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Jiaying Jiang

Last month, the United States passed the Genius Act, a landmark piece of legislation that finally brings stablecoin – a cryptocurrency asset pegged to the US dollar – under a federal regulatory framework. While this may seem like a domestic achievement, the global implications are far-reaching, particularly for jurisdictions in Asia, including Hong Kong and mainland China.
The Genius Act is more than just cryptocurrency regulation; it represents a digital extension of US financial influence.
By legally defining stablecoins used in payment as non-securities and assigning oversight to banking regulators rather than securities regulators, the act clears the path for stablecoins like Tether and USDC to flourish globally. These tokens already dominate over 90 per cent of the stablecoin market and are set to become a default payment rail for digital transactions worldwide, especially in regions underserved by traditional banking systems.
Dollar-backed stablecoins are not just technical tools; they function as a new layer of financial infrastructure. In areas with high inflation or currency instability – such as parts of Latin America or Africa – users increasingly prefer holding Tether or USDC over local currency. In decentralised finance (DeFi) and Web3 ecosystems, dollar stablecoins are the dominant medium of exchange.
Even in sanctioned jurisdictions, the US government can exert influence by regulating issuers like Circle and Tether, providing Washington with a new lever of financial statecraft.
In effect, the Genius Act enables the digitisation and global distribution of the dollar through private-sector channels, with potentially minimal direct cost and substantial geopolitical advantage. Through the embedding of dollar-backed tokens in digital trade, finance and remittance systems, the dollar’s reach extends into markets beyond traditional banking networks. This reinforces the dollar’s role not only as the global reserve currency, but also as the default unit of account in emerging digital economies.

Domestically, China may not face immediate urgency in responding to stablecoins. Alipay and WeChat Pay dominate China’s retail payment landscape, and the digital yuan is being introduced in a controlled, secure manner. Internationally, however, the growing use of dollar stablecoins in cross-border payments, digital trade and cryptocurrency markets raises concerns about long-term currency competition, capital controls and financial sovereignty.
Without a viable alternative, dollar stablecoins could become the de facto medium of exchange across much of Asia and the rest of the Global South, including regions tied to China’s Belt and Road Initiative. This creates incentives for policymakers to consider the development of a yuan stablecoin – not for domestic circulation, but as an instrument of currency diplomacy and a means to preserve financial sovereignty in the age of programmable money.
Hong Kong is uniquely positioned to serve as a bridge between international financial markets and China’s digital currency ecosystem. With its common law system, established financial sector and regulatory sandbox, Hong Kong can pilot offshore yuan stablecoin initiatives and contribute to the creation of a compliant cross-border payment framework.
That said, a Hong Kong dollar-based stablecoin is unlikely to significantly alter the global balance, given the Hong Kong currency’s dollar peg. The greater strategic opportunity lies in using Hong Kong as a test bed for an offshore yuan stablecoin ecosystem – one that interoperates with the e-CNY where appropriate, while serving global users in trade, commerce and DeFi. Hong Kong’s new stablecoin law marks a meaningful first step.
To move in this direction, Hong Kong could use its regulatory sandbox to test offshore yuan stablecoins with selected commercial banks and licensed payment providers, focus on cross-border business-to-business applications, particularly in emerging markets with weak banking infrastructure, and coordinate with mainland regulators to ensure interoperability, compliance and effective capital control frameworks, while allowing space for innovation in trade finance.


It could also emphasise transparency and reserve backing, drawing lessons from the Genius Act to build international trust, build partnerships with belt and road countries to promote acceptance of offshore yuan stablecoins in regional trade, and encourage academic, legal and policy dialogue with international financial centres to shape common standards for stablecoin governance.
In addition, Hong Kong could develop technical and regulatory pathways to link offshore yuan stablecoins with tokenised assets and smart contracts in global DeFi platforms, and establish a trusted audit and certification framework to verify reserve quality, cybersecurity and anti-money-laundering compliance for yuan stablecoins.
In the meantime, regulators must remain cautious. Many private-sector entities expressing interest in issuing stablecoins lack concrete business and implementation plans and are primarily motivated by market hype. Hong Kong regulators should carefully distinguish between speculative initiatives and projects with genuine use cases, strong governance and long-term viability.
Rather than rushing to obtain licences, private companies should focus on developing practical, high-impact applications – such as cross-border trade settlement or DeFi integrations – that align with Hong Kong’s strategic role and regulatory objectives.


The rise of stablecoins – and America’s institutional embrace of them – marks a pivotal shift in the global monetary landscape. Washington has effectively “uploaded” the dollar into the digital economy. If other major economies do not develop credible digital alternatives, they risk losing both market relevance and long-term strategic influence.
For jurisdictions considering their next steps, the challenge is not to replicate the US model, but to develop a distinct and credible framework for sovereign digital currencies. Hong Kong, with its unique position, can play a catalytic role. The stakes are not merely technological – they are monetary, economic and geopolitical.


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Hong Kong can lead charge for yuan alternative to US stablecoin

Illustration: Stephen Case

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China's digital currency

As legislation and dollar stablecoin dominance give US a new lever of financial statecraft, with its new law, Hong Kong can develop a credible alternative


As legislation and dollar stablecoin dominance give US a new lever of financial statecraft, with its new law, Hong Kong can develop a credible alternative.


Stablecoins

Tether

Cryptocurrency

China digital currency

Yuan

Currencies

United States

China

Hong Kong economy

Trade

Fintech

Regulation

Financial regulation

American Samoa

WeChat Pay

Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Hong Kong can lead charge for yuan alternative to US stablecoin

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}As legislation and dollar stablecoin dominance give US a new lever of financial statecraft, with its new law, Hong Kong can develop a credible alternative

As legislation and dollar stablecoin dominance give US a new lever of financial statecraft, with its new law, Hong Kong can develop a credible alternative