The stablecoin market has surged to a capitalization of $240 billion, underscoring a significant shift in global financial power dynamics. This expansion from $133 billion in 2024 represents growing mainstream acceptance and has triggered strategic concerns from Chinese officials who see the trend as reinforcing U.S. dollar hegemony.
Tether (USDT) and USD Coin (USDC) now control 83% of the global stablecoin market, according to CoinGecko data. These dollar-pegged digital assets have become critical infrastructure connecting traditional financial systems with cryptocurrency markets, facilitating everything from trading to cross-border payments and decentralized finance applications.
President Donald Trump has emerged as a significant supporter of the stablecoin ecosystem. "I've called on Congress to create simple, common-sense rules for stablecoins and market structure," Trump said. "With the right legal framework, institutions large and small will be enabled to invest, innovate, and take part in one of the most exciting technological revolutions in modern history."
The proliferation of dollar-pegged stablecoins carries profound economic and geopolitical implications that extend far beyond cryptocurrency markets. Chinese economist Zhang Ming argues these digital assets represent a sophisticated mechanism for maintaining American economic dominance in the digital era. The growth has been particularly concerning for Beijing, which has invested heavily in developing alternative payment systems.
"Once the U.S. dollar stablecoin links the international credit of the U.S. dollar with the application scenarios of the virtual world more closely, it may greatly consolidate the hegemony of the U.S. dollar," Zhang warned.
China's Cross-Border Interbank Payment System (CIPS) was specifically designed to reduce dependence on SWIFT and mitigate potential U.S. financial sanctions. However, the rapid adoption of dollar-pegged stablecoins threatens to undermine these efforts by further entrenching dollar dominance in digital transactions. European Union officials have similarly expressed concern that the American stablecoin push could weaken Euro stability.
In response, China has accelerated development of its digital yuan (e-CNY). The total transaction value of e-CNY reached 7 trillion yuan ($986 billion) as of June 2024, nearly quadrupling from 1.8 trillion yuan ($253 billion) in July 2023, according to the Atlantic Council. By July 2024, the e-CNY app had attracted 180 million individual users, with cumulative transaction value reaching 7.3 trillion yuan ($1 trillion) in pilot regions, Euromoney reported.
The circulation of China's digital currency also expanded from 13.61 billion yuan in 2022 to 16.5 billion yuan by June 2023, according to Ledger Insights. These figures demonstrate Beijing's determination to establish domestic adoption while preparing for international expansion of its digital currency.
China has strategically positioned the e-CNY for cross-border payments through initiatives like mBridge, a collaboration between the People's Bank of China and the Bank for International Settlements. The project expanded trials with 11 other central banks in 2024, demonstrating its potential to compete directly with dollar-pegged stablecoins in global trade settlements.
Despite this progress, China faces significant hurdles in challenging dollar-based stablecoins, including its own capital flow restrictions and international concerns regarding transparency in its financial system.