The rapid evolution of digital currencies is reshaping the foundations of global finance. At the 2025 Academic Conference on China’s Digital Economy and Governance held at Nankai University, Zhang Ming, Deputy Director of the National Institute of Financial Development and researcher at the Chinese Academy of Social Sciences, delivered a compelling keynote address titled Digital Currency's Impact on the International Monetary System. His analysis offers critical insights into how stablecoins, central bank digital currencies (CBDCs), and cryptocurrencies are redefining monetary power dynamics in the digital age.
This article synthesizes Zhang Ming’s speech, exploring the transformative potential of digital currencies, with a focus on stablecoin dominance, CBDC innovation, and strategic implications for the global financial order.
Understanding Three Major Types of Digital Currencies
To grasp the broader impact, it's essential to distinguish between the three primary forms of digital money: cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs).
Bitcoin: A Volatile Asset, Not a True Currency
Bitcoin, the most well-known cryptocurrency, faces two fundamental limitations that prevent it from functioning as reliable money:
- Extreme price volatility undermines its role as a stable store of value or medium of exchange.
- Fixed supply cap limits its ability to support monetary policy or economic stabilization.
As a result, Bitcoin behaves more like a speculative financial asset than actual currency. However, its underlying technology—blockchain—holds immense promise for future financial infrastructure development.
👉 Discover how blockchain is transforming financial systems beyond cryptocurrency
The Rise and Legacy of Stablecoins: From Libra to USDT
Although Facebook’s Libra (later Diem) project was ultimately shelved due to regulatory concerns, it sparked a global shift. The idea of combining massive digital platforms with dollar-backed digital assets highlighted a powerful synergy: global reach + monetary stability = enhanced dollar dominance.
Today’s stablecoin market is dominated by dollar-pegged tokens, particularly USDT (Tether) and USDC (USD Coin). As of late 2024, total stablecoin market capitalization approached $170 billion, with over 80% tied directly to the U.S. dollar. In contrast, euro-pegged stablecoins remain marginal, accounting for less than $300 million.
This concentration means that even in decentralized environments, the U.S. dollar exerts influence through digital proxies—a phenomenon Zhang Ming calls a "dollarization of the virtual world."
Digital Yuan: A Strategic but Limited CBDC
China’s digital yuan (e-CNY) was designed conservatively to minimize disruption to commercial banks by only replacing M0—physical cash in circulation. While this ensures financial stability, it severely restricts functionality:
- Cannot be used for large-scale interbank or corporate settlements.
- Limited utility in cross-border transactions.
- Falls short in supporting advanced use cases like programmable finance or DeFi integration.
For digital yuan to play a meaningful role in RMB internationalization, it must evolve beyond M0 to support M1 (narrow money) and eventually M2 (broad money). Only then can it serve as a viable alternative in global trade and finance.
Why Stablecoins Deserve Greater Attention
Stablecoins are no longer niche instruments—they are becoming core components of the global financial ecosystem. Their growing influence stems from three key roles:
- Primary trading pair in crypto markets: Over half of all Bitcoin and Ethereum trades now occur via USDT, making it the de facto settlement currency in decentralized exchanges.
- Liquidity provider in DeFi: Stablecoins fuel lending, borrowing, and yield generation across decentralized platforms.
- De facto reserve assets in emerging economies: In countries with weak currencies or capital controls, citizens increasingly hold stablecoins as a reliable store of value.
These trends reveal a deeper structural shift: stablecoins are extending the reach of fiat currencies—especially the U.S. dollar—into new digital domains without requiring physical presence or traditional banking access.
Four Ways Stablecoins Are Reshaping the Global Monetary Order
Zhang Ming identifies four major disruptions caused by the rise of stablecoins:
1. Accelerating Cross-Border Payment Innovation
Traditional systems like SWIFT suffer from high costs, slow processing times, and reliance on multiple intermediaries. In contrast, stablecoin-based transfers leverage blockchain to enable near-instant, peer-to-peer value transfer with lower fees—bypassing correspondent banking networks entirely.
This efficiency makes stablecoins particularly attractive for remittances and international commerce in regions underserved by traditional banks.
2. Challenging Non-U.S. Monetary Sovereignty
In high-inflation economies—particularly across Latin America and Africa—citizens are turning to dollar-pegged stablecoins as a practical alternative to local currencies. Unlike physical dollarization, which requires export earnings or foreign investment, digital dollarization can occur organically through online work, gaming, or social media platforms.
The existence of a “stablecoin premium”—where USDT trades above parity with USD—further illustrates strong demand for accessible dollar equivalents in restricted economies.
3. Outpacing Central Bank Digital Currencies
Despite government efforts, many CBDCs struggle with adoption. Nigeria’s eNaira, for example, saw over 98% abandonment within a year, while cryptocurrency usage surged to $56.7 billion in just one year. This reflects a stark reality: without real-world utility and user trust, state-backed digital money may lose out to private alternatives.
Moreover, political shifts in major economies affect digital currency strategies. While the Biden administration prioritized a cautious approach toward digital dollars, the Trump administration later embraced stablecoin development—recognizing their potential to reinforce dollar hegemony through private-sector innovation.
4. Creating Regulatory and Compliance Challenges
While beneficial for users, widespread stablecoin adoption poses risks:
- Anonymity tools like mixers make transaction tracing difficult, complicating anti-money laundering (AML) enforcement.
- Private issuers operating without full transparency could destabilize markets if reserves are mismanaged.
These issues underscore the need for coordinated global regulation—not suppression—of digital asset ecosystems.
👉 Learn how secure digital wallets are evolving to meet modern financial demands
Strategic Recommendations for China
To remain competitive in this shifting landscape, Zhang Ming proposes four strategic actions:
- Expand digital yuan’s scope from M0 to M1/M2, enabling broader use in corporate finance and cross-border payments.
- Develop RMB-pegged stablecoins leveraging platforms like Tencent, Alibaba, and Douyin to combine sovereign credibility with global digital reach.
- Allow controlled experimentation with crypto applications in special zones such as Hong Kong, Hainan Free Trade Port, and the Guangdong-Hong Kong-Macao Greater Bay Area.
- Promote e-SDR (digital Special Drawing Rights) within the IMF framework to support a multipolar digital monetary system and reduce dependency on any single currency.
Frequently Asked Questions
Q: Can stablecoins really challenge the U.S. dollar?
A: Not directly—but they significantly extend the dollar’s global footprint by digitizing its function in decentralized networks.
Q: Is the digital yuan behind other CBDCs?
A: In terms of technology, no—but its limited scope (M0-only) restricts real-world impact compared to more ambitious designs.
Q: Why do people prefer USDT over holding actual dollars?
A: USDT offers faster transfers, easier access in restricted economies, and seamless integration with crypto platforms—advantages traditional banking doesn’t provide.
Q: Could RMB-pegged stablecoins boost yuan internationalization?
A: Yes—if backed by credible reserves and integrated into global digital platforms, they could mirror USDT’s success in expanding currency reach.
Q: What is e-SDR and why does it matter?
A: The electronic version of the IMF’s SDR could serve as a neutral digital reserve asset, promoting fairness and diversity in the future monetary system.
👉 Explore how next-generation financial platforms are integrating multi-currency digital assets