China, Japan, and other countries to challenge USD-pegged stablecoins crusade
A lot was said about how the U.S. economy can benefit from USD-pegged stablecoins, especially now, when the GENIUS Act provides a clearer framework for the issuers. But can other countries benefit from issuing stablecoins pegged to their respective national currencies? Yes, they can, and several countries are already joining the race.
Summary
- USD-pegged stablecoins strengthen the U.S. dollar; hence, other countries are trying to galvanize their local currencies through issuing stablecoins.
- If the dominance of the USD-pegged stablecoins is downplayed, it may siphon away deposits from local banks.
- Japan and China are working on their national stablecoins, while the European Union is busy creating a CBDC on Ethereum and Solana.
USD-pegged stablecoins as a medicine for the U.S. economy
The U.S. has rejected plans to develop a central bank-issued digital dollar. Critics of the digital dollar cited privacy issues–the central bank shouldn’t have that much control and data over transactions that people make.
Instead, the government encouraged the private and public companies to issue stablecoins–private blockchain-based money backed by real assets 1:1, usually by U.S. dollars or the U.S. Treasury bills. Most stablecoins out there are pegged to USD (99% of all are pegged to USD), so each of them has a value equal to one U.S. dollar. Stablecoin issuers don’t generate yield directly on stablecoins, but they do earn interest by holding U.S. Treasury bills that back those coins.
While it may look like the government gave away its benefit of control and favored the market, actually, it creates new growth opportunities for the companies that issue stablecoins and buy American dollars and t-bills as they must back their stablecoins 1:1. This condition is required by the GENIUS Act signed by President Donald Trump on July 18, 2025.
As stablecoins are circulating freely across the globe and are very popular in the Global South, where local currencies are losing value against USD, these countries’ residents eagerly use USD-pegged stablecoins for remittances and as a savings asset. Their demand for the USD-pegged stablecoins boosts the demand for USD and t-bills as issuers have to back their stablecoins with these assets.
Explaining how stablecoins work for the U.S. economy, BitMEX exchange co-founder Arthur Hayes wrote in his newsletter, using the biggest USD-pegged issuer Tether as an example:
“The business model of Tether is very simple. Receive dollars, issue a digital token that rides on a public blockchain, invest the dollars in T-bills, and earn the [net interest margin, which is the Federal Reserve-set interest rate]. [The U.S. Secretary of the Treasury Scott] Bessent will ensure that issuers that the empire will tacitly support by law can only hold dollars in a chartered US bank, and or treasury debt securities. No funky stuff.”
Hayes stresses that most countries — except mainland China — use American social media apps. If these platforms begin supporting USD-pegged stablecoin transfers, it could trigger major capital outflows from the Global South and sharply boost demand for the U.S. dollar. More than that, it may effectively replace local banks with the U.S.-controlled digital currency.
On Aug. 26, Trump vowed to impose substantial tariffs on countries that try to “discriminate against American Technology” through digital taxes and digital market regulations. It means that fighting against the implementation of stablecoin transactions on, say, WhatsApp would be a costly move for other countries.
When the U.S. is printing dollars, it devalues USD reserves held by countries abroad. No wonder lately many countries have preferred to buy more gold. The conjunction of American stablecoins and the power of American Tech may turn the USD into a stronger currency than it is now.
The downside is that it will make exporting from the U.S. too expensive. Given that Trump wants to boost the U.S. manufacturing and exports, a strong dollar may not be the way to go. Some might argue that the growing value of the American dollar makes the U.S. national debt even a bigger problem, but demand for stablecoins drives the demand for t-bills, gradually paying off the debt.
China gets closer to launching a yuan-pegged stablecoin
China is one of the few countries that has its own powerful social media giants, like WeChat. Launching a yuan-pegged stablecoin may see an effect similar to what the U.S. is doing. China’s economy is heavily export-driven. In that context, stablecoins could become a more attractive tool than yuan-based bank transfers, offering instant and low-cost remittances.
Thus, Chinese authorities decided not to wait until American stablecoins would replace the yuan. In 2021, China launched digital yuan, a CBDC that didn’t gain much traction, however, losing popularity to services like WeChat Pay and AliPay.
In May 2025, Hong Kong adopted the Stablecoins Bill, which allows the issuance of stablecoins backed by Chinese assets. On Aug. 20, it was reported that the State Council of China is working on launching a yuan-pegged stablecoin for international trade.
In the event that yuan-pegged bank-issued stablecoins become reality, they may counterpoise the American dollar-pegged stablecoin invasion. Given that the renminbi’s market share dropped below 3% (the USD share is above 47%), China has something to go after.
Yen-pegged stablecoin will soon be launched in Japan
Monex Group is a Tokyo-based financial company. It made headlines on Aug. 26, when it revealed ambitious plans to launch a yen-pegged stablecoin. Monex is trying to repeat America’s formula. As Japan lacks social media resources that the U.S. and China have, the yen stablecoin has somewhat limited prospects in this race.
Nevertheless, the company aims to back its coins with Japanese government bills. Stablecoins are set to serve for cross-border remittance and corporate trades. The project may get a boost from Coincheck, a crypto exchange owned by Monex Group. More than that, Monex chairman Oki Matsumoto claims Monex is going to acquire several European crypto companies, which will widen Monex’s stablecoin platform. The stablecoin launch is scheduled for the fall of 2025.
European Union’s efforts
European Central Bank economist Piero Cipollone cited the growing USD-pegged stablecoins as the reason for rushing a launch of the digital euro. In the growing de-dollarization narratives, the digital euro may come as a possible replacement for the U.S. dollar.
On Aug. 22, 2025, it was revealed that to speed up the launch of the digital euro, the EU is considering using a public blockchain, namely Ethereum and Solana, instead of creating a private blockchain controlled by the central bank.
The news was met with criticism from the crypto community. According to multiple commenters, if launched on Solana or Ethereum, the digital euro will be the worst variant of a CBDC. Transaction data will be available on public blockchains, while the central bank will have even greater control over transaction data.
There are several euro-pegged stablecoins in circulation; however, combined, they make up only 0.2% of the entire stablecoin market. Given that Europe doesn’t have products like Meta or WeChat that could boost the adoption of Euro stablecoins dramatically, it’s not clear how strong it can be in the ongoing race.
