In the rapidly evolving landscape of digital finance, stablecoins have emerged as a transformative force—particularly in cross-border payments. On June 27, Liu Ying, a researcher at the Chongyang Institute for Financial Studies at Renmin University of China, published an insightful analysis in 21st Century Business Herald, comparing the contrasting regulatory approaches of the United States’ GENIUS Act and Hong Kong’s stablecoin ordinance. Her perspective sheds light on the global competition in stablecoin development and the broader implications for monetary system restructuring.
With central bank officials like Pan Gongsheng, Governor of the People's Bank of China (PBOC), highlighting stablecoins during the Lujiazui Forum, and the recent launch of the “Cross-Border Payment Connect” by the PBOC and Hong Kong Monetary Authority (HKMA) on June 22, momentum is building. This new infrastructure enables instant RMB-HKD cross-border transfers and lays the groundwork for future RMB-pegged stablecoins to integrate into mainstream payment systems—ushering in a new era of compliant digital currency applications.
The Transformative Power of Stablecoins in Cross-Border Payments
Stablecoins offer a quantum leap over traditional payment methods—especially across borders.
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Traditional wire transfers come with high costs—averaging around 6% in fees—and can take several business days to settle. In contrast, public blockchain-based stablecoins enable peer-to-peer transactions with near-zero fees and settlement times measured in seconds. This efficiency drastically reduces operational costs, accelerates capital turnover, and ultimately boosts corporate profitability.
Beyond cost and speed, stablecoins provide financial inclusivity. They operate independently of traditional banking infrastructure, requiring no bank account to transact. More importantly, they bypass legacy systems like SWIFT, reducing exposure to financial sanctions and secondary sanctions. Backed 1:1 by reserve assets such as fiat currencies or short-term government bonds, stablecoins maintain price stability while offering the flexibility of digital assets—making them ideal tools for the digital economy.
The US Dollar Dilemma and the Rise of Stablecoins
The dominance of the US dollar in global finance is increasingly under strain. As former US Treasury Secretary John Connally once quipped, “The dollar is our currency, but your problem.” Today, that statement rings truer than ever.
The US federal government debt has surged to nearly $37 trillion, with interest payments consuming 18.7% of fiscal revenue in 2024—well above the 10% warning threshold. Rising interest rates and inverted yield curves signal looming recession risks. These pressures have led all three major credit rating agencies to downgrade America’s once-pristine AAA sovereign rating.
As foreign institutions reduce their holdings of US Treasuries, the US Treasury has been forced to buy back its own debt—a clear sign of weakening confidence. In this context, stablecoins represent a strategic lifeline for the US: a mechanism to sustain demand for dollars and Treasuries through digital channels.
Currently, over 95% of stablecoins are backed by USD or US Treasury assets, reinforcing dollar hegemony in the digital realm. The rapid growth of the stablecoin market—from zero just over a decade ago to $250 billion in value and 250 million users as of May 2025—suggests that this trend will only accelerate. Projections indicate the market could reach several trillion dollars by 2030, possibly even sooner.
The GENIUS Act: Regulatory Control vs. Financial Innovation
The US recently passed the GENIUS Act, aiming to bring stablecoins under federal oversight. While it classifies stablecoins as cryptocurrencies rather than securities or commodities—a positive step—it imposes strict conditions:
- Issuers must be insured depository institutions.
- Reserves must consist of 100% US dollars or short-term US Treasuries (within three months maturity).
- Only authorized US financial entities can issue stablecoins.
These rules effectively centralize control over stablecoin issuance within the US financial system, ensuring continued demand for Treasuries and reinforcing digital dollar dominance. However, critics argue this approach is overly restrictive and monopolistic, limiting innovation and global participation.
Hong Kong’s Open and Forward-Looking Approach
In stark contrast, Hong Kong’s stablecoin legislation takes a more open, flexible, and internationally oriented path.
Rather than mandating that reserves be held solely in HKD or specific instruments, Hong Kong allows reserve backing in various forms—including foreign currencies, gold, other high-quality liquid assets, or even algorithmic models (subject to strict risk controls). Applicants must maintain at least HKD 25 million in qualifying reserves, ensuring financial soundness without stifling innovation.
This regulatory openness enhances Hong Kong’s appeal as a global hub for fintech and digital asset innovation. By welcoming diverse stablecoin models—including those pegged to RMB or multi-currency baskets—Hong Kong positions itself as a bridge between East and West in the emerging digital economy.
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Compared to the US model, Hong Kong’s framework is more inclusive, innovative, and globally integrated, supporting not only financial stability but also technological advancement.
Global Momentum: From Tech Giants to National Regulators
Stablecoin adoption is no longer niche. Major internet platforms, banks, credit card networks, and retailers are racing to enter the space. JD.com, for example, is actively pursuing stablecoin licenses globally—hinting at a future where consumers use digital dollars or e-HKD to shop online.
As a global leader in trade, China stands to benefit immensely from stablecoin integration. With efficient, low-cost cross-border settlements, Chinese exporters and importers could bypass traditional banking bottlenecks and reduce reliance on foreign payment systems.
Meanwhile, jurisdictions like the EU (MiCA), UK, Singapore, and Japan have either implemented or are advancing their own stablecoin regulations—reflecting a global consensus on the need for oversight that balances innovation with risk management.
Toward Global Coordination: Key Steps for Sustainable Growth
For stablecoins to thrive sustainably on public blockchains, international regulatory cooperation is essential. Liu Ying outlines three critical areas for coordination:
- Establish a unified regulatory framework
Harmonize standards for reserve assets, licensing requirements, and tiered supervision to prevent regulatory arbitrage. - Enhance cross-border regulatory collaboration
Align anti-money laundering (AML) protocols, create joint crisis response mechanisms, and mitigate systemic risk transmission across jurisdictions. - Develop user protection guidelines
Empower users to assess issuer credibility, reserve transparency, compliance status, and policy risks. Encourage price volatility alerts and promote responsible usage.
Only through coordinated global efforts can stablecoins fulfill their promise as neutral, efficient, and resilient tools for digital commerce.
Frequently Asked Questions (FAQ)
Q: What are stablecoins?
A: Stablecoins are cryptocurrencies designed to maintain a stable value by being pegged to reserve assets like fiat currencies (e.g., USD, HKD), commodities (e.g., gold), or algorithms. They combine blockchain efficiency with price stability.
Q: Why are stablecoins important for cross-border payments?
A: They drastically reduce transaction costs (often to near zero) and settlement time (to seconds), bypassing traditional banking delays and high fees—making them ideal for international trade and remittances.
Q: How does Hong Kong’s stablecoin regulation differ from the US approach?
A: Unlike the US GENIUS Act—which restricts reserves to USD/US Treasuries and limits issuance to US banks—Hong Kong allows diverse reserve assets and welcomes international issuers, making its framework more open and globally inclusive.
Q: Can China benefit from developing its own stablecoins?
A: Absolutely. As the world’s largest trading nation, China can leverage RMB-pegged stablecoins to enhance cross-border transaction efficiency, reduce dollar dependency, and strengthen its role in global digital finance.
Q: Are stablecoins safe for everyday use?
A: Safety depends on issuer transparency, reserve adequacy, and regulatory oversight. Users should choose regulated stablecoins with audited reserves and clear compliance frameworks.
Q: Will stablecoins replace traditional currencies?
A: Not replace—but complement. Stablecoins are likely to become key infrastructure in digital payments, especially in cross-border contexts, while coexisting with central bank digital currencies (CBDCs) and traditional money.
The future of money is digital—and stablecoins are at the forefront. With Hong Kong championing an open, international model and nations worldwide racing to regulate responsibly, the stage is set for a more efficient, inclusive, and multipolar financial system.