China has raised concerns about the growing dominance of US dollar-backed stablecoins in global finance.
A senior economist from one of the country’s research bodies has warned that their unchecked rise could further solidify the United States control over the international monetary system.
Dollar-backed stablecoins raise concerns
According to Zhang Ming, deputy director at the Institute of Finance and Economics and the National Finance and Development Laboratory, the current landscape heavily favors US dollar stablecoins.
Zhang warned that if the US successfully connects dollar-pegged stablecoins to global credit markets, it could deepen the dollar’s presence in physical and digital economies. He argues that this would make competing globally even more challenging for other currencies.
He wrote:
“Once the US dollar stablecoin links the international credit of the US dollar with the application scenarios of the virtual world more closely, it may greatly consolidate the hegemony of the US dollar.”
According to CryptoSlate’s data, Tether (USDT) and USD Coin (USDC) now account for nearly 90% of the stablecoin market. USDT alone has a market cap of $143 billion, while USDC controls almost $60 billion. Together, they comprise the bulk of the $236 billion stablecoin sector.
These stablecoins are widely used as trading pairs on crypto exchanges. They provide liquidity and act as intermediaries between fiat currencies and digital assets like Bitcoin and Ethereum.
In several developing countries, these assets are popular as digital stores of value, helping users preserve purchasing power in unstable economies.
Digital Yuan expansion
The report calls on China to ramp up its efforts to internationalize the digital yuan (CNY).
He suggests that China expand the use of digital tokens on domestic and international platforms, aligning sovereign credit with global application scenarios.
With appropriate design and risk control, Zhang believes these efforts could help elevate the renminbi’s standing and counterbalance the rising influence of dollar-denominated stablecoins.
According to the report:
“As long as the design and risk prevention and control are appropriate, expanding the use of digital tokens on these platforms can significantly expand the international currency status of RMB, thereby more calmly responding to the challenges of US dollar stablecoins.”
China’s concern mirrors similar warnings in Europe. Earlier this month, EU officials expressed fears that the US’s pro-crypto stance could give dollar-backed stablecoins an edge over Euro-based alternatives.
Pierre Gramegna, managing director of the European Stability Mechanism, emphasized that this trend may threaten the EU’s financial autonomy.
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