[Perspective] How is China Disrupting the Dominance of the US Dollar Stablecoin? The Ultimate Chess Match of Renminbi and Hong Kong Dollar Stablecoins!

Opinion articles present diverse views and do not represent the stance of WEB3+

The Battle for the Throne of Digital Currency

400 years ago, Spanish silver conquered global trade, establishing a monetary hegemony that dominated the world! Today, stablecoins, this “digital cash,” have surged to a market value of $200 billion, revolutionizing global transactions. Dollar-backed stablecoins have taken the lead, capturing 80% of the market! China, not to be outdone, is challenging the US dollar’s digital throne with its own digital currency solutions: the Chinese Renminbi stablecoin and Hong Kong Dollar stablecoin!

As a new investor in Hong Kong or Taiwan, you may wonder: How does China’s strategy disrupt the market? How will this digital currency war shape the future? Follow us as we explore the past and future of this ultimate chess game! This article is for informational reference only and not investment advice.

The Challenge of Dollar Stablecoins: Why Do We Need the Renminbi and Hong Kong Dollar Stablecoins?

Dollar-backed stablecoins (such as USDT, USDC) dominate 80% of market transactions, but they pose three major problems for China and Hong Kong:

• Transactions are controlled by the U.S.: Companies using dollar-backed stablecoins may be subject to U.S. regulations (such as OFAC sanctions). If accounts are frozen due to political reasons, transactions will stop. It’s like using someone else’s bank card that could be locked at any time.
• Exchange issues and high costs: When a Hong Kong company receives USDT, it must first exchange it for U.S. dollars and then convert it into Hong Kong dollars, incurring a transaction fee of 0.7-1% and waiting 2-3 days. For example, when an e-commerce company in Hong Kong receives USDT for goods, it faces high costs and long waiting times when converting USDT into Hong Kong dollars to pay rent.
• The Renminbi is hard to go global: The U.S. dollar accounts for 58% of global foreign exchange reserves ([International Monetary Fund – Currency Composition]), while the Renminbi only accounts for 2.5%. Chinese companies are often forced to use U.S. dollars, which increases transaction costs and exchange rate risks. It’s like wanting to use Hong Kong dollars to buy something, but the store only accepts U.S. dollars.

The Renminbi stablecoin and the Hong Kong Dollar stablecoin can solve these issues. The Renminbi stablecoin enables faster and cheaper “Belt and Road” transactions; the Hong Kong Dollar stablecoin, relying on Hong Kong’s international trust, attracts global users and helps reduce U.S. control. But how can these two stablecoins gain global acceptance? Let’s look to history for answers.

Historical Lessons: The Secrets of Resource and Network Hegemony

How did monetary hegemony arise? Let’s look at three historical stories:

• 400 years ago, Spain controlled South American silver mines, producing 80% of the world’s silver. Through Manila galleons, Spain spread silver coins, and even the Ming Dynasty of China used them for taxation.
• In the 1800s, Britain promoted the pound through textile and railway technology, using the London banking system and colonies, backed by gold to guarantee its value.
• Since the 1900s, the U.S. has used oil transactions and military power to ensure that the dollar accounts for 58% of global foreign exchange reserves.

What is the secret? Control of key resources (like silver, machinery, and oil) and trading networks (like galleons and colonies). Today, what resources and networks can China use to build a stablecoin hegemony?

China’s Three Power Moves: Rare Earths, the Belt and Road Initiative, and Hong Kong Blockchain Finance

We suggest that China can use three strategies to promote the Renminbi stablecoin and the Hong Kong Dollar stablecoin, challenging the dollar-backed stablecoin hegemony. Each strategy focuses on controlling key resources or trading networks:

Rare Earth Trading:

• Key Resource: According to the 2024 International Energy Agency (IEA) report, China controls 90% of global rare earth refining, supplying core materials for electric vehicles and AI chips, similar to Spain’s silver.
• Why it works: Rare earths are crucial for technology. Offering discounts for settlements using stablecoins attracts buyers, increasing the usage of stablecoins.
• How to do it: If settlements are made with Renminbi stablecoins, a 0.5-1% discount can be offered. For example, a Malaysian company purchasing rare earths with Renminbi stablecoins would pay just 0.1% transaction fees, much lower than the 0.7% cost of using U.S. dollars. The Hong Kong Dollar stablecoin can assist by attracting buyers who prefer not to use Renminbi.

The Belt and Road Initiative:

• Trading Network: In 2024, the Belt and Road Initiative (BRI) reached a trade volume of $2.5 trillion, covering over 140 countries, similar to Spain’s galleon network.
• Why it works: The massive trade volume provides an application scenario for stablecoins, and low-cost settlements increase circulation.
• How to do it: The Renminbi stablecoin is primarily used for settling large projects under the BRI. For example, the Pakistan BRI port project could use Renminbi stablecoins to pay Chinese companies with a 0.1% transaction fee. Hong Kong Dollar stablecoins would serve smaller transactions in Hong Kong.

Hong Kong Blockchain Finance:

• Trading Network: According to the 2024 Hong Kong Monetary Authority report, Hong Kong is the world’s third-largest financial center, handling 4% of cross-border payments. Its international network connects Asia with Europe and America, similar to the global influence of London banks, offering efficient settlements (real-time payments) and high trust (linking with the currency peg system).
• Why it works: As the third-largest global financial center, Hong Kong has a large number of trading users and an international network. By introducing traditional financial products (like bonds and trade financing) onto the blockchain and incentivizing the use of Hong Kong Dollar stablecoins for settlement, it can attract global users and significantly boost the usage of Hong Kong Dollar stablecoins.
• How to do it: International investors could use Hong Kong Dollar stablecoins to buy digital bonds, earning stable returns without converting to USDT. Hong Kong businesses could use Hong Kong Dollar stablecoins to pay Southeast Asian suppliers, with a transaction fee of just 0.3%.

Summary: These Three Power Moves Using Rare Earths (Key Resources) and the Belt and Road Initiative and Hong Kong’s Financial Network (Trading Networks) Can Help Promote the Renminbi and Hong Kong Dollar Stablecoins, Replicating the Historical Model of Currency Hegemony.

How Renminbi and Hong Kong Dollar Stablecoins Support China’s Strategy

How do Renminbi and Hong Kong Dollar stablecoins work together to support China’s three key strategies? Below are their roles and how they complement each other:

Renminbi Stablecoins: Driving Rare Earth and Belt and Road Trade:

• Why used in rare earths and the Belt and Road Initiative? Backed by China’s economy (2024 GDP about $18 trillion), Renminbi stablecoins are suitable for large-scale trade settlements. Offering 0.5-1% discounts promotes the internationalization of the Renminbi, reducing reliance on the U.S. dollar (58% of foreign exchange reserves). Rare earths and the Belt and Road Initiative need a strong economic backbone, and the Renminbi stablecoin is the best fit.
• Example: A Pakistani company uses Renminbi stablecoins to pay for the Belt and Road railway project, with a 0.1% transaction fee. A Malaysian company buys rare earths with Renminbi stablecoins, saving 0.7% on U.S. dollar settlement fees.
• Limitations: The Renminbi only accounts for 2.5% of foreign exchange reserves, and Western countries may resist its use due to political reasons.

Hong Kong Dollar Stablecoins: Promoting Hong Kong Blockchain Finance:

• Why used in Hong Kong Blockchain Finance? As the third-largest financial center globally, Hong Kong has a wide international trading network and handles 4% of cross-border payments. Its currency peg system (HKD/USD 7.75-7.85) ensures currency stability, and an independent judiciary system enhances international trust. Once stablecoin regulations are perfected by 2025, using Hong Kong Dollar stablecoins for settling digital bonds and trade finance with just 0.3% transaction fees and real-time payments will attract global investors and businesses.
• Example: International investors use Hong Kong Dollar stablecoins to buy Hong Kong digital bonds, enjoying stable returns without needing to convert to USDT. Hong Kong businesses use Hong Kong Dollar stablecoins to pay suppliers in Southeast Asia, with a 0.3% transaction fee.
• Limitations: Hong Kong’s economy is small (2024 GDP about $400 billion), and Hong Kong Dollar circulation is limited (foreign exchange reserves 0.1%), making it unsuitable for large-scale trade.

Complementary Relationship: Jointly Disrupting Hegemony:

Renminbi stablecoins mainly target rare earths and large Belt and Road trades, providing transaction scenarios. Hong Kong Dollar stablecoins promote blockchain finance and attract international financial users. Funds move between the two, amplifying their influence. Hong Kong Dollar stablecoins, benefiting from Hong Kong’s neutrality (independent judiciary), avoid the political resistance to the Renminbi and attract Western users, indirectly supporting the Belt and Road and rare earth trade.

Conclusion: The New Digital Currency King?

China is using rare earths, the Belt and Road Initiative, and Hong Kong Blockchain Finance to promote the Renminbi and Hong Kong Dollar stablecoins, challenging the 80% market hegemony of the U.S. dollar! The Renminbi targets trade, while the Hong Kong Dollar leads financial innovation. Together, they are rewriting the future of money. History teaches us that resources and networks determine victory. Will China be the new king? New investors, explore the stablecoin trend and ride the digital wave! Who will dominate? Leave a comment, share with friends, and let’s debate!

Opinion articles present diverse views and do not represent the stance of WEB3+