Beijing's Monetary Sovereignty: Why China is Putting a Stop to Tech Giants' Stablecoin Ambitions

Power struggle in the financial system: Who will shape the currency of tomorrow?

"Chinese tech giants pause stablecoin plans after Beijing intervenes" – this headline marks far more than just another regulatory intervention in China's tightly controlled financial sector. It reveals a fundamental conflict that will shape the global financial architecture of the coming decades: Who has the ultimate right to create money – sovereign states or private technology corporations? When the People's Bank of China and the Cyberspace Administration of China ordered companies like Ant Group and JD.com to put their plans to issue stablecoins in Hong Kong on hold in October 2025, Beijing sent an unmistakable message. The episode offers unprecedented insight into China's strategic calculations between technological innovation, monetary sovereignty, and the struggle for global currency dominance in an increasingly digitized global economy.

This analysis examines the complex economic, geopolitical, and systemic dimensions of this development. It first illuminates the historical roots of China's ambivalent relationship with fintech innovation, then analyzes the complex market mechanisms and actor constellations in the global stablecoin ecosystem, assesses the current situation using quantitative indicators, and places China's intervention in an international comparative framework. Finally, it discusses the long-term strategic implications for the global monetary order, digital payment systems, and the power relations between states and technology corporations.

Historical roots: From fintech enthusiasm to regulatory turnaround

The history of China's approach to digital financial innovation is one of spectacular successes, dramatic reversals, and increasing state control. To understand the current intervention against private stablecoins, one must look back to the early 2010s, when China emerged as the global spearhead of the fintech revolution.

Between 2010 and 2020, China experienced an unprecedented expansion of digital payment systems. Alipay, originally founded in 2004 as a payment processor for Alibaba's e-commerce platform Taobao, and WeChat Pay, launched in 2013 as an extension of the WeChat messaging app, transformed the country's entire payments landscape within a few years. By 2025, these two platforms combined controlled over 90 percent of China's mobile payment market, with Alipay holding a market share of approximately 53 percent and WeChat Pay around 42 percent. Transaction volumes reached dizzying heights: Alipay alone processed transactions worth an estimated $20.1 trillion in 2025.

This development was initially welcomed and encouraged by the Chinese authorities. Digital payment systems increased financial inclusion in rural areas, reduced transaction costs, and created an efficient, cashless payment ecosystem. Mobile payment penetration reached over 85 percent in urban areas and approximately 65 percent in rural regions. However, as the dominance of private fintech giants grew, so did the central government's concerns.

The turning point came in November 2020, when China's regulators halted Ant Group's planned IPO at the last minute. The $37 billion IPO would have been the largest in history. But just two days before the planned listing, the Shanghai Stock Exchange and the Hong Kong Stock Exchange suspended the IPO. The decision was officially justified by "significant changes in the regulatory environment for financial technology." Indeed, just a few days earlier, Alibaba founder Jack Ma had sharply criticized China's financial system at a financial conference in Shanghai, calling traditional banks "pawnshops" that only lend to companies that don't need money. Moreover, Ma had denounced the regulatory standards as hampering innovation and argued that China "does not have a systemic financial risk problem" but suffers from a "lack of system."

What followed was a comprehensive regulatory offensive against China's tech sector that continues to this day. Between 2020 and 2023, authorities forced Ant Group to undergo a fundamental restructuring that reduced Jack Ma's voting rights from over 50 percent to 6.2 percent. In July 2023, regulators imposed fines of 7.123 billion yuan on Ant Group and 2.99 billion yuan on Tencent for violations of consumer protection, anti-money laundering, and other regulations. Alibaba itself received a record fine of 2.75 billion US dollars in 2021 for alleged monopolistic practices.

At the same time, China intensified its efforts to develop its own state-controlled digital currency. The People's Bank of China launched research on the digital yuan, the e-CNY, as early as 2014. By 2025, the digital yuan reached a user base of approximately 260 million people and a cumulative transaction volume of 7.3 trillion yuan. Unlike private cryptocurrencies, the e-CNY allows the central bank complete monitoring and control over money flows, programmable monetary policy, and direct intervention options.

This historic development highlights a fundamental paradigm shift: While China largely gave free rein to private innovation in the fintech sector in the 2010s, the leadership has now recognized that unchecked dominance of private actors in payments and money creation could threaten monetary sovereignty and financial stability. The recent intervention against stablecoin plans is the logical continuation of this reversal.

Systemic drivers: actors, incentives and power relations in the digital currency system

Beijing's decision to suppress private stablecoin initiatives is deeply rooted in the structural dynamics and power constellations of the global digital currency system. To understand the underlying economic mechanisms, we need to analyze the key players, their incentive structures, and the systemic interactions.

The primary actors can be divided into four categories: first, sovereign central banks and regulators; second, private technology corporations and fintech companies; third, financial institutions; and fourth, end users. Each group of actors pursues different, often conflicting goals.

Central banks like the People's Bank of China prioritize monetary sovereignty, financial stability, and macroeconomic control. Monetary policy transmission only works if the central bank can control the money supply and effectively set interest rates. Private stablecoins circulating alongside sovereign currencies could undermine this control. As an insider familiar with the regulatory discussions explained to the Financial Times: "The key regulatory concern is who has the ultimate right to mint coins—the central bank or private companies in the market?"

For technology companies like Ant Group and JD.com, stablecoins represent a logical extension of their business models. With hundreds of millions of users on their digital platforms, they could establish stablecoins as efficient payment methods for cross-border trade, e-commerce, and financial services. The economic incentives are significant: Stablecoin issuers generate income from the interest earned on deposited reserves. Tether, the world's largest stablecoin issuer, generated a profit of $4.9 billion in the second quarter of 2025. Circle, issuer of the second-largest stablecoin, USDC, earned $251 million during the same period. With a total market volume of over $300 billion in 2025, the stablecoin market is a lucrative business area.

The geopolitical dimension further exacerbates this dynamic. With the passage of the GENIUS Act in July 2025, the US created a comprehensive regulatory framework for stablecoins. The law allows licensed issuers to issue dollar-based stablecoins with full reserve backing and regular audits. This regulatory clarity significantly accelerated the growth of dollar-denominated stablecoins. Tether (USDT) dominates with a market share of approximately 58 percent and a supply of $173 billion, followed by USDC with $74 billion and a 25.5 percent market share. Together, these two dollar stablecoins control over 80 percent of the global stablecoin market.

For China, this dollar dominance in the emerging digital currency system poses a strategic threat. Wang Yongli, former vice president of the Bank of China, warned that China should establish an offshore-based renminbi stablecoin system to compete against the growing dominance of dollar-based stablecoins. Huang Yiping, an advisor to the People's Bank of China, argued that Hong Kong could be well positioned to pioneer the issuance of offshore renminbi stablecoins. The logic is understandable: Stablecoins could accelerate the internationalization of the renminbi by providing an efficient, low-cost alternative for cross-border payments.

But this is precisely where the dilemma lies for Beijing. While renminbi stablecoins could theoretically increase the global reach of the Chinese currency, they also pose significant risks to China's rigid capital controls. China maintains one of the strictest capital control systems in the world. Companies, banks, and individuals can only transfer money abroad under strict conditions. Individuals are permitted to exchange a maximum of $50,000 in foreign currency annually. These controls are essential for China's macroeconomic stability, prevent capital flight, and enable the government to manage the exchange rate.

Stablecoins, inherently borderless and programmed for seamless international transfers, could circumvent these controls. Even if stablecoins were issued only offshore in Hong Kong, there would be a risk that mainland Chinese could gain access through technical loopholes and move capital out of the country. Zhou Xiaochuan, former governor of the People's Bank of China, warned at a closed financial forum in August 2025 about the systemic risks of speculative stablecoin use and questioned their real utility for payments. His intervention marked a significant shift in sentiment within China's financial circles.

Another key mechanism is the network dynamics of digital payment systems. Money works best when it is universally accepted—everyone uses a particular currency because everyone else uses it too. These network effects lead to natural monopolies or duopolies. The success of Alipay and WeChat Pay is based precisely on this mechanism: with hundreds of millions of users and near-universal merchant adoption, they have become de facto the only alternative. The same logic applies to stablecoins. USDT and USDC are dominant because they are available on over 25 different blockchains, are accepted by virtually all exchanges, and have over 109 million wallets holding USDT. A newly launched renminbi stablecoin would first have to build these network effects—a significant barrier to entry.

At the same time, the concentration in a few private issuers poses systemic risks. The collapse of the algorithmic stablecoin TerraUSD (UST) in May 2022 wiped out approximately $45 billion in market value within a week and triggered panic throughout the crypto market. UST lost its dollar peg as large investors withdrew capital on a massive scale, triggering a "death spiral": The attempt to restore UST parity by minting new LUNA tokens led to hyperinflation in LUNA and the collapse of both currencies. This episode vividly demonstrated the fragility of insufficiently collateralized stablecoins and the contagion effects that can result from their collapse.

The Terra crash served as a warning signal for regulators around the world. The European Commission responded with the Markets in Crypto-Assets Regulation (MiCA), which has been fully applicable since December 2024 and imposes strict reserve, transparency, and governance requirements for stablecoin issuers. Hong Kong introduced its own comprehensive regulatory regime for stablecoins in August 2025, requiring issuers to maintain full reserve coverage, maintain minimum capital of 25 million Hong Kong dollars, and undergo regular audits.

Against this background, Beijing's intervention must be understood as an attempt to maintain control over the financial system, minimize systemic risks, and protect monetary policy sovereignty – even if this means foregoing potential benefits for the internationalization of the renminbi.

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The current constellation: indicators, data and structural tensions

The current situation in October 2025 is characterized by fundamental tensions between various trends: rapid growth of the global stablecoin market, increasing regulatory clarity in Western jurisdictions, China's push with the digital yuan, and now the abrupt intervention against private stablecoin plans.

Quantitatively speaking, the global stablecoin market reached new highs in 2025. The total supply exceeded $300 billion for the first time, driven by institutional adoption and regulatory clarity. In August 2025 alone, Tether generated weekly revenue of $149 million, while Circle earned $49 million. These figures illustrate the economic viability of the business model.

Dollar-denominated stablecoins dominate with a combined market share of approximately 85 percent. USDT is the undisputed market leader with a 58 percent market share, followed by USDC with 25.5 percent. Other stablecoins, such as Ethena's USDe, achieve only 5 percent. This focus on the dollar solidifies its role as the dominant international currency, even in the digital age. According to Federal Reserve data, the US dollar accounted for approximately 58 percent of global foreign exchange reserves in 2024—a share that has remained remarkably stable since 2022 despite US sanctions against Russia.

In contrast, the renminbi's modest international role is evident. Despite years of internationalization efforts, the renminbi accounts for only about 2 to 3 percent of global foreign exchange reserves and ranks only sixth in international payments. In June 2025, the renminbi's share of global payments was 2.88 percent, significantly behind the dollar at 47 percent and the euro at 23 percent. In some months, the renminbi even slipped to sixth place behind the Japanese yen.

China's digital yuan is showing growth, but remains a niche product so far. With 260 million users and cumulative transactions of 7.3 trillion yuan, the numbers initially sound impressive. However, compared to Alipay and WeChat Pay, which together processed a transaction volume of approximately 70 trillion US dollars in 2023, its limited reach becomes clear. The e-CNY accounted for just 0.16 percent of China's M0 money supply in June 2023. Less than a fifth of the Chinese population appears to have used the new currency, often motivated by government incentives or mandates. Privacy concerns and the dominance of established payment platforms are hindering wider adoption.

Against this backdrop, the stablecoin plans of Chinese tech companies were entirely understandable. Hong Kong introduced its stablecoin licensing regime in August 2025, creating a regulatory framework that, in principle, allowed issuance. Over 40 companies are said to have already expressed interest in licenses. Ant Group and JD.com were both interested in Hong Kong's pilot program in the summer of 2025 or were planning to issue tokenized financial products such as digital bonds. Some sources reported that both companies wanted to issue Hong Kong dollar-pegged stablecoins.

The intervention came abruptly. In October 2025, Ant Group and JD.com received instructions from the People's Bank of China and the Cyberspace Administration of China to pause their stablecoin ambitions. At the same time, Beijing reportedly asked brokers and think tanks to stop promoting stablecoins. A report by the Chinese financial publication Caixin about Beijing's restrictions on Hong Kong's stablecoin activities was deleted shortly after publication, raising doubts about its credibility.

At the same time, China's securities regulator ordered several local brokers to pause their real-world asset tokenization activities in Hong Kong, signaling Beijing's growing unease over the rapid expansion of offshore digital asset initiatives. These measures contrast with concurrent tokenization successes: CMB International Asset Management, a Hong Kong subsidiary of China Merchants Bank, tokenized its $3.8 billion money market fund on the BNB Chain in October 2025.

These contradictions highlight Beijing's dilemma: On the one hand, China wants to benefit from blockchain innovation and Hong Kong's attractiveness as a fintech hub. On the other hand, the government fears losing control over money creation and capital flows. The solution appears to be a strictly controlled two-track strategy: state-controlled innovation (e-CNY, selected tokenization projects of state institutions) is encouraged, while private initiatives that could achieve systemic significance are suppressed.

Another important indicator is the development of cross-border payment systems. With the Cross-Border Interbank Payment System (CIPS) and the mBridge project, China is promoting alternatives to the dollar-dominated SWIFT system. CIPS processed transactions worth 175 trillion yuan in 2024, a 43 percent increase over the previous year. The mBridge project, a collaboration between the People's Bank of China, the Hong Kong Monetary Authority, the Bank of Thailand, the Central Bank of the United Arab Emirates, and the Bank for International Settlements, enables direct cross-border CBDC transactions without traditional correspondent banks. Tests have shown a reduction in transaction costs of 50 to 70 percent and a reduction in processing times from days to seconds. By July 2025, the Bank of China had processed nearly 200 transactions in Hong Kong via mBridge, with a volume of over 11 billion Hong Kong dollars, 80 percent of which was in renminbi.

These infrastructure investments demonstrate China's long-term strategy: to build a parallel, state-controlled digital payment system that promotes the internationalization of the renminbi without compromising monetary sovereignty. Private stablecoins do not fit into this strategy, as they would undermine the central bank's control.

Divergent paths: regulatory models in international comparison

A comparative look at different regulatory approaches in key jurisdictions reveals fundamentally different philosophies in dealing with stablecoins and highlights the peculiarities of the Chinese position.

With the GENIUS Act, passed in July 2025, the United States created a market-oriented yet regulated framework. The law allows various entities to issue stablecoins: subsidiaries of insured deposit-taking institutions, non-bank entities licensed by the Office of the Comptroller of the Currency, and federally licensed issuers with issuance volumes of up to $10 billion. Issuers must back stablecoins with one-to-one collateralization in U.S. dollars or low-risk assets such as U.S. Treasury securities and are subject to regular audits and anti-money laundering regulations. Approved stablecoins are not considered securities or commodities and are therefore not subject to SEC or CFTC oversight. This regulatory clarity has greatly accelerated the growth of dollar-backed stablecoins and cemented their dominance in the global market.

The philosophy behind it is clear: The US is using stablecoins as a tool to consolidate dollar hegemony in the digital age. As economist Barry Eichengreen argues, currencies are often first used in commerce before becoming reserve currencies. Dollar stablecoins already fulfill this function in much of the crypto economy and are now expanding into cross-border payments.

The European Union is pursuing a more comprehensive, yet also more restrictive, approach with its MiCA regulation. MiCA, fully applicable since December 2024, covers not only stablecoins but all crypto assets and establishes harmonized rules for the entire EU. The regulation categorizes crypto assets into asset-referenced tokens, e-money tokens, and other crypto assets. Particularly strict requirements apply to "significant stablecoins" that could pose systemic risks. Issuers must meet comprehensive transparency, governance, and reserve management standards. The EU thus prioritizes consumer protection, financial stability, and the prevention of market abuse, even if this may create barriers to innovation.

Hong Kong is positioning itself as a bridge between Eastern and Western approaches. The Stablecoins Ordinance, which came into force on August 1, 2025, establishes a licensing regime for fiat-pegged stablecoins. Issuers must maintain 25 million Hong Kong dollars in equity, 3 million Hong Kong dollars in liquid assets, and additional liquid assets for 12 months of operating expenses. Reserve assets must be fully segregated, highly liquid, and equal to the face value of the circulating stablecoins. Repayments must be made within one business day. Hong Kong's model is stricter than Singapore's but more flexible than EU regulations, and aims to establish the city as a global center for regulated stablecoin innovation.

Singapore pursues a tiered, market-driven approach under its Payment Services Act. The Monetary Authority of Singapore regulates single-currency stablecoins with specific requirements for tokens pegged to the Singapore dollar or G10 currencies. Reserve requirements are similar to those in Hong Kong, but Singapore allows a repayment period of up to five business days instead of one. Capital requirements are significantly lower at 1 million Singapore dollars compared to Hong Kong's 25 million. Singapore prioritizes market flexibility and fostering innovation, but also accepts higher risks.

China stands in fundamental contrast to all these approaches. The mainland completely bans cryptocurrency trading and mining. Stablecoins are considered virtual goods, not legal tender. Courts have recognized crypto as property for civil purposes, but commercial activities remain prohibited. Financial institutions must block crypto-related transactions and report suspicious activity. The philosophy is clear: complete state control over money creation and payment transactions.

The recent intervention against stablecoin plans in Hong Kong makes it clear that Beijing intends to assert this control even in the special administrative region, even though Hong Kong theoretically enjoys a high degree of autonomy. The "one country, two systems" principle allows Hong Kong to pursue its own economic and monetary policy. However, on issues of potentially systemic importance for the mainland, Beijing is increasingly showing a willingness to restrict this autonomy.

The comparison reveals two fundamentally different worldviews. Western jurisdictions view stablecoins as innovations that can be contained through appropriate regulation to manage both benefits (efficiency, financial inclusion, technological leadership) and risks (systemic instability, money laundering, consumer protection). China, on the other hand, views private digital currencies as an existential threat to monetary sovereignty and social control. This divergence will shape the global digital currency landscape for years to come.

Critical risks: Systemic distortions and unresolved conflicts of objectives

The suppression of private stablecoin initiatives in China poses significant risks for both the country itself and the global financial system, revealing fundamental conflicts of interest that cannot be easily resolved.

For China, the most obvious risk is falling behind in the global race for digital currency systems. While the US is aggressively promoting dollar stablecoins with the GENIUS Act and accelerating their global adoption, China is drastically limiting its own options. The renminbi already accounts for only 2 to 3 percent of global payments and reserves. Without innovative digital payment solutions that simplify cross-border transactions, the internationalization of the renminbi will continue to stagnate. As Wang Yongli, former vice president of the Bank of China, warned: If China cannot keep up with dollar stablecoins in terms of payment efficiency and clearing costs, progress in the international use of the renminbi will remain limited.

A second risk lies in the brakes on innovation. China's tech sector has developed enormous momentum over the past two decades. Companies like Ant Group and Tencent were pioneers of digital payment systems that transformed the daily lives of over a billion people. Continued regulatory repression could permanently damage this innovative power. Talented developers and entrepreneurs could migrate to more liberal jurisdictions. Venture capital could withdraw. The long-term economic damage from the loss of innovation could outweigh the short-term benefits of increased scrutiny.

Third, there is a fundamental trade-off between capital controls and currency internationalization. To become a truly international currency, the renminbi must be freely convertible and tradable. But this very convertibility would undermine China's ability to control capital flows and ensure financial stability. Economists have described this trilemma as the "impossible trinity": A country cannot simultaneously maintain a fixed exchange rate policy, free capital mobility, and independent monetary policy. China has opted for capital controls and monetary autonomy, which fundamentally limits currency internationalization.

The intervention against stablecoins exacerbates this conflict of objectives. Offshore renminbi stablecoins could theoretically offer a middle ground: They would operate outside the mainland but could promote international use of the renminbi. However, as Zhou Xiaochuan warned, the risks are difficult to control. Even with IP blocking and other technical restrictions, mainland Chinese could find ways to access offshore stablecoins and move capital out of the country.

From a global perspective, China's intervention cements dollar dominance in the digital currency system. With 85 percent of the global stablecoin market accounted for by dollar-denominated tokens and the US providing regulatory clarity, the dollar will further solidify its position as the dominant digital reserve currency. Economists and regulators have repeatedly emphasized that the factors that support dollar dominance—the size of the US economy, financial market liquidity, the rule of law, military alliances, and network effects—remain effective even in the digital age.

Another systemic risk is the concentration among a few private issuers. Tether and Circle control over 80 percent of the stablecoin market. This concentration creates potentially systemic risks. Should one of these issuers collapse—whether due to mismanagement, reserve problems, or external shocks—contagion effects could spread throughout the entire financial system. The Terra crash in 2022 was a foretaste of such risks. The European Systemic Risk Board warned in October 2025 of "elevated" risks in the stablecoin sector due to geopolitical uncertainty and multi-jurisdictional structures. Without international regulatory coordination, these risks could grow further.

There is also a risk that stablecoins could be misused for illegal activities. Their pseudonymous nature on public blockchains and the ability to circulate in self-custodial wallets complicate know-your-customer controls. Mixer services can obscure transactions. The Bank for International Settlements warned in its 2025 Annual Report that stablecoins are attractive to criminal and terrorist organizations because they can circumvent integrity protections. While analytics firms are working with law enforcement agencies, this approach does not scale for billions of everyday transactions.

Finally, there is a fundamental philosophical conflict: Who should have the power to create money? Historically, this has been a state monopoly, or at least a heavily regulated privilege. Stablecoins represent a partial privatization of money creation. As one commentator aptly put it: "Money is not a private commodity. It is a public institution that represents a social contract guaranteed by the state. When private corporations create quasi-currencies, they are, in effect, privatizing part of that social contract." The Chinese government has accepted this logic and acted accordingly. Western democracies face the challenge of striking a balance between innovation and public control—a balance that has not yet been convincingly achieved.

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Scenarios of the global digital currency order

The medium-term development paths of the global digital currency order depend on multiple, partly unpredictable variables. Nevertheless, based on current trends and structural dynamics, several plausible scenarios can be outlined.

Scenario 1: Dollar hegemony in the digital age

In this scenario, dollar-denominated stablecoins further consolidate their dominance. Regulatory clarity in the US provided by the GENIUS Act attracts institutional investors and corporations. Tether and Circle expand their market share, while new issuers—possibly large banks like JPMorgan—also issue dollar stablecoins. Network effects amplify: The more users and merchants accept dollar stablecoins, the more attractive they become to additional participants. Within five to ten years, dollar stablecoins could become a dominant medium for cross-border payments and an on-ramp for digital assets. The market could grow to $2 trillion by 2028, some analysts predict. China remains limited to its digital yuan, whose international use remains marginal. The renminbi stagnates at 2 to 3 percent of global payments. The US is using its digital currency dominance as a geostrategic tool, similar to how it uses the SWIFT system.

Scenario 2: Multipolar digital currency order

In this scenario, the landscape diversifies. In addition to dollar stablecoins, euro stablecoins (supported by MiCA regulation), renminbi offshore stablecoins in select regions, and possibly stablecoins of other currencies such as the pound sterling or Swiss franc are becoming established. Different currency blocs use different stablecoins: Europe dominates euro stablecoins, Southeast Asia is increasingly using renminbi stablecoins for trade with China, while the dollar remains dominant in global markets. The European Central Bank could intensify its efforts to give the euro a more prominent role, as ECB President Christine Lagarde has suggested. The Bank for International Settlements and multilateral platforms such as mBridge enable interoperable cross-border CBDC transactions. This scenario would bring more competition and potentially greater efficiency, but also fragmentation and increased complexity.

Scenario 3: CBDC dominance

In this scenario, government-issued central bank digital currencies will prevail over private stablecoins. China is aggressively expanding its digital yuan, making it mandatory for government transactions, social benefits, and increasingly in the private sector. Other central banks—the European Central Bank with its digital euro, possibly the Federal Reserve, the United Kingdom, and Japan—are launching their own CBDCs. These government-issued digital currencies offer advantages: direct central bank control, no private intermediaries, programmable monetary policy, and robust security. Regulators could increasingly restrict private stablecoins to promote CBDCs. The irony would be that China's authoritarian approach—complete control over digital money—will become the global model, albeit with different motivations in different countries.

Scenario 4: Fragmentation and instability

In this pessimistic scenario, the proliferation of unregulated or weakly regulated stablecoins leads to repeated crises. Following the example of the Terra crash, further stablecoins collapse, triggered by reserve problems, bank runs, or external shocks. Regulators respond with fragmented, incoherent measures that hamper innovation without guaranteeing stability. Geopolitical tensions lead to "currency wars" in the digital space, with competing stablecoin systems separated by mutual sanctions and technical incompatibilities. Users and businesses suffer from high levels of uncertainty, volatility, and a lack of interoperability. Overall trust in digital currencies declines.

Interoperability, regulation, trust: The three levers of digital currencies

Which scenario is most likely depends on several critical factors: First, the ability and willingness of international institutions and regulators to develop coordinated standards. The Financial Stability Board has put forward recommendations for global stablecoins, but their implementation varies widely. Second, geopolitical developments. Increasing tensions between the US and China, the EU's stance on digital sovereignty, and the position of emerging markets will be key. Third, technological developments. Advances in the interoperability, scalability, and security of blockchain systems could increase the attractiveness of digital currencies. Fourth, public trust. Repeated crises or cases of misuse could undermine confidence in private stablecoins and make government-sponsored solutions more attractive.

Based on current trends, a combination of Scenario 1 and Scenario 2 appears most likely: Dollar stablecoins will remain dominant, but other currencies, especially the euro, will play significant roles in their regions. CBDCs will exist in parallel, primarily for domestic transactions and selected cross-border corridors. China will play a special role: internally, a tightly controlled digital yuan system, externally limited renminbi use via platforms like mBridge, and possibly tightly regulated offshore stablecoins in selected partner markets.

In the long term, over a time horizon of 20 to 50 years, disruptive technologies or fundamental geopolitical shifts could render these scenarios obsolete. Quantum computers could endanger existing cryptography systems and require entirely new security paradigms. Decentralized autonomous organizations and algorithmic governance systems could give rise to alternative forms of money that evade state control. Climate change, pandemics, or geopolitical conflicts could fundamentally reshape the global economic order and thus redefine monetary systems.

One thing is certain: Beijing's decision in October 2025 to block private stablecoin initiatives was a significant turning point that will shape the fundamental tension between innovation and control, between global integration and national sovereignty, and between private and state power over money for years to come.

Strategic decisions: The reorganization of monetary power

Beijing's intervention against private stablecoin plans by Chinese tech giants in October 2025 is far more than an isolated regulatory event. It marks a defining moment in the struggle over the architecture of the global financial system in the 21st century. Analysis has shown that this decision is deeply rooted in historical experiences, structural economic constraints, geopolitical calculations, and fundamental questions about the nature of money and state sovereignty.

The key findings can be summarized in five theses:

First: Monetary sovereignty as a non-negotiable core of state power

The Chinese leadership has signaled unequivocally that control over money creation and payment transactions represents a red line that even powerful private actors must not cross. Historical precedents—the halted Ant IPO in 2020, the billion-dollar fines against tech companies, the enforcement of restructurings—demonstrate a consistent course. This position is not irrational. Uncontrolled private money creation could undermine monetary policy transmission, circumvent capital controls, and create systemic instability. The theoretical basis of this position is empirically supported by the Terra crash of 2022, which demonstrated how catastrophic the collapse of inadequately regulated digital currencies can be.

Second: The fundamentally unresolved conflict of objectives between currency internationalization and capital controls

China faces a dilemma that cannot be resolved by technical finesse. To become a truly international currency, the renminbi would need to be freely convertible. This, however, would undermine China's ability to manage capital flows and ensure financial stability. The modest successes in renminbi internationalization—2 to 3 percent of global payments and reserves after years of effort—reflect this structural limitation. Offshore renminbi stablecoins could theoretically offer a middle ground, but they carry the risk of uncontrolled capital flight. Beijing's decision not to take this risk prioritizes stability over expansion—a rationally defensible, albeit costly, choice.

Third: The consolidation of dollar hegemony in the digital age

By rejecting private stablecoins, China is foregoing a potential tool to challenge dollar dominance, while the US is doing the exact opposite with the GENIUS Act. Dollar stablecoins already control 85 percent of the global market, and their institutional adoption is accelerating. Network effects reinforce this dominance: The more users, exchanges, and companies use dollar stablecoins, the more difficult it becomes for alternatives to gain a foothold. In the long term, dollar stablecoins could become the dominant medium for digital cross-border payments, positioning the US currency as centrally in the digital age as it is in the analog age.

Fourth: The growing gap between authoritarian and liberal models of digital currency systems

China pursues a model of complete state control: a state-issued, centrally controlled, and comprehensively monitored digital yuan, flanked by strict bans on private cryptocurrencies and now also private stablecoins. Western democracies, in contrast, seek to contain innovation and market dynamism through regulation without stifling them. These diverging approaches reflect fundamentally different values ​​and political systems. The long-term consequences are difficult to assess. Authoritarian control may guarantee stability in the short term but could inhibit innovation. Liberal approaches may be more dynamic but carry higher risks of instability and abuse.

Fifth: The critical role of regulatory coordination and international standards

In a globalized, interconnected world economy, isolated national regulatory approaches can create gaps and arbitrage opportunities. The European Systemic Risk Board warned of the risks of multi-jurisdictional stablecoin structures without coordinated standards. The Financial Stability Board has put forward recommendations, but their implementation varies. Without stronger international coordination—similar to the Basel Accords in the banking sector—digital currency systems could remain fragmented, inefficient, and unstable.

The strategic implications for various stakeholder groups are significant

Policymakers must navigate the fundamental tension between innovation and control. An overly restrictive stance risks a loss of innovation and global significance. An overly permissive stance risks systemic instability and a loss of control over critical infrastructure. The optimal path likely lies in thoughtful, adaptive regulation that sets clear rules but leaves room for experimental learning. The approaches of Singapore and Hong Kong—regulatory sandboxes, tiered licensing systems, and close cooperation between regulators and industry—may offer viable models.

For business leaders, especially in the fintech and technology sectors, the episode serves as a reminder of the limits of private power. Even the largest, most innovative companies operate within a framework of state sovereignty. Strategic planning must centrally incorporate regulatory risks. At the same time, the diverging regulatory approaches of different jurisdictions offer opportunities: Companies can engage in regulatory shopping and operate in more friendly environments as long as they manage the risks of cross-border compliance.

For investors, this development signals both risks and opportunities. Dollar stablecoins, especially those from well-capitalized, regulated issuers like Circle, are likely to continue to grow. Investments in infrastructure for digital payment systems—blockchain protocols, custody solutions, compliance technology—should offer attractive returns. At the same time, significant risks remain: regulatory uncertainty in many jurisdictions, potential stablecoin collapses, and geopolitical tensions. A diversified, risk-based strategy is indicated.

The long-term significance of China's intervention against private stablecoins will depend on how the tension between state sovereignty and technological innovation develops globally. If authoritarian control models prove superior—be it through greater stability, more effective enforcement of monetary policy objectives, or other advantages—more countries could follow China's example. Conversely, if more liberal models prove more convincing through higher innovation, stronger economic growth, and greater international acceptance, China could be forced to reconsider its position.

The only thing that is certain is that the battle for control over digital money has only just begun. It will shape the coming decades and raise fundamental questions about power, sovereignty, and the organization of modern societies. Beijing's decision in October 2025 was an important move in this game—but the endgame is far from reached.

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Konrad Wolfenstein

I would be happy to serve you and my team as a personal advisor.

You can contact me by filling out the contact form or simply call me on +49 89 89 674 804 (Munich) . My email address is: wolfenstein ∂ xpert.digital

I'm looking forward to our joint project.

☑️ SME support in strategy, consulting, planning and implementation

☑️ Creation or realignment of the digital strategy and digitalization

☑️ Expansion and optimization of international sales processes

☑️ Global & Digital B2B trading platforms

☑️ Pioneer Business Development / Marketing / PR / Trade Fairs