC), Anti-Money Laundering (AML), and Anti-Terrorist Financing (FTC), be able to screen customers against government watchlists and report suspicious activities to regulators, and have systems capable of freezing or intercepting specific stablecoins at the order of law enforcement. Issuers must hold no less than 100% of regulator-approved USD assets (including cash, short-term Treasuries, Treasury-backed repurchase agreements, etc.) as reserves, and US customer funds must be held in US banks and not transferred overseas. Paying interest or returns on stablecoins is prohibited, and strict controls are imposed on over-issuance and proprietary manipulation of stablecoins. Reserve assets must be held by independent institutions recognized by regulators and audited at least monthly by auditing firms, with audit reports published. This will greatly enhance the value stability of stablecoins relative to the dollar, strengthen their payment function and compliance, and weaken their investment attributes and illegal uses; it will also significantly increase the regulatory costs of stablecoins and correspondingly reduce their windfall profits under unregulated conditions.

The US stablecoin legislation officially took effect on July 18, but there are still many issues and challenges: Although the scope of reserve assets for issuing stablecoins is specified (bank deposits, short-term Treasuries, Treasury-backed repurchase agreements, etc.), since these mainly include assets like Treasuries whose prices fluctuate, even if reserves are adequate at issuance, a subsequent decline in Treasury prices could lead to insufficient reserves. If different issuers have different reserve asset structures and there is no central bank backstop, their USD stablecoins are not identical, creating arbitrage opportunities and posing challenges for regulation and market stability. Even if there is no over-issuance at the time of issuance, if decentralized finance (DeFi) is allowed to engage in stablecoin lending, it could still result in derivative and over-issued stablecoins, unless it is strictly limited to matching borrowers and lenders without proprietary trading. It is also not easy for non-financial-institution stablecoin issuers to meet regulatory requirements, and regulation itself faces significant challenges.

More importantly, the earliest and most fundamental demand for stablecoins is for borderless, decentralized, 7x24 hour trading and settlement of crypto assets on the blockchain. It is precisely because bitcoin and other crypto assets cannot meet the basic requirement for money as a measure of value and value token—that is, the total money supply must be able to change in line with the total value of tradable wealth requiring monetary pricing and settlement, thereby maintaining basic currency stability—that their prices fluctuate sharply relative to fiat currencies (thus, using bitcoin and other crypto assets as collateral or strategic reserves carries significant risks), making them difficult to become true circulating currencies, which gave rise to fiat-pegged stablecoins (thus, bitcoin and the like are only crypto assets; calling them "cryptocurrencies" or "virtual currencies" is inaccurate; translating the English "Token" as "coin" or "token" is also inappropriate—it should be transliterated as "Tongzheng" and clearly identified as an asset, not a currency). The emergence and development of fiat stablecoins have brought fiat currencies and more real-world assets (RWA) onto the blockchain, strongly supporting on-chain crypto asset trading and development, and becoming the channel connecting the on-chain crypto world and the off-chain real world. This has strengthened the integration and influence of the crypto world on the real world, greatly enhancing the scope, speed, scale, and volatility of global wealth financialization and financial transactions, and accelerating the transfer and concentration of global wealth to a few countries or groups. In this context, without strengthened global joint regulation of stablecoin and crypto asset issuance and trading, the risks are enormous and extremely dangerous. For this reason, the stablecoin and crypto asset boom vigorously promoted by the Trump administration has already created huge bubbles and potential risks, is unsustainable, and requires the international community to be highly vigilant!

Stablecoin Legislation May Seriously Backfire on Stablecoins

An outcome beyond the expectations of stablecoin legislation is that, once fiat stablecoins are brought under legislative regulation, this will inevitably lead to legislative regulation of crypto asset trading—including bitcoin and other on-chain assets as well as real-world assets (RWA) operating on-chain—using fiat stablecoins for pricing and settlement, which will have profound effects on stablecoins.

Before crypto assets are brought under legislative regulation and compliance protection, licensed financial institutions such as banks cannot directly participate in crypto asset trading, settlement, custody, and related activities, leaving the opportunity to private organizations outside the financial sector. Due to the lack of regulation and regulatory costs, existing stablecoin issuers and crypto asset trading platforms have become highly profitable and attractive organizations, exerting increasing pressure on banks and the financial system, and forcing governments or monetary authorities such as the US to accelerate stablecoin legislative regulation. However, once crypto assets are brought under legislative regulation and compliance protection, banks and other financial institutions will certainly participate fully. Payment institutions such as banks can directly promote on-chain operation of fiat deposits (deposit tokenization), which can completely replace stablecoins as the new channel and hub connecting the crypto world and the real world. Existing exchanges for stocks, bonds, money market funds, ETFs, and other financial products can also promote these relatively standardized financial products to be traded on-chain as RWAs. Having sufficiently regulated banks and other financial institutions as the main entities for on-chain operations and connecting the crypto world and the real world is more conducive to implementing the current legislative regulatory requirements for stablecoins, ensuring the principle of "same business, same regulation" for all institutions, and reducing the impact and risk of crypto asset development on the existing monetary and financial system. This trend has already emerged in the US and is rapidly strengthening and becoming unstoppable.

Thus, stablecoin legislation may seriously backfire on or even overturn stablecoins (see Wang Yongli’s WeChat public account, September 3, 2025: “Stablecoin Legislation May Seriously Backfire on Stablecoins”).

In this context, it is not a reasonable choice for other countries to imitate the US and vigorously promote stablecoin legislation and development.

China Cannot Follow the US Stablecoin Path

China already has a global leading advantage in mobile payments and the digital RMB. Promoting RMB stablecoins domestically offers no advantage, and internationally there is little room for development or influence. China should not follow the path of USD stablecoins by vigorously promoting the development of both onshore and offshore RMB stablecoins.

More importantly, bitcoin and other crypto assets and stablecoins can use borderless blockchains and crypto asset trading platforms to achieve global 7x24 hour uninterrupted trading and settlement. While efficiency is greatly improved, the highly anonymous, high-frequency, and efficient global flows, combined with a lack of international collaborative regulation, make it difficult to meet KYC, AML, FTC, and other regulatory requirements. There are clear risks and real cases of their use in money laundering, fundraising fraud, and illegal cross-border capital transfers. With USD stablecoins already dominating the crypto asset trading market, the US has greater control or influence over major global blockchain operating systems, crypto asset trading platforms, and the exchange of crypto assets with the dollar (the US can trace, identify, freeze, and confiscate the crypto asset accounts of certain institutions and individuals, and can punish or even arrest some crypto asset trading platform operators as proof). In this situation, if China follows the USD stablecoin path to develop RMB stablecoins, it will not only fail to challenge the international status of USD stablecoins, but may even make RMB stablecoins subordinate to USD stablecoins, impacting national tax collection, foreign exchange management, and cross-border capital flows, and posing serious threats to RMB sovereignty and the stability of the monetary and financial system. In the face of an increasingly sharp and complex international situation, China should place national security in a prominent position, remain highly vigilant, and strictly guard against and control speculation in crypto assets, including stablecoins, rather than simply pursuing efficiency gains and cost reductions. It is necessary to accelerate the improvement of relevant regulatory policies and legal foundations, focus on key areas such as information and capital flows, strengthen information sharing among relevant departments, further enhance monitoring and tracking capabilities, and severely crack down on illegal and criminal activities involving crypto assets.

Of course, while resolutely halting stablecoins and cracking down on virtual currency trading and speculation, it is also essential to accelerate the innovative development and widespread domestic and international application of the digital RMB, forming an internationally leading advantage for the digital RMB, forging a uniquely Chinese path for digital currency development, and actively exploring the establishment of a fair, reasonable, and secure new international monetary and financial system.

Based on the comprehensive consideration of the above factors, it is not difficult to understand why China has chosen to resolutely curb virtual currencies, including stablecoins, while firmly advancing and accelerating the development of the digital RMB.

About the Author

Wang Yongli, PhD in Economics, Co-Chairman of Digital China Information Service Group Co., Ltd.

Former Vice President and Executive Director of Bank of China, directly responsible for the bank’s response to the US subprime mortgage crisis and the global financial crisis, as well as leading the unified optimization of the bank’s core systems; first mainland China board member of Swift; Senior Vice President of LeEco Holdings and CEO of LeEco Finance; Chief Economist of Shenzhen Haiwang Group; General Manager of China International Futures Co., Ltd.

He has conducted in-depth research and possesses unique insights and extensive practical experience in financial accounting, monetary finance, international settlement, foreign exchange reserves, RMB internationalization, futures and derivatives, internet finance, cryptocurrencies and blockchain, digital RMB, and more.