Global Stablecoin Development Trends and Policy Evolution

The "Renmin University of China Shenzhen Social Science Salon (Issue 62) and the Great Financial Thought Salon (Issue 256)" was held on June 21, organized by the Shenzhen Research Institute of Renmin University of China and the Advanced Institute of Social Sciences of Renmin University of China (Shenzhen), and co-hosted by the International Monetary Institute (IMI) of Renmin University of China and the Advanced Institute of Finance of Renmin University of China (Shenzhen). Experts and scholars from various fields conducted in-depth discussions on the theme of "Global Stablecoin Development Trends and Policy Evolution." The Renmin University of China Fintech Research Institute has compiled the core parts.

In the current era of rapid development of the digital economy, stablecoins, as an important innovation in the field of digital currency, are profoundly rewriting the global financial landscape. Since their first launch in 2014, the stablecoin market size has rapidly expanded, and the issuance mechanisms and application scenarios are continuously evolving. On May 21, the Legislative Council of the Hong Kong Special Administrative Region passed the "Stablecoin Regulation Bill" on the third reading, marking a significant step in formally incorporating stablecoins into the legal regulatory framework. Apart from Hong Kong, countries and regions such as the United States, the European Union, and Africa are also fiercely competing for dominance in stablecoins. Against the backdrop of the rapid development of global digital currencies, stablecoins and cryptocurrencies have become core topics of financial innovation and policy discussions.

To further explore the above topics, the "Big Finance Thought Salon" (Session No. 256), initiated by the International Monetary Research Institute of Renmin University of China, invited several experts from government, industry, academia, and research to discuss the "Trends in Global Stablecoin Development and Policy Evolution." Wang Yongli, Co-Chairman of Digital China Information Service Group Co., Ltd., and Zhu Taihui, Senior Research Fellow at the National Institute of Finance and Development, each gave keynote presentations. Participants in the discussion included Xiao Geng, Chairman of the Hong Kong International Finance Society and Vice Dean of the School of Public Policy at the Chinese University of Hong Kong (Shenzhen); Tang Ke, Professor at the Institute of Economics, School of Social Sciences, Tsinghua University, and Dean of Zhishan College; Zeng Gang, Chief Expert and Director of the Shanghai Finance and Development Laboratory; and Tu Yonghong, Deputy Director of the International Monetary Research Institute of Renmin University of China and Dean of the Yangtze River Economic Belt Research Institute. This salon was hosted by Song Ke, Executive Vice Dean of the Shenzhen Research Institute of Renmin University of China and Executive Dean of the Institute of Advanced Social Sciences (Shenzhen).

Core Insights

Wang Yongli delivered a keynote speech titled "The Deep Warnings Brought by the Rapid Development of US Dollar Stablecoins." He pointed out that the emergence of US dollar stablecoins (such as USDT) is to meet the demand for cryptocurrency trading, serving as a bridge connecting the crypto world and the traditional fiat currency system. With the development of crypto assets, stablecoins have rapidly expanded, but the issue of their long-term detachment from regulation has raised concerns. He emphasized that regulated stablecoins are essentially fiat currency tokens rather than independent currencies, and their development highlights the inefficiencies of the fiat currency system. Countries need to leverage stablecoin technology to enhance the cross-border payment capabilities of their legal currencies. He suggested prioritizing the internationalization of the digital yuan, combining it with digital identity technology to form a competitive advantage, while actively participating in the overseas stablecoin market. The strengthening of stablecoin regulation is a normative use of cryptographic technology by national sovereignty, rather than an acknowledgment of the decentralized concept, and it needs to balance innovation and risk within a compliance framework.

Zhu Taihui believes that stablecoins possess the technological advantages of the underlying cryptocurrency assets and the value stability of fiat currencies, while effectively addressing the incentive mechanism issues for market participants (achieving Pareto improvements for all parties). They have become a key tool linking fiat currencies with cryptocurrency assets, the cryptocurrency market, and the traditional financial system. The development trend of stablecoins is mainly reflected in the scale of stablecoins entering a phase of significant growth, stablecoins becoming popular payment tools, and the accelerated integration of stablecoins with the traditional financial system. Among these, the continuous decrease in the single transaction scale of stablecoins indicates that stablecoin payments are rapidly expanding into cross-border trade and real transaction scenarios, while the integration of banking institutions with stablecoins has opened up funding sources for the development of stablecoins. The United States has created a new dollar circulation through dollar stablecoins to strengthen the international position of the dollar. The gradual model of "first offshore (Hong Kong) - then onshore (Free Trade Zone Free Trade Port)" for launching offshore RMB stablecoins is a new approach to accelerate the internationalization of the RMB.

Xiao Geng believes that Hong Kong urgently needs to develop stablecoins to significantly reduce the cost of cross-border transactions and support the need for Hong Kong to develop digital finance. In terms of regulation, the stablecoin should be issued by licensed institutions, balancing market freedom while ensuring compliance. It is crucial for the stablecoin to be pegged to the Renminbi, as it can address the instability of the dollar system and create a relatively independent ecosystem without directly affecting mainland monetary policy. In addition, a Renminbi-pegged stablecoin can create a broad and efficient investment platform for Renminbi assets, which, thanks to its advantages of information transparency and traceability, can efficiently connect global capital with real assets in the mainland, creating conditions for an orderly relaxation of foreign exchange controls, helping to achieve "hiding wealth among the people," strongly supporting the Renminbi and Renminbi assets, and enhancing national financial resilience and geopolitical standing.

Tang Ke pointed out that currently, China should promote the Hong Kong dollar stablecoin under the premise of ensuring regulation, and in the future, more real-world asset tokens (RWA) purchased with stablecoins should be issued to support the ecosystem construction of the Hong Kong dollar stablecoin.

Zeng Gang stated that, from the essence of currency, stablecoins belong to the broad category of money. As the acceptance of digital assets continues to increase, it is not ruled out that they could replace sovereign currency.

Tu Yonghong believes that the rapid expansion of stablecoin trading, as an on-chain currency in the digital age, is a result of growing market demand. The current international trade model, payment system, and production organization methods have undergone significant changes, creating a huge demand for reducing transaction costs and breaking through foreign exchange controls. Globally, the dollar's safe-haven property and the stability of the renminbi are the best. China's digital economy has a leading advantage globally. If central bank digital currencies and stablecoins issued by private licensed institutions coexist, it will help promote the renminbi to more countries and international markets. It is suggested that stablecoins be used more in the offshore renminbi market, choosing the Hainan Free Trade Port, and exploring the use of renminbi stablecoins in specific application scenarios.