Wang Yongli argues that licensing stablecoins is what will eventually hollow them out, and China should stay out of the race and finish building the digital yuan instead
The midterm finally concluded. As Democrats took over the Senate and House, we will probably see more drama surrounding the stablecoin and crypto world. (if AI hasn’t taken all the attention) For today’s episode, I want to share the insight of Wang Yongli. In an event hosted by New Economist’s TAIXUE(太学) earlier this year, Wang provided a valuable Chinese scholar's perspective on stablecoin and what attitude China should take on pushing forward RMB internationalisation.
Wang is the General Manager of China International Futures Co(CIFCO). He also served as the Vice President of the Bank of China and SWIFT's First Mainland China Director. He was in direct command of the response of the Bank of China to the 2007 U.S. subprime crisis and the 2008 global financial crisis, and has gained profound theoretical knowledge and rich practical experience in fiscal and taxation financial aspects.
Wang Yongli argues that stablecoins have to be understood in terms of “monetary sovereignty” and the “on-chain crypto world.” They are tokens that stand for fiat money. Non-governmental entities issue them, fiat-currency assets back them in full, and they run on blockchains. Their job is to bridge the real world and the crypto world. That emerging parallel world is a new domain where major powers must compete for control.
He argues that the US rush to legislate in 2025 is at bottom an “America First” approach, one that seeks to balance regulation and innovation. On the one hand, it wants to stop decentralization from eroding its ability to exercise extraterritorial jurisdiction and surveillance through the dollar. On the other, it is unwilling to give up a crypto-asset trading market where the dollar already accounts for more than 98%. The legislation also builds international demand for U.S. Treasury debt and helps lower interest rates. It ignores countries that see things differently. Each legislates on its own. Their monetary sovereignty is at risk, and so are foreign-exchange controls, tax administration, and asset transfers.
He says the legislation could, paradoxically, undermine stablecoins themselves. Until now, licensed financial institutions were reluctant to move on-chain, so the opportunity went to unlicensed entities. Once the law permits such activity, though, banks and payment institutions will tokenize deposits directly. Real-world assets (RWAs) — such as securities, bonds, and commodities — will also move on-chain in large volumes. Licensed institutions then become the hubs that connect the two worlds, and stablecoins matter much less. The dollar already dominates. Non-dollar stablecoins have almost no room internationally and end up as little more than appendages of the dollar system.
So if China follows suit and issues a RMB stablecoin, the same threats apply at home: tax collection and administration, foreign-exchange controls, capital controls. China should instead keep digitizing its sovereign currency through the digital renminbi. It should push other countries to issue their own sovereign digital currencies and connect them through the central-bank mBridge platform and interoperable blockchains. That gives a system distinct from dollar stablecoins, and it can compete on fair terms. With stablecoin initiatives halted, China then needs to speed up innovation on the digital RMB, above all by revising how it is classified as M0 and linking the currency to digital identity.
Chinese version is on the WeChat account of New Economist. Below is the English version I translated with the help of AI.
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How to View the U.S. Stablecoin Legislation
Hello everyone. I’m Wang Yongli. The topic I’d like to discuss with you today is: how should we view the United States’ stablecoin legislation?
First, a quick recap. In May 2025, the United States and Hong Kong, China, both rushed to speed up their stablecoin legislation.
On 17 May 2025, building on preparatory work done earlier, the U.S. Senate passed America’s stablecoin legislation, the GENIUS Act, known in Chinese as the “Genius Act.” The name of the Act was reverse-engineered from the acronym GENIUS.
But under the American legislative process, Senate passage is not the end of it. It still has to go through the House of Representatives and be approved there.
Close behind, on 21 May, the Legislative Council of Hong Kong completed the third reading of Hong Kong’s stablecoin bill. Under Hong Kong law, that completed the entire legislative process. So on 30 May the Hong Kong government announced that the Hong Kong stablecoin ordinance would formally take effect on 1 August.
The moment that announcement came out, President Trump in the United States got anxious, and demanded that Congress speed things up. Under his personal pushing, on 19 July the House passed the stablecoin bill, which likewise completed the full legislative process and went straight to the President’s desk. He signed it and it took effect the same day, on 21 July, ahead of Hong Kong’s 1 August date.
The moves by the two sides caused a global stir. Many people believe Hong Kong is not merely competing with Singapore over international financial status; it is more that mainland China behind it may be pushing it forward, competing with the U.S. stablecoin legislation. That set off a worldwide wave of stablecoin legislation, and of legislation across the whole crypto-asset field that is closely tied to stablecoins.
This not only drew intense public attention to stablecoins, but even a very hot investment frenzy. You know, at this stage there were a great many institutions and individuals in the mainland wanting to register or issue stablecoins in Hong Kong, and many came to me asking how exactly to do it.
It also triggered a big controversy: should mainland China also quickly open up our stablecoin market, speed up legislation, and push the development of RMB stablecoins? Or at least push the development of offshore RMB in Hong Kong?
Going further, because while the U.S. was passing stablecoin legislation, it also rolled out bills that have not yet completed the legislative process — a crypto digital asset market bill, and a bill prohibiting a digital dollar. So some people also ask whether China should not only speed up RMB stablecoins but also halt our digital RMB process.
And behind all this came a further question: what exactly is money? And how should our future international monetary system be advanced? A whole series of debates has come out of it.
We really must attach great importance to this question, because it is not a simple matter of a financial product. It involves monetary sovereignty, it involves the international monetary system, it involves how the future world of human society is to be governed. So it has to be treated prudently.
Next, I want to make clear with you what the stablecoin we are going to discuss actually refers to — the stablecoin in the U.S. legislation, or the stablecoin that many countries are now legislating on.
Here it must be clear: this stablecoin refers to a fiat-backed stablecoin. It is issued by a non-official organization outside the monetary authority, backed by officially designated assets of some fiat currency held in reserve, keeping a relatively stable or basically stable price against that currency — but it has to be converted so that it runs on a borderless, globalized blockchain system. That kind of encrypted digital currency.
There are several concepts packed in there. First, it is not issued officially by the monetary authority. Second, it must be pegged at equal value to some legal tender, with officially designated assets held as full reserves, keeping its price stable against that legal tender.
Many people say that it is pegged to the dollar, but the dollar’s own value isn’t stable either. True, the dollar’s value fluctuates. But the “stability” here refers only to the stability of the stablecoin’s price against the currency it is pegged to.
Also, it runs on a blockchain. That is different from our current monetary system, or the system we ran before — especially in cross-border payment and clearing, which has to go through banks and organizations like SWIFT. It needs no intermediary; it can pay point to point, directly on a blockchain platform.
So once we understand these concepts, we know that the idea of a currency pegged at equal value to something has existed for a long time. Metal-standard paper money, for instance — gold-standard paper money, or metal-standard paper money. Wasn’t that pegged to metal? Take the Hong Kong dollar: it has a linked exchange rate to the U.S. dollar. Isn’t it, then, a dollar stablecoin?
So this broad concept — structurally linked to something, or pegged at equal value to it — has long existed. But the stablecoin we are talking about this time specifically means the kind that runs on a blockchain and is pegged at equal value to some legal tender. It is in fact a token running on a blockchain that is pegged to the legal tender it is linked with. It cannot be separated from the legal tender it is pegged to. This is something we must understand this time.
Of course, its outward form is also very different from the money we traditionally understand. It is neither paper money nor our existing model of bank deposits. On the surface it is a string of characters, an encrypted thing, but behind that string of characters is linked real and important information that regulation requires. In operation, it may not be encrypting a particular banknote, or encrypting the account itself; beyond encrypting the account, the entire payment process is encrypted. That is one difference in its whole operating system.
So from this we must understand: it is unrealistic to talk about stablecoins apart from the blockchain.
Second, the stablecoin we speak of here refers only to fiat stablecoins. Because stablecoins circulating in the market also include ones that use algorithms and hedging to keep their value relatively stable, and ones pegged to some important real-world asset, such as gold, to keep their value relatively stable. But those two have huge theoretical flaws and have had major problems in practice. So although they exist in the market, their share is very low and their scale very small. They have not been brought within the scope of legislative regulation, and they do not get legal protection for compliance. So we won’t discuss them here.
This immediately raises a question. When we talk about stablecoins today, we must know where the biggest application scenario for stablecoins lies.
The most fundamental application scenario for stablecoins is the on-chain crypto world. When we talk about stablecoins today, first we must know that they are bound up with the blockchain. Second, stablecoins cannot be viewed merely from a financial angle, or a monetary-financial one. They have to be placed in the context of the blockchain building a new crypto world that is parallel to, or an extension of, our real world. That is the height from which to look at the question.
We know that on 3 January 2009, a so-called cryptocurrency combining blockchain and distributed ledger — Bitcoin — formally launched and began running. It has been more than a decade now.
On its foundation, an Ethereum blockchain and a cryptocurrency called ether emerged. And when Ethereum launched its blockchain and ether, it also launched a protocol you could download and then issue your own coins with — ERC-20. Many people want to issue a coin, but building your own blockchain like Bitcoin’s or Ethereum’s is very hard. Once you download ERC-20, though, you can easily issue coins yourself.
At the same time, on top of this, it launched an “ICO” trading model. After you issue a coin, can you go directly and raise legal tender? If you issue a coin and raise legal tender, that is an “IPO” — and without SEC approval, it is illegal.
Their thinking was: you don’t need to raise legal tender, you can just raise Bitcoin or ether. That created a new form of coin issuance and gave their own Bitcoin and ether an application scenario. So it quickly drove the price of Bitcoin and the price of ether up faster. Ethereum also has smart contracts. So once this came out, it drove the whole crypto-asset field forward rapidly.
But in the course of that rapid development, a problem suddenly emerged. People had assumed Bitcoin and ether could be used as money, but in reality their supply is extremely limited, and the amount actually available for trading is even more limited. They are easily manipulated by the market, and prices swing wildly.
As you know, real money is opposed both to severe inflation — currency depreciation — and to severe deflation, that is, insufficient supply. It has to keep its value basically stable on the basis of ensuring sufficient supply. So people found that Bitcoin and ether fluctuate far too much. Use them as money, as a measure of value, and the whole thing falls apart.
So people started thinking: is there something relatively stable? One option is to put our legal tender onto the chain. But our real world’s existing payment and clearing system cannot meet the needs of borderless, globalized, 7×24 uninterrupted trading and payment clearing on the blockchain. And that gave rise to a stablecoin backed by legal tender — or one where I declare that this thing of mine is pegged at equal value to some legal tender — to support your online crypto-asset trading. That is how the stablecoin came into being.
Of course, the earliest stablecoin was the dollar stablecoin. With stablecoins, the crypto-asset business developed faster. And as it developed faster, it needed more support from legal tender. Then, on the basis that legal tender could get onto the chain, people also began to explore what other assets could be traded on-chain. So today we have what we call real-world assets on-chain, RWA. And once those things get on-chain too, you find that on the foundation of our real world, the blockchain has produced a world parallel to ours — the on-chain crypto world.
And through stablecoins, the connection between the crypto world and our real world has been opened up. Because the connection is open, more of the real world’s currencies and assets go onto the chain. The chain has in fact begun to reach down into the real world, and its influence on our real world keeps growing.
Facing a new world like this, the first thing we must understand is that ignoring it and trying to control it are both useless. We have to track it, study it, adapt to it. So the on-chain crypto world will certainly become an important emerging domain that all major countries must compete for and must seize the commanding heights of. Major countries like the U.S. and China especially must pay close attention.
So when we talk about stablecoins, we cannot stay only within the monetary field or the monetary-financial category. We have to rise to the height of the new world order that is taking shape, and look at the question from there.
This involves a question. The blockchain up there has driven the development of crypto assets, and crypto assets in turn need large amounts of real-world legal tender to invest in them and realize their value — and to cover the large costs generated by mining, by running blockchains, by trading platforms, all of which must be supported by legal tender. That means the conversion of existing money onto the chain has to be accelerated.
In this field we must attach great importance. This is what I want to stress. First, crypto stablecoins cannot be separated from the blockchain; talking about stablecoins apart from the blockchain is useless. Second, when we talk about stablecoins, we have to look at them from the height of the crypto world, and work out how we should view them.
Next let’s look at why the U.S. suddenly accelerated the stablecoin legislation in 2025.
In fact, as we know, the dollar-based stablecoin was formally launched back in 2014, by a company called Tether — 泰达 in Chinese. Tether launched USD in 2014, translated into Chinese as 泰达币. Of course, in Southeast Asia and Hong Kong, many people simply call it “U,” because USD is abbreviated U; people say they are “changing into U” when they mean exchanging into dollar stablecoins. It has been running for about ten years now.
Early on, there was continuous exploration of whether and how to regulate it. But at the beginning, people in the crypto circle were firmly against regulation, because they said, I want decentralization — and the main purpose of decentralization is to escape regulation. They did not want to be taken in hand, because once you regulate, you regulate it to death. So the regulators earlier had their disputes and debates too, but by and large, especially in the U.S., there was not much management of it.
By the end of 2023, when Trump had basically secured a decisive victory in his second presidential campaign, the crypto market was developing rapidly.
As you know, during President Trump’s first term he was not friendly to the crypto circle. But after he left office, especially after the Capitol riot, many Democrats believed Trump was the root cause of that riot and that he had committed many illegal acts, so many large institutions were unwilling to work with him.
As you know, a few days ago Trump said he would sue JPMorgan Chase, saying that because the bank did not support him he had suffered big losses, and he wants five billion dollars in compensation.
When nobody would cooperate with him, his business was hard to carry on. So at that point someone in the crypto circle told him: you don’t have to go through the banks, go through cryptocurrency. He tried it, and it seemed to work. And with that, a big shift in his values took place.
Of course he also found that many young people and many wealthy people — people like Musk — were all entering the crypto circle and investing heavily in it, and its influence was growing fast. If he wanted to run for office, he could not do without that force. So he began to support the development of crypto assets in a big way.
Then, as soon as he took office, crypto assets heated up fast. That fast heating drove stablecoins to develop fast, so the scale of USDT expanded rapidly as well.
When stablecoins were still small and could not have much impact, regulators might simply watch them. Generally they would not strangle something at the outset, because whether it is good or bad inside still needs a period of observation. But once it had grown fast — by May 2024 it had broken through the 250 billion dollar mark, and was still growing rapidly worldwide — that raised the question: to regulate, or not?
On one hand, dollar stablecoins really did take the dollar to many places where offline dollars could not reach. But that brought a problem too. Because it is decentralized and will not let you regulate it, it also poses a threat to dollar hegemony. Offline, the dollar is the world’s central currency, and the U.S. can regulate the dollar’s global circulation through its long-arm jurisdiction. But if a large amount of it moved onto stablecoins like USDT for circulation, how would the U.S. monitor the dollar then? So they concluded it must be regulated.
But they could not strangle it either, because the on-chain crypto world the blockchain is building is something you must seize the high ground in, and the dollar, through stablecoins, already accounts for more than 98% of all crypto-asset trading. If you say it is wrong and kill it, you will find it very hard to occupy that space. Yet not regulating is not an option either.
So from that angle, the U.S. says it wants to strengthen, and to protect and promote innovation at the same time. The GENIUS Act is in part about guiding and supporting stablecoin innovation; it encourages innovation, but it also wants to keep things safe. So you will find that even with the bill passed, there are still many debates afterwards, and it still needs constant improvement. This is a very, very important purpose of it.
Many people initially thought that the U.S. legislating on stablecoins amounted to recognizing their legality, fully protecting them, with no regulation. Wrong. Regulation comes first; only then, within the scope of my regulation, do you meet my requirements and develop faster.
There are, of course, other benefits. For example, many people, including the Americans themselves, say that through stablecoins — because to use dollar stablecoins you need dollar assets as collateral. Among dollar assets, besides bank deposits, the larger part is short-term U.S. Treasuries, or repo agreements backed by Treasuries — mainly Treasuries, which are the biggest chunk. If dollar stablecoins develop on a large scale, that opens up yet another source of international demand for Treasuries and dollar assets, and that would also lower interest rates on the dollar and on Treasuries.
Right now it is pushing hard for the U.S. to cut rates, while the Fed feels it is not yet time to cut. The contradiction between the two sides runs deep. If stablecoins can develop fast, that is an indirect goal, and it can be achieved as well.
But I want to say: all of that is their own business. The main thing is this. First, it must be regulated — you have to meet my requirements, I have to be able to reach you; go beyond what I support and I will crack down. But at the same time, you still have to encourage its innovation and its healthy growth.
Here, of course, you can see that the U.S. legislating on stablecoins is an important part of the Make America Great Again strategy, and it naturally expresses the intent of the America First strategy. Because dollar stablecoins can circulate globally, without borders. If dollar stablecoins circulate in large volumes, and many countries still find it hard to monitor stablecoins effectively to this day, then it will threaten those countries’ monetary sovereignty, their foreign exchange controls, and even their trade and economic exchanges, social stability, tax administration, asset transfers, and a whole series of other things.
For a currency to circulate globally, it needs joint consultation among international organizations, to identify common problems and regulate together. Offline, we have the G20’s Financial Stability Board, we have various regulatory agreements — offline, such agreements exist. But on stablecoins, you will see, the U.S. does not need to consult any country at all. It goes its own way alone, and once it moves, many countries move too. They are broadly similar, but each goes its own way.
So you will see the biggest problem here: there is a serious problem between the global circulation of stablecoins and each country legislating on its own. If this is not contained — if the U.S., in pursuit of maximizing its own interests, does not hesitate to sacrifice other countries’ interests, or even the global common interest — that is a very dangerous thing.
This is how we should view why the U.S. is rushing to push stablecoin legislation. It must be viewed objectively. It is not simply a matter of loosening up and letting go, or of “I only protect you because you are legal.” It is definitely seeking a balance between regulation and innovation. But it looks at the question globally, from America First. That is the angle.
Next, let us briefly look at the main content of the U.S. stablecoin legislation, and at what changes will come to stablecoins after it, and then do an analysis.
The U.S. stablecoin legislation is very long, but the core content comes down to roughly these few points.
First, stablecoin issuers must be licensed by U.S. regulators — meeting their regulatory conditions, then operating under license. Without a license, you may not operate in the U.S., and may not issue stablecoins to U.S. citizens. Of course, these regulators sit at two different levels: federal and state.
Second, issuing stablecoins requires dollar assets that meet prescribed standards, held as full reserves to back them. Dollar assets include cash and bank deposits, and also short-term U.S. Treasuries, or repo products backed by Treasuries. That is the second requirement: other assets are not allowed.
Take Tether. Tether’s USDT originally held Bitcoin or Ethereum reserves in addition to dollar assets, and in recent years it has begun investing heavily in gold. All of those returns count as its own, because Tether was not regulated before, so its regulatory costs were extremely low, and it earned not only the returns on reserve assets. As you know, when U.S. rates were relatively high, the yield on the Treasuries it bought was basically around 4%, so a year’s return was substantial — and that was theirs. Its earlier investments in Bitcoin and crypto assets have also appreciated in recent years, so those returns were large too.
Beyond the returns on reserve assets, when you buy its coin or redeem it — redeeming especially — it is very hard. For amounts under a million dollars, don’t bother; it simply will not process it for you. Above a million, it will not be done for you right away either. More important, it does a great deal of proprietary trading with the coin itself, and those returns are particularly large. It claims 150 people worldwide, and in 2023 its profit exceeded 13 billion dollars.
There is another requirement for these reserve assets: they must be fully custodied with an independent third-party institution, one recognized by the regulators, and an audit firm must audit at least once a month, with the audit results disclosed.
All of this is to prevent over-issuance and issuance without backing, and to protect the people who want to redeem — the buyers — so that when they redeem, whatever the amount, you must satisfy them. You cannot say that only amounts above a million get redeemed and below a million you don’t care. Whatever the amount, you must redeem for them promptly, fully protecting investors’ interests.
There is another point: when an issuer issues dollar stablecoins, it cannot promise to pay interest or other returns to the people who buy them. This is extremely controversial now. The people issuing coins, the trading platforms, are all against it. But there is a reason for doing it this way: it is not taking deposits. You are handing it reserve assets; it is not taking your deposit, it is doing a transaction with you. It gives you the stablecoin, and you can only use that stablecoin to invest and earn. You cannot buy the stablecoin and also collect the return on the reserve assets — that would no longer be a buyer-and-seller relationship. The controversy here is big right now.
At the same time, it does not allow issuing institutions to inject funds directly through credit.
Do you know how our money is created today? How is our renminbi created today, for instance? Many people say it is printed by the People’s Bank. What the People’s Bank prints is the concept of cash, and cash is no longer the main channel of money creation — it is not even a channel of money creation.
Today our money is created by monetary institutions through credit. The central bank, at the request of a commercial bank — when the commercial bank is short of funds, it goes to the central bank and says, I want to borrow from you; we agree on the term, the amount, and how principal and interest will be repaid; I will repay you principal and interest, you lend me the money first — the central bank credits the money to the commercial bank’s account at the People’s Bank, and the money is out. Then the commercial bank lends its money out to enterprises, individuals and non-bank institutions through credit, and the money is out.
Many people think, doesn’t the People’s Bank print banknotes? It prints as much as it wants and injects as much as it wants. That is pure folk legend, because the People’s Bank is strictly regulated. The banknotes it prints cannot be used directly. There are two separate lines, revenue and expenditure. What it can spend must be under budget management, and it can spend only within the budget. It cannot take the money it prints and spend it directly. That is precisely to stop it from printing money at will.
So this tells you a principle: how is money created? First, someone has to want to borrow, and only then can it be created. If nobody wants to borrow, the bank cannot create it. Of course there is a premise: banks cannot hand out money free on the street the way a fiscal authority could. Every bit of money that leaves its hands as money creation must carry the requirement of repayment of principal and interest.
If people borrow money and can repay principal and interest when due, that shows the money created was not created out of thin air; it is backed by socially realizable value. Only when the credit assets it created cannot be repaid at maturity, when principal or interest cannot be recovered, does it show that you overvalued the borrower in the first place — that the valuation was inflated.
What is money over-issuance? Unrecoverable credit principal or interest — that is what we call over-issuance. That over-issued money has to be written off, disposed of in one way or another, to ensure that our total money stock corresponds, in aggregate, to the value scale of socially tradable wealth — so as to ensure both sufficient supply and prevention of over-issuance. That is a basic requirement in the U.S. and around the world.
Of course, in actual execution more and more places slip out of control. Things that are over-issued should in principle be confirmed and written off as early as possible, but in reality many are zombie enterprises, or particular loans, and for the sake of stability nobody writes them off. Second, central banks and commercial banks buy large amounts of Treasuries and other things, and that also puts money out, so it brings new problems too. But in terms of management, that is the requirement.
So when is cash released? Only when depositors need cash. You go to the bank and say you want cash, and only then does the bank transfer cash to you. So today, under the credit money system, cash’s share of the total money stock keeps shrinking, and direct cash payment’s share of total money payments is smaller still. All of us here — I believe many of you have some cash at home, but you may not have used cash to pay for anything in a long time.
How does our money operate? You notify your bank to pay the deposit in your account to whomever you want to pay; you tell the bank that party’s account name; you give the bank the information it needs; and the bank deducts your money and transfers it to the payee. That’s it.
So money today has largely shifted from cash money to deposit money, and money payment has largely shifted from direct cash payment to deposit transfer payment and bookkeeping clearing. From this angle, it is no longer a matter of anyone injecting as much as they want; there has to be a basis.
This is its regulatory provision: the issuing institution is not allowed to inject funds directly through credit. Otherwise there would be no reserves, and you could over-issue.
Another one is that stablecoin issuance must meet regulatory requirements — KYC, know-your-customer requirements, anti-money-laundering requirements, counter-terrorist financing, and a whole series of others.
Once these requirements come out, you will see that if they are strictly enforced, the regulatory threshold for stablecoins rises sharply, and your regulatory costs rise sharply. Windfall profits like Tether’s become impossible.
So many people come to me saying they want to issue a coin. Now I ask them: where is the application scenario for your coin? How will you run your stablecoin going forward? They don’t know. They think, whatever — I issue a coin, take other people’s legal assets, and that’s the end of it. That absolutely will not do. If you go on like that, stablecoins cannot develop.
Next, let us see: now that the U.S. stablecoin bill is out, has it become the truth? In fact, U.S. stablecoin legislation still faces many challenges.
First, it specifies which assets can serve as reserve assets, but the bulk of those reserves is U.S. Treasuries, and Treasuries have market trading prices. When you issue, it is 100% reserved. Afterwards, if Treasury prices go up, no problem. But if Treasury prices fall, what then? Will the reserves be insufficient? That is a real problem. The same goes for gold and Bitcoin today: if their prices rise, you can hold them as reserves, but what if they fall sharply? That problem has not been solved.
Second, although it specifies which assets can serve as reserve assets, it does not set a uniform structural ratio. If we all issue dollar stablecoins, but your structure and my structure differ, if the reserve asset structures differ, then these are different stablecoins. This is not the same as Hong Kong, where Bank of China, Standard Chartered and HSBC all issue Hong Kong dollar banknotes, because behind them is the HKMA’s highly unified regulation, with a backstop. U.S. stablecoins today have no central bank backstop, which means that if countless dollar stablecoins emerge and each is different, the arbitrage space between them is large, and regulation becomes very difficult.
There is another one. When you issue, you are not allowed to over-issue, and it has enough reserves. But in the market there is decentralized finance, with stablecoin deposits and loans. If this decentralized platform — DeFi — purely matches transactions and does no proprietary business itself, that is fine. But if it lends directly itself, you still cannot control it.
And another. With all the regulatory requirements you impose, it is very hard for these non-licensed financial institutions to meet them in a short time, because much of the cost is extremely, extremely high.
It is expanding rapidly around the world, but with many countries you do not consult them, and it poses a big threat to them. Will that work? We have to understand: the greater the impact on others, the stronger their resistance, and that will in turn have a big effect on your dollar stablecoin.
Going further, let us look at whether the stablecoin is indispensable to the blockchain development process, to the crypto world. Despite the legislation, is it something that can develop on a large scale, rather than something dispensable? I think this is also a point many people miss when they talk about stablecoins.
My own view is that stablecoin legislation may in fact seriously backfire on the stablecoin, or even overturn it. Where exactly?
Before the legislation, licensed financial institutions — banks, payment institutions, securities trading institutions — did not much dare to go on-chain, because you had not said whether these things were legal. So the opportunity was left to non-licensed institutions, and they took it.
But when you legislate today and say it is legal, then all licensed financial institutions will go all out to seize this new market.
Banks and payment institutions, for instance, can solve their own system problems directly. You no longer need to buy USDT. Today you have to transfer from a bank account to Tether’s account, Tether issues you USDT, and only then can you trade crypto assets. Can’t banks transform directly and put your dollar assets on-chain for you? That has already started. It is called tokenized deposits, and it has already started — and where did it start? Mainly in the U.S.
Second, all securities trading, bond trading, commodity trading, ETFs, derivatives and so on — relatively standardized financial assets — have already begun to be RWA-ized on a large scale and to go on-chain. Where did that start? Also in the U.S. ICE in America is actively pushing it.
So when all these things start going on-chain, is a stablecoin still necessarily needed? Can tokenized bank deposits directly replace the stablecoin and become the bridge connecting the crypto world and the real world? Can licensed financial institutions directly become the hub connecting the two worlds? I think it is entirely possible.
So once these things arrive, the importance of stablecoins may be greatly reduced.
As you know, from May to September last year, many large institutions were predicting that once the legislation came out, stablecoins would grow explosively. Some held that by 2030 the market value of stablecoins would reach 3.7 trillion dollars. Hong Kong included: at the end of August, 77 institutions applied to issue coins; by September, 36 had withdrawn. So global stablecoins are no longer as fierce as people imagined.
Under these circumstances — especially with the dollar already holding more than 98% of the entire crypto world — if you issue non-dollar stablecoins there is almost no space left. Internationally, they have little practical significance. This is a point I have always insisted on, and to this day many people still strongly dispute it. So I would ask everyone to take note.
Going further: when large amounts of real-world resources go on-chain, trading may even hit the value of crypto assets like Bitcoin and ether, because people may no longer need to trade only these crypto assets on-chain, but may bring real-world assets up there instead. That is what we need to pay close attention to.
One last point: facing this situation, what should China do?
First, China already has a globally leading advantage in mobile payment and in the digital RMB. If at this point we stopped and started following the U.S., developing RMB stablecoins or offshore RMB stablecoins, there would not be much space. Even stablecoins in other currencies would ultimately end up inside the dollar stablecoin operating system and become appendages of the dollar stablecoin. Do we want to do that? I think absolutely not, because it would pose serious threats to our tax collection and administration, our foreign exchange controls, our capital controls, our asset transfers, and a whole series of other issues.
Second, if China gave up at this point too, who else in the world could counter the dollar stablecoin? So China — not only from China’s own standpoint, but from a global standpoint — should not give up our digital RMB. We should not simply follow the dollar stablecoin and trail along behind it. We should respect every country’s monetary sovereignty.
Because the digital RMB is the digitalization of a sovereign currency; it is not something supranational. China issues China’s digital RMB, and other countries will issue their own sovereign-currency digital products. We can reach agreements among ourselves and connect through the central banks’ mBridge, by putting each other’s systems on-chain. That is of great significance for protecting monetary sovereignty worldwide and for the fairness and security of the international monetary system.
And this is something only China can accomplish; other countries basically have no hope of it. Once China’s digital RMB is up and running, it will form a system different from the dollar stablecoin, and everyone can compete fairly. From this angle, China carries a major historical mission.
Of course, calling a halt to stablecoins is easy. As you know, on 28 November 2025, the People’s Bank and twelve other ministries and commissions jointly convened a coordination meeting to keep cracking down on all kinds of trading and speculation in virtual assets, and stablecoins were placed in the virtual currency category — very clear: our country has called a halt to stablecoins. If you want to issue stablecoins in China now, or even go to Hong Kong to issue RMB stablecoins, that is unrealistic.
But calling a halt is easy; what is needed more is that we speed up the innovative R&D and innovative development of the digital RMB. So you will also see that at the end of last year the People’s Bank made clear it would adjust the M0 positioning of the digital RMB, moving it from cash money to deposit money, and that market immediately looks different.
Bigger changes, of course, still require the further integration of digital currency and digital identity. And in digital currency and digital identity, China already leads the world; it is entirely possible to achieve bigger breakthroughs, and the space there is very, very large.
The digital RMB, of course, is a bigger and more complex subject than the stablecoin I am discussing today, and I cannot open it up here. If you are interested, we will have to find another time to talk separately about how exactly the digital RMB should be positioned and how it should develop. That is a bigger subject.
What I wanted to share with you today is how to view the U.S. stablecoin legislation. I believe that after listening, you may find some points differ from your previous understanding or from what you have heard elsewhere, and I hope it helps you understand stablecoins, and understand the renminbi.
