The Great Stablecoin Race: Who Will Reign Supreme?

In a world where the U.S. dollar, like a mighty oak, stands tall and unyielding, other nations, much like the smaller trees in the forest, seek their own sunlight. The GENIUS Act, a stroke of legislative genius, has provided a framework for USD-pegged stablecoins, promising to fortify the American economic fortress. Yet, in this grand chessboard of global finance, other players are not content to merely watch from the sidelines. 🌍💰

USD-pegged stablecoins as a medicine for the U.S. economy

The United States, in its wisdom, has chosen not to develop a central bank-issued digital dollar, citing concerns over privacy and the potential for excessive control. Instead, the government has encouraged private and public companies to issue stablecoins-digital tokens backed by real assets, often U.S. dollars or Treasury bills. These stablecoins, like a well-tended garden, are designed to grow and flourish, each one representing a single U.S. dollar. The issuers, like farmers tending their fields, earn interest by holding U.S. Treasury bills that back these coins.

While it may seem that the government has relinquished control, in truth, it has created a fertile ground for growth. The GENIUS Act, signed into law by President Donald Trump, ensures that stablecoin issuers must back their coins 1:1 with U.S. dollars or Treasury bills. This requirement, like a sturdy fence around the garden, protects the integrity of the system. As stablecoins circulate globally, particularly in regions where local currencies are weakening, they boost the demand for U.S. dollars and Treasury bills, much like a farmer’s crops attracting buyers from far and wide.

Arthur Hayes, co-founder of the BitMEX exchange, explained the mechanics of stablecoins in his newsletter, using Tether, the largest USD-pegged stablecoin issuer, as an example:

“The business model of Tether is very simple. Receive dollars, issue a digital token that rides on a public blockchain, invest the dollars in T-bills, and earn the [net interest margin, which is the Federal Reserve-set interest rate]. [The U.S. Secretary of the Treasury Scott] Bessent will ensure that issuers that the empire will tacitly support by law can only hold dollars in a chartered US bank, and or treasury debt securities. No funky stuff.”

Hayes notes that most countries, save for China, rely on American social media platforms. If these platforms begin supporting USD-pegged stablecoin transfers, it could trigger significant capital outflows from developing nations, further strengthening the U.S. dollar. President Trump, ever the protector of American interests, has vowed to impose tariffs on countries that attempt to “discriminate against American Technology” through digital taxes and regulations. This means that resisting the spread of stablecoin transactions on platforms like WhatsApp could prove costly for other nations.

As the U.S. continues to print dollars, it risks devaluing foreign reserves held by other countries. Not surprisingly, many nations have begun to diversify their holdings, favoring gold over paper. The combination of American stablecoins and the influence of American tech companies may elevate the U.S. dollar to even greater heights. However, a strong dollar could make U.S. exports more expensive, potentially hindering Trump’s goal of boosting American manufacturing and exports. Some argue that the growing value of the dollar exacerbates the national debt, but the increased demand for stablecoins and Treasury bills may help mitigate this issue.

China gets closer to launching a yuan-pegged stablecoin

China, with its own robust social media giants like WeChat, is well-positioned to launch a yuan-pegged stablecoin. Such a move could replicate the effects seen in the U.S., making stablecoins a more attractive option for international trade and remittances. China’s economy, driven by exports, stands to benefit significantly from the widespread adoption of yuan-pegged stablecoins.

In 2021, China introduced the digital yuan, a central bank digital currency (CBDC), but it failed to gain significant traction, overshadowed by the popularity of services like WeChat Pay and Alipay. Undeterred, Chinese authorities have accelerated their efforts. In May 2025, Hong Kong adopted the Stablecoins Bill, allowing the issuance of stablecoins backed by Chinese assets. On August 20, 2025, it was reported that the State Council of China is actively working on launching a yuan-pegged stablecoin for international trade.

If successful, yuan-pegged stablecoins could counterbalance the influence of USD-pegged stablecoins. With the renminbi’s market share currently below 3% (compared to the USD’s 47%), China has a clear incentive to pursue this strategy.

Yen-pegged stablecoin will soon be launched in Japan

Monex Group, a financial company based in Tokyo, announced ambitious plans on August 26, 2025, to launch a yen-pegged stablecoin. While Japan lacks the social media reach of the U.S. and China, the yen stablecoin still holds promise, particularly for cross-border remittances and corporate trades. Monex intends to back its coins with Japanese government bills, and the project may receive a boost from Coincheck, a crypto exchange owned by Monex. Chairman Oki Matsumoto has also hinted at acquiring several European crypto companies, expanding Monex’s stablecoin platform. The launch is scheduled for the fall of 2025.

European Union’s efforts

The European Central Bank, recognizing the growing influence of USD-pegged stablecoins, has expedited the development of the digital euro. In the context of de-dollarization, the digital euro could serve as a viable alternative to the U.S. dollar. On August 22, 2025, it was revealed that the EU is considering leveraging public blockchains, such as Ethereum and Solana, to accelerate the launch of the digital euro.

This decision has drawn criticism from the crypto community, with many arguing that a digital euro on a public blockchain would be a suboptimal CBDC. Critics contend that transaction data would be publicly accessible, while the central bank would retain significant control over transaction data.

Despite the existence of several euro-pegged stablecoins, their combined market share remains a mere 0.2%. Without the equivalent of Meta or WeChat to drive adoption, the future of euro-pegged stablecoins remains uncertain in the ongoing race for global financial dominance.

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2025-08-29 00:08