Push For Stablecoin Adoption In The West An Exercise At Undermining China’s Sovereignty?

Key Insights:

• China expresses concern about rising stablecoin adoption and potential threat to its Sovereignty.
• Former wall Street investor reveals how stablecoins support U.S dollar hegemony.
• How Ant Pay’s recent push into stablecoin may underscore China’s efforts to compete on a level playing field.

Stablecoin adoption has reached new heights so far this year across the globe. Especially with countries like the U.S leaning heavily towards stablecoin legislation but those efforts have attracted negative criticism especially from China.

Recent reports revealed China’s negative criticism of the U.S’ stablecoin pursuits. The Asian giant recently warned that stablecoins will threaten sovereignty by undermining its tight monetary control.

China also noted that stable coins will vastly transform the future of the monetary landscape. China’s criticism of the U.S’ aggressive push towards stablecoin adoption suggested that Trump’s recent efforts were aimed at injecting new life into the U.S dollar’s dominance.

Meanwhile, China has maintained a strict monetary policy and has been chipping away at the U.S dollar’s dominance with its de-dollarization efforts. But how exactly do U.S dollar backed stablecoins threaten China’s sovereignty?

How do stablecoins expand U.S hegemony and threaten China?

The U.S’ requirement that stable coin issuers should back their stablecoins at a 1:1 ratio with the dollar aims to establish a strong link to blockchain based assets.

We recently observed that the U.S government has been struggling to sell treasuries at lower rates because investors demanded higher interest rates on account of the rising risks caused by rapidly rising debt.

One of the consequences of the stablecoin approach is that it will allow the U.S to attract treasury deposits with ease on the blockchain. Stablecoin payments could potentially undercut China’s payment system, thus making it more difficult for alternative currencies like the Chinese Yuan to thrive under such conditions.

In other words, the U.S might have a lot of incentive to deploy a stablecoin strategy as a new lifeline for the greenback. A critical move especially at a time when it has been facing heavy pressures including China’s attempt to dethrone the dollar as the global reserve currency.

Simply put, a stable coin standard may extend the dollar’s roots deeper into the international markets and undermine China’s efforts to push the Yuan internationally. The adoption of the stablecoin standard will thus not only be a threat to China’s currency but also most other currencies across the world.

Should China fight fire with fire?

One of the obvious ways that China can clap back at the U.S would be to deploy its own stablecoin strategy. However, the country previously attempted to deploy a CBDC version of the Yuan which received heavy criticism due to tight controls.

However, China might be taking a leaf from the West which could lead to the rise of Chinese stablecoins. We previously highlighted that Jack Ma’s Ant International, a Chinese payments giant recently applied for stablecoin license.

However, recent information emerged revealing that China may have already created a stablecoin in collaboration with China long before the U.S. And the same company Ant International may have been part of the development alongside Ripple.

The reports suggest that China might also be adopting a similar strategy to that of the U.S. Rather than pursuing a government controlled stablecoin, the involvement of Ant International indicates the separation of state from money or at least the illusion of such a scenario.

This approach may allow China to compete more effectively with U.S stable coins. Hwever, the fact that even China recognizes the potential for stablecoins signaled that that there is no stopping the WEB3 train.

More countries will likely pursue a similar path in an attempt to capture the efficiency that comes with WEB3. However, this still raises questions regarding the potential implications, both negative and positive.