The integration of emerging payment technologies, including stablecoins, holds the potential to enhance cross-border payment experiences. However, it is unlikely to alter the multipolar trajectory of the international monetary system or significantly impact the pace of emerging currency internationalization.
Understanding Stablecoins: Technology Over Monetary Revolution
Recent legislative developments in the United States and Hong Kong have brought stablecoins into the spotlight. With Circle, a major stablecoin issuer, going public and China announcing the establishment of a digital yuan international operations center in Shanghai, discussions about the future of digital currencies are intensifying.
Stablecoins, as defined by new regulations in these regions, are value-based, decentralized tokens pegged to fiat currencies. They differ from the account-based, centralized Central Bank Digital Currencies (CBDCs) pioneered by China, yet the two share comparable attributes. As former People's Bank of China Governor Zhou Xiaochao noted, CBDCs comprise digital currency (DC) and electronic payment (EP) components. Stablecoins essentially follow a similar structure.
Much of the current debate centers on the token characteristics of stablecoins. There's an underlying suggestion that applying blockchain technology to program and trade tokenized versions of fiat currency—under a new monetary unit—could unlock their potential for efficient, peer-to-peer cross-border settlements. However, when properly regulated and backed by 100% reserves, the digital representation of fiat currency achieves "possession as ownership" verification. In distributed ledger applications, whether the currency unit retains its original name becomes irrelevant to its functional essence.
Case Study: The Cross-Border Payment Link Between Mainland China and Hong Kong
The recently launched cross-border payment connection between mainland China and Hong Kong offers a compelling case study in improving cross-border payment experiences.
This initiative links China's domestic rapid payment system with Hong Kong's equivalent, creating policy frameworks that enable efficient, convenient, and secure cross-border payments between residents of both regions. According to officials from the People's Bank of China, the program focuses on small-value便民 (convenience-serving) transactions, supporting cross-border remittances for routine expenses under the current account.
Six banks from each region participate, processing simplified remittances for individuals within certain amount limits without requiring detailed background information. The service supports bidirectional transactions for tuition fees, medical payments, salary disbursements, and other惠民 (public benefit) financial services.
Compared to traditional cross-border remittances, this connection significantly shortens transaction chains and improves efficiency:
- Users can initiate RMB and HKD remittances through mobile or online banking using phone numbers or bank accounts
- Certain current account remittances benefit from real-time settlement
- Direct对接 (linking) of payment infrastructures reduces intermediate steps and lowers costs
Notably, this system achieved its first transactions on June 22, 2025—a Sunday when bank branches were closed—without impacting customer experience through off-counter mobile banking services. Importantly, these transactions didn't utilize stablecoins but rather conventional bank accounts, following an "account-based" rather than "value-based" payment approach.
This demonstrates that multiple technological paths exist for improving cross-border payment efficiency. The mainland's rapid payment system, established in 2010, reportedly doesn't yet employ blockchain or distributed ledger technology—though banks face no significant technical or legal barriers to adopting such technologies.
Blockchain applications need not be anonymous to be effective. While Bitcoin's consensus algorithm created a "value-based" distributed ledger enabling anonymous ownership, applying blockchain to traditional finance doesn't necessarily require anonymity. Transitioning from account-based to value-based payment systems—or creating compatibility between them—presents manageable technical challenges.
Furthermore, the cross-border payment connection requires cooperation between financial regulators in both jurisdictions. Similarly, regulated stablecoins must obtain licenses, establish systems, and develop customers across different markets. The cross-border connection model leverages existing banking customer relationships, reducing acquisition costs—a key driver behind the current integration of stablecoins with traditional financial systems.
People's Bank of China Governor Pan Gongsheng addressed this technological diversification at the 2025 Lujiazui Forum, noting that emerging technologies like blockchain and distributed ledgers are driving the development of CBDCs and stablecoins. These enable "payment as settlement," fundamentally reshaping traditional payment systems and shortening cross-border payment chains, while presenting significant regulatory challenges.
The Bank for International Settlements (BIS) maintains a balanced perspective on stablecoins. While acknowledging that stablecoins struggle to fulfill money's three primary functions (medium of exchange, store of value, and unit of account), and noting their transparency issues and regulatory gaps reminiscent of 19th-century private bank note issuance, BIS also recommends that central banks explore "unified ledger" architectures for tokenized systems. These could integrate central bank reserves, commercial bank deposits, and government bond assets through programmable platforms enabling near-instant settlement of payments and securities transactions.
Stablecoins Cannot Alter Multipolar International Monetary Trends
Governor Pan further identified three inherent instability sources when international dominant currencies are sovereign currencies:
- The challenge for sovereign currency issuers to balance domestic and international policy objectives
- The risk of fiscal and financial imbalances spilling over internationally
- The weaponization of currency by issuing countries
These instability sources won't be resolved through stablecoin adoption. Since stablecoins peg their value to sovereign currencies, they inherently borrow the credibility of those currencies—meaning no "supersovereign" international monetary system emerges.
A recent BIS report noted that while stablecoins show promise in tokenization, they suffer from fundamental flaws. Their compatibility with three ideal characteristics of sound monetary systems—singleness (acceptance at face value), elasticity (timely obligation fulfillment without deadlock), and integrity (financial crime prevention)—remains inadequate, preventing them from becoming pillars of the future monetary system. Without proper regulation, stablecoins could pose risks to financial stability and monetary sovereignty.
The notion that stablecoins might help the U.S. government manage debt and consolidate dollar dominance appears overly optimistic. While tying stablecoin issuance to short-term U.S. Treasury bonds might increase demand and marginally lower government financing costs, these debts still require repayment. More importantly, if the U.S. continues down an unsustainable fiscal expansion path, it could eventually trigger a sovereign debt crisis—as demonstrated by the collapse of the Bretton Woods system.
In the 1960s, Great Society programs and the Vietnam War contributed to persistent U.S. balance of payments deficits, dollar depreciation, and gold reserve outflows. Measures like the London Gold Pool and Special Drawing Rights (SDR) attempted to address the "Triffin Dilemma," but expanding deficits and 1970s stagflation ultimately led to the Nixon Shock of 1971—suspending dollar-gold convertibility and effectively constituting sovereign default that unraveled the Bretton Woods system by 1973.
Today, U.S. government policies themselves undermine dollar credibility. Stablecoins won't alter these policy orientations, especially under 100% reserve requirements (equivalent to narrow banking without money creation capabilities). Just as few countries factor SWIFT considerations into their economic policies (unless facing exclusion from the system), stablecoins won't fundamentally change policy calculations.
Dollar credibility concerns primarily stem from:
- Radical U.S. policies triggering global trade and monetary system recalibration
- Expansionary fiscal policies exacerbating debt sustainability worries
- Government interference in interest rate decisions damaging Federal Reserve independence
Since April 2025, U.S. Treasury market turbulence—with yield spikes frequently accompanying equity volatility and dollar plunges ("stock-bond-currency triple sell-off")—has highlighted how recession expectations are reshaping traditional safe-haven logic and how U.S. government policies are颠覆 (overturning) dollar hegemony "game rules." These are problems dollar stablecoins cannot solve. Moreover, with uncertain U.S. inflation and fiscal prospects increasing Treasury yield volatility, these assets have transformed from safe havens to risk assets—potentially making dollar-pegged stablecoins themselves unstable, as exemplified by the Silicon Valley Bank incident.
The Myth of Currency Internationalization Leapfrogging
The idea that stablecoins could enable currencies to "overtake" in internationalization appears fanciful for several reasons:
First, blockchain technology supporting stablecoins is typically open-source, avoiding "chokepoint" concerns for other countries. The application of underlying technologies like blockchain and distributed ledgers isn't exclusive—any interested and capable nation can utilize them. Even if early stablecoin issuers gain some advantage, this doesn't prevent other currencies from catching up or surpassing them through their own implementations.
Second, international currency acceptance depends more on comprehensive national strength than any single technology. If a currency lacks international recognition, stablecoins pegged to it won't magically achieve higher credibility. 👉 Explore advanced currency strategies
In the multipolar international monetary landscape, major international currencies maintain competitive relationships. If traditional currencies adopt more advanced payment technologies than emerging currencies, they might reinforce network effects and path dependence, increasing usage inertia and further constraining emerging currency advancement.
Frequently Asked Questions
What exactly are stablecoins?
Stablecoins are digital tokens designed to maintain stable value by pegging to traditional assets like fiat currencies or commodities. They combine characteristics of cryptocurrencies (using blockchain technology) with the price stability of conventional money, serving primarily as efficient mediums of exchange within digital ecosystems.
How do stablecoins differ from Central Bank Digital Currencies?
While both represent digital forms of money, CBDCs are centralized digital currencies issued by central banks with full sovereign backing, whereas stablecoins are typically issued by private entities and may have varying reserve structures. CBDCs generally follow account-based models, while stablecoins often utilize value-based token systems.
Can stablecoins really challenge the dominance of traditional currencies?
Current evidence suggests stablecoins are unlikely to challenge major currency dominance directly. Since they derive value from their peg to established fiat currencies, stablecoins essentially extend rather than replace existing monetary systems. Their impact appears more technological than monetary, improving payment efficiency without altering fundamental currency dynamics.
What are the main risks associated with stablecoin adoption?
Key risks include reserve transparency issues, potential regulatory gaps, financial stability concerns during stress events, and possible misuse for illicit activities. Proper regulatory frameworks addressing these concerns are essential before stablecoins can achieve widespread adoption as trusted financial instruments.
How might stablecoins affect cross-border payments?
Stablecoins could potentially reduce cross-border settlement times from days to minutes and lower transaction costs significantly by eliminating intermediaries. However, their effectiveness depends on regulatory cooperation across jurisdictions, technological infrastructure compatibility, and widespread merchant adoption—hurdles that traditional systems are also addressing through improvements like the cross-border payment connection between China and Hong Kong.
Should investors consider stablecoins as safe investments?
While stablecoins aim to maintain price stability, they aren't risk-free. Investors should assess the quality and transparency of reserve assets, the regulatory status of issuers, and the technical security of underlying platforms. Unlike bank deposits, stablecoins may not offer similar consumer protections unless specifically regulated to do so.
Conclusion: Embracing Technology Without Exaggeration
Current cross-border payment and remittance systems face significant challenges regarding processing times and transaction costs. The international community has actively explored using emerging technologies like CBDCs and stablecoins to improve efficiency, reduce durations, and lower expenses.
We should maintain open attitudes toward new technologies, imagining boldly while verifying carefully, without preconceived rejection of potential technical paths. Since applying these technologies to traditional financial business involves technological empowerment—even for general commercial enterprises—they should fall under financial regulation to avoid disintermediation.
Implementation should follow principles of proceeding from easy to difficult, simple to complex, and pilot to expansion, while proactively researching how to address potential penetration of overseas stablecoin issuance. Simultaneously, maintain rational understanding: avoid mystifying stablecoins or overstating their role in international monetary system evolution and currency internationalization, maintaining strategic patience toward their development.
More importantly, avoid stablecoin superstition while neglecting risks—particularly preventing their degeneration into purely profit-seeking financial instruments. Continuous regulatory strengthening, consumer education, and protection of consumer rights remain essential throughout this technological evolution.