The global financial landscape is undergoing a profound transformation, driven by rapid advancements in digital assets and blockchain technology. At the heart of this evolution lies the growing prominence of stablecoins—digital currencies pegged to traditional fiat assets—that are reshaping cross-border payments, financial infrastructure, and monetary policy frameworks. As regulatory clarity emerges and institutional adoption accelerates, questions about currency dominance, financial sovereignty, and innovation have taken center stage.
In a recent exclusive interview with Huang Yiping, Dean of the National School of Development at Peking University and member of the People's Bank of China’s Monetary Policy Committee, key insights were shared on the future trajectory of stablecoins, central bank digital currencies (CBDCs), and their implications for global finance—particularly in the context of Hong Kong’s evolving role.
The Rise of Stablecoins in Global Finance
Stablecoins have emerged as one of the most impactful innovations in the digital asset space. With transaction volumes surpassing those of traditional payment giants like Visa and Mastercard—reaching $27.6 trillion in 2024—they are no longer niche instruments but critical components of modern financial infrastructure.
The impending implementation of Hong Kong’s Stablecoin Ordinance on August 1 marks a pivotal moment: it establishes the world’s first comprehensive regulatory framework for fiat-backed stablecoins. This move positions Hong Kong as a leader in fostering a secure and sustainable digital asset ecosystem.
👉 Discover how regulated stablecoin ecosystems are shaping the future of global finance.
Will Stablecoins Reinforce Dollar Dominance?
A major concern among policymakers is whether the widespread use of dollar-pegged stablecoins will further entrench U.S. monetary hegemony. Currently, the majority of circulating stablecoins are tied to the U.S. dollar, raising fears of "digital dollarization"—a phenomenon where emerging markets increasingly rely on foreign digital currencies, undermining domestic monetary control.
Huang Yiping notes that while this trend could deepen reliance on the dollar, it is still early to predict long-term outcomes. Alternative stablecoins pegged to other currencies or government bonds are beginning to emerge, suggesting a more diversified future.
However, he cautions that overreliance on dollar-based stablecoins poses risks, particularly for economies with less developed financial systems. When local transactions shift toward dollar-denominated digital assets, central banks lose leverage over liquidity and interest rate transmission mechanisms.
A Strategic Opportunity: Offshore RMB-Pegged Stablecoins in Hong Kong
Given China's cautious approach to capital account liberalization, launching a domestic RMB stablecoin remains challenging. However, Hong Kong presents a unique opportunity.
As a global financial hub with a mature offshore RMB market (CNH), Hong Kong is well-positioned to pioneer a stablecoin pegged to the offshore yuan. Such an instrument would operate within a regulated environment while circumventing restrictions associated with mainland capital controls.
Huang highlights this as “a viable possibility.” By anchoring stablecoins to CNH rather than HKD—which itself is pegged to the USD—Hong Kong can help diversify the global stablecoin landscape and support the internationalization of the renminbi without compromising financial stability.
This approach aligns with broader efforts to enhance cross-border payment efficiency through projects like mBridge, a multi-CBDC platform developed by the BIS Innovation Hub and several central banks, including China’s.
Regulatory Balance: Innovation vs. Financial Stability
Regulation remains a cornerstone of sustainable growth in the digital asset sector. While early iterations of blockchain emphasized decentralization and anonymity, today’s reality demands accountability.
Huang emphasizes that complete deregulation is neither feasible nor desirable. Instead, regulators must strike a balance between enabling innovation and safeguarding financial integrity. Concepts such as “travel rule” compliance and identity verification are becoming standard, ensuring transparency without stifling technological progress.
There is also growing discussion around international coordination—potentially through institutions like the Bank for International Settlements (BIS)—to establish harmonized standards for cross-border stablecoin operations.
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CBDCs and Stablecoins: Competitors or Complements?
China’s aggressive push for digital RMB adoption contrasts with Western markets’ preference for private-sector-led stablecoins. This divergence raises an important question: will CBDCs and stablecoins compete—or coexist?
According to Huang, the relationship is both competitive and complementary. While CBDCs offer state-backed security and integration into existing monetary systems, stablecoins bring agility and private-sector efficiency.
Moreover, the mere presence of a public digital currency introduces contestability into the market. Even if the digital yuan doesn’t dominate retail payments, its existence pressures private providers to maintain fair practices, protect consumer rights, and avoid monopolistic behavior.
This dynamic ensures healthier competition and enhances overall system resilience.
Demographic Shifts and Monetary Policy Challenges
Beyond digital finance, Huang also addresses macroeconomic headwinds—particularly population aging. As societies age, natural interest rates tend to decline due to reduced savings and investment activity.
Lower rates limit the effectiveness of conventional monetary tools like rate cuts. Older populations are also less responsive to interest rate changes, weakening policy transmission mechanisms.
In response, central banks may need to adopt unconventional measures—quantitative easing, negative rates, or targeted fiscal-monetary coordination—to sustain demand and manage risk.
Yet technological breakthroughs—especially in artificial intelligence—could counterbalance these trends. If AI boosts productivity despite labor shortages, it may reverse downward pressure on growth and interest rates.
Economic Outlook: Navigating Uncertainty in 2025
Despite strong second-quarter performance in exports, production, and consumption—supported by government stimulus—the outlook remains cautious. Indicators such as PMI and CPI suggest underlying weakness.
Huang stresses that macroeconomic policy must continue providing support through uncertain times. Additional fiscal or monetary easing could bolster confidence and stabilize growth trajectories in the second half of 2025.
Reducing geopolitical uncertainty—such as through clearer trade agreements—would further enhance investor sentiment and economic resilience.
Frequently Asked Questions (FAQ)
Q: What are stablecoins?
A: Stablecoins are digital currencies designed to maintain a stable value by being pegged to a reserve asset, such as a fiat currency (e.g., USD or EUR) or commodities. They combine blockchain efficiency with price stability.
Q: Why is Hong Kong ideal for launching an offshore RMB stablecoin?
A: Hong Kong hosts the largest offshore RMB market, operates under a robust legal system, and maintains financial autonomy under “One Country, Two Systems,” making it a strategic gateway for RMB internationalization.
Q: How do stablecoins affect monetary policy in emerging markets?
A: Widespread adoption of foreign-currency stablecoins can erode central banks’ control over money supply and interest rates—a phenomenon known as “digital dollarization”—potentially weakening domestic policy effectiveness.
Q: Can CBDCs prevent private stablecoin monopolies?
A: Yes. Even without dominating usage, CBDCs act as a competitive check, ensuring private issuers uphold consumer protection, fairness, and transparency in digital payments.
Q: What role does regulation play in stablecoin development?
A: Regulation ensures financial stability, prevents illicit activities, and builds user trust. Well-designed rules enable innovation while mitigating systemic risks like runs on reserves or lack of transparency.
Q: How might AI impact future interest rate trends?
A: If AI significantly boosts productivity and economic output—even amid aging populations—it could reverse downward pressure on natural interest rates and reshape long-term monetary policy assumptions.
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