Latest news from China and the United States! The United States takes "stunning measures" to counter China's de-dollarization initiatives.

U.S. President Donald Trump does not hide the fact that he is competing with China. Although the U.S. remains the largest economy in the world, the Asian superpower is closely following. In April of this year, Trump initiated a global tariff war, with China clearly being the main target. However, the previous Biden administration also had a trade war with China. One of the many concerns of the Trump administration was that China was actively attempting to de-dollarize global trade in its dominant emerging markets. In response to China's growing influence, the U.S. is adopting a striking strategy: to solidify the dollar's dominance in the global financial system by promoting the dollar stablecoin.

China's De-dollarization Strategy: RMB Payments and the Belt and Road Initiative

China's most significant example in promoting de-dollarization is its "Belt and Road" initiative (also known as the New Silk Road). This ambitious infrastructure project aims to connect China with other parts of the world. China is increasingly encouraging the use of the digital yuan (i.e., its central bank digital currency, abbreviated as "e-CNY") for trade settlement.

In fact, the Financial Times of the UK reported in August 2024, citing the State Administration of Foreign Exchange, that the share of dollar payments has decreased from around 80% in 2010 to about 40% in 2024, while the share of renminbi payments has risen from negligible levels in 2010 to around 55% in 2024. This data shows that China has made significant progress in promoting the internationalization of the renminbi and de-dollarization. To break the dominance of the dollar in global trade settlements, China is relying on renminbi payments, bypassing the dollar-based SWIFT payment network.

Trump's GENIUS Act Challenge: The Counterattack of the US Dollar Stablecoin

In response to China's de-dollarization strategy, the Trump administration in the United States has taken unexpected countermeasures. On July 18, Trump signed the GENIUS Act, regulating stablecoins linked to the dollar. A stablecoin is a type of cryptocurrency that attempts to stabilize its value by being pegged to traditional currencies like the dollar or commodities like gold, which is different from the volatility of traditional cryptocurrencies like Bitcoin. The GENIUS Act only pertains to stablecoins that are pegged to the dollar at a 1:1 ratio.

The Trump administration is actively promoting the digital asset economy, with stablecoins being a leading part of it. However, according to a recent stablecoin report published by the on-chain data analysis platform Messari, stablecoins may also become a "balancer" in the trend of de-dollarization in emerging markets. David Krause, a professor emeritus of finance at Marquette University, wrote in a paper cited by Messari: "In the context of increasing discussions about de-dollarization, the Trump administration's promotion of dollar-backed stablecoins represents a strategic effort to strengthen the dollar's global position."

The brilliance of this strategy lies in its utilization of the technological advantages of cryptocurrencies while linking them to the strong credit of the US dollar. By promoting the adoption of dollar stablecoins, the United States hopes to continue to solidify the hegemony of the dollar in the digital finance realm.

Trillions of dollars in market potential: The future of stablecoins

According to data from DeFiLlama, as of the writing of this article, the total market capitalization of stablecoins is $263 billion. Tether's USDT and Circle (NYSE: CRCL)'s USDC account for over 86% of the market share.

In addition to the existing stablecoin giants, other currencies, such as the Trump-backed USD1, Ripple's RLUSD, and PayPal's PYUSD, are also entering this growing market. Ripple CEO Brad Garlinghouse recently stated that many believe the stablecoin market will reach 1 trillion to 2 trillion dollars "within a few years."

However, whether its growth scale can challenge China's efforts to promote global economic de-dollarization remains to be seen. Nevertheless, the U.S. government's active promotion of stablecoins undoubtedly adds new variables to this currency competition. Through U.S. dollar stablecoins, the United States hopes to penetrate the liquidity of the dollar into every corner of the world without relying on the traditional SWIFT system, thereby countering China's RMB payment network.

Conclusion:

The competition between the two major economies of China and the United States has extended from traditional trade wars into the digital finance sector. China is actively promoting the internationalization of the renminbi and de-dollarization, while the United States is attempting to reinforce the dollar's dominance in the global financial system through the GENIUS Act and dollar stablecoins. This digital battle over currency hegemony will have far-reaching effects on the global economic landscape. Stablecoins, as a key tool in this battle, will be a focal point of our continued attention regarding their future development and applications.