$2 trillion stablecoin market battle: Is the Renminbi challenging the dominance of the US dollar?

With the recent passage of the GENIUS Act in the United States, Chinese tech giants are seeking to balance the rising dominance of dollar-pegged digital currencies. At the heart of this competition is the stablecoin market, which could reach a scale of 2 trillion dollars in the future.

1. Background and Motivation for China's Promotion of Stablecoins

According to a report by Reuters, JD.com and Ant Group have urged the People's Bank of China to approve the development of a stablecoin based on the renminbi, particularly through Hong Kong. These proposed stablecoins will be pegged to the offshore renminbi and aim to expand the global influence of the renminbi while challenging the growing digital influence of the dollar.

Former Vice President of the Bank of China, Wang Yongli, stated: "If cross-border RMB payments are not as efficient as USD stablecoins, it will be a strategic risk." The chairman of a cryptocurrency exchange operator also expressed a similar view, adding: "China can no longer avoid taking action."

If China's lobbying efforts succeed, this could mark a policy shift for Beijing since the cryptocurrency ban in 2021, and may suggest a broader strategy to enhance the international influence of the yuan through digital finance.

2. The Dominance and Market Size of the US Dollar Stablecoin

Despite China's ambitious plans to challenge the dominance of the US-backed stablecoin, catching up is not easy. According to data from the Bank for International Settlements, Tether's USDT and Circle's USDC currently dominate the market, with over 99% of stablecoins in circulation pegged to the US dollar.

Although the current stablecoin market size is only $247 billion, Standard Chartered believes that by 2028, the stablecoin market size could soar to $2 trillion. This indicates that the stablecoin market may see significant rise in the future.

3. The Current Status of the Renminbi in the Global Payment System

China's desire to elevate the yuan as a global reserve currency still faces obstacles, especially due to the country's capital controls.

Despite China being the world's second-largest economy, the influence of the Renminbi in the global payment system is relatively weak. According to SWIFT data, the Renminbi exchange rate fell to 2.89% in May, the lowest level in nearly two years. In contrast, the US dollar still maintains a dominant position at 48.46%.

IV. Actions of Chinese Tech Giants

As dollar-backed stablecoins become increasingly popular among Chinese exporters, many of whom now prefer to use USDT for cross-border settlements, tech giants like Ant Group and JD.com are accelerating the issuance of their own stablecoins in an effort to reclaim monetary status.

JD plans to launch a stablecoin pegged to the Hong Kong dollar by the end of the year, while Ant Group is actively seeking licenses in Hong Kong, Singapore, and Luxembourg to expand its blockchain-based payment infrastructure. These initiatives align with broader efforts to counter the growing dominance of the digital dollar.

It is worth noting that these updates overlap with the optimistic sentiment surrounding the restart of US-China trade negotiations. Recently, this briefly pushed the price of Bitcoin to break above $110,000, but the rally has weakened due to a lack of substantial progress—this may reflect the turbulent geopolitical backdrop of stablecoins.

Conclusion:

The competition between the renminbi and the US dollar in the stablecoin market reflects the evolution of the global digital financial landscape. Chinese technology giants are promoting the development of renminbi stablecoins with the aim of enhancing the international influence of the renminbi and countering the dominance of US dollar stablecoins. However, the current status of the renminbi in the international payment system and factors such as capital controls will be important considerations in this competition.