CICC: The potential impact of stablecoins on the financial system

Authors: Lin Yingqi, Zhou Jiming, etc., CICC Dianqing

Milestones in cryptocurrency regulation. Recently, the United States passed the stablecoin bill, becoming the first bill in the United States to establish a regulatory framework for stablecoins, filling the regulatory gap in this area. After only two days, Hong Kong, China also passed a stablecoin bill with similar functions, which will help Hong Kong participate in the competition for global digital financial centers and consolidate its position as an international financial center. Stablecoins are the "bridge" between the traditional financial system and the decentralized financial system (Defi). After the EU, the United States and Hong Kong, China have launched regulatory frameworks for stablecoins, becoming an important step for cryptocurrencies to integrate into the mainstream financial system.

From "wild growth" to gradually moving towards standardized development. This stablecoin-related bill mainly targets the risk points that have appeared in the industry before, including opacity of reserve assets, liquidity management risks, unstable algorithm stablecoin currency value, money laundering and illegal financial activities, and insufficient consumer protection, and formulates a series of regulations. The bills refer to the regulatory framework for traditional financial institutions, but they are more stringent in liquidity management. The statutory reserve ratios for banks in the United States, the EU and Hong Kong, China are all close to 0%, but the reserve ratio required for stablecoins is 100% . We believe that the main reason is that there is already relatively mature and strict supervision for banks and the liquidity of deposits is relatively stable; but stablecoins do not pay interest and transactions are more frequent. Overseas regulation’s positioning of stablecoins is not “ on-chain deposit ”, but “on-chain cash”, thereby building a solid foundation for the decentralized financial system.

How to understand the impact of stablecoins on the financial system? As of the end of May 2025, the total market value of mainstream stablecoins was about US$230 billion, an increase of more than 40 times compared with the scale at the beginning of 2020, with a faster growth rate, but the scale of the mainstream financial system is still relatively small, which is only equivalent to 1% of the US onshore deposits. However, in terms of transaction volume, stablecoins have obvious roles as important payment means and infrastructure in the cryptocurrency system. The annual transaction volume of mainstream stablecoins (USDT and USDC) reaches US$28 trillion, exceeding the annual transaction volume of credit card organizations Visa and Mastercard [2]. With the inclusion of stablecoins in the financial regulatory framework, decentralized finance is also expected to usher in development opportunities and deepen its integration with the traditional financial system.

Lower cost and more efficient international payment methods. According to the World Bank, the average global remittance fee rate as of the third quarter of 2024 was 6.62%, and the United Nations 2030 Sustainable Development Goals require that the fee be reduced to no more than 3%, and the arrival time will take 1-5 working days. The efficiency of traditional financial systems is mainly affected by the SWIFT network that requires multiple transit banks. In contrast, the transaction cost of using stablecoin remittance rates is generally less than 1%, and the time is generally within a few minutes. But it is worth noting that stablecoin payments have not been included in KYC and anti-money laundering supervision before the bill was introduced, which also poses a challenge to the regulation of cross-border capital accounts in emerging markets. Therefore, although the technically efficient use of stablecoins for cross-border payments, this difference actually comes from regulatory differences to some extent, and the compliance cost of stablecoins may also increase as regulatory regulation is regulated. Due to the potential impact on emerging market capital accounts and currency sovereignty, stablecoins also have regulatory restrictions in some countries and regions [3]. In the long run, with the improvement of the regulatory framework, we expect the market share of stablecoins in international payments to increase [4], although this process is still accompanied by industry development and regulatory improvement.

Full reserve requirements limit the function of currency creation: theoretically, 100% reserve assets requirements limit the ability of stablecoin issuing institutions to expand their credit. The process of converting deposits into stablecoins is actually a transfer of bank deposits rather than creation. Therefore, the issuance of stablecoins does not theoretically affect the supply of US dollar money, but when funds continue to flow out of deposits, it may lead to bank balance sheet reduction and the supply of currency; the process of converting other currencies into US dollar stablecoins actually produces the effect of foreign exchange exchange, but this is reflected in the flow of the US dollar across borders or cross-accounts, and does not affect the total US dollar money supply. In addition, lending platforms that use cryptocurrencies as collateral actually play a role similar to bank credit creation, which can increase the scale of "quasi-currency" (i.e. stablecoins) in the decentralized financial system, but do not affect the supply of traditional money. Since the application scenarios involved in the crypto asset financial system are mainly concentrated in the fields of payment and investment, lending is mainly based on speculative demand. As of the end of 2024, the scale of the crypto asset lending platform is about US$37 billion [5], which is relatively small.

The impact on bank deposit disintermediation. The impact of stablecoins on the banking system is mainly reflected in the financial disintermediation effect (i.e., de-mediation). The exchange of deposits into stablecoins may lead to deposit outflows. This effect is similar to the impact of money funds and high-yield bond markets on the banking system. For example, since 2022, deposits flowing to money funds in a high-interest rate environment in the United States is about US$2.3 trillion, becoming one of the triggers of Silicon Valley banking risk events. According to statistics from the Federal Deposit Insurance Company of the United States, as of the end of 2024, about $6 trillion of the approximately $18 trillion in the U.S. bank deposits were traded, and were classified by the U.S. Treasury Department as a deposit with theoretical risk of loss. However, considering that the development of stablecoins has been included in the government regulatory framework, the impact on the financial system is relatively controllable. At the same time, traditional banks have also made some explorations in order to adapt to the development trend of stablecoins and respond to the challenges of deposit diversion, such as JPMorgan Chase, Societe Generale, Standard Chartered Bank, etc.

Undertake government debts and affect the transmission of monetary policy. As of the first quarter of 2025, USDT and USDC issuers held a total of about US$120 billion in U.S. bond reserves. If they were merged as an "economy", they ranked 19th in the overseas US bond-holding economy, between South Korea and Germany's holdings. As the market value of stablecoins rises, we expect demand for U.S. Treasury bonds as reserve assets may increase. However, stablecoins can mainly accept short-term US bonds within three months. We expect that the ability to absorb long-term US bonds is relatively limited, while short-term US bond interest rates are regulated by the central bank's monetary policy, which depends on real economic factors such as inflation and employment. For monetary policy, stablecoin issuers buy US bonds, lowering short-term interest rates, making the central bank need to recover currency hedging; in the long run, the attraction of stablecoins to deposits may lead to a trend of financial disintermediation, and the migration of financing from the traditional financial system to the decentralized financial system may also weaken the effect of central bank monetary policy regulation.

The transmission of crypto asset price fluctuations to the financial market. From the perspective of currency creation, lending behaviors within the decentralized financial system have realized the creation function of "quasi-currency", especially when purchasing tokenized stock assets through stablecoins, funds will flow directly into/out of the stock market; from the perspective of market sentiment, cryptocurrency prices fluctuate greatly, affecting stock market expectations. Historically, the Nasdaq index and Bitcoin prices show a certain correlation; targets related to crypto assets and stablecoins in the stock market, such as crypto asset exchanges, financial institutions, etc., affect stock prices through changes in fundamentals.

The potential reconstruction force of the international monetary order. For the US dollar, the impact of stablecoins is more "contradictory": on the one hand, since the current market value of 99% of fiat stablecoins is pegged to the US dollar, the development of stablecoins seems to be able to consolidate the dominance of the US dollar in the global financial system; on the other hand, the international background of the development of stablecoins and crypto assets is actually based on the rising risk of geopolitical restrictions and weakened fiscal discipline in the financial field under the trend of anti-globalization, and the demand for de-dollarization in some economies. Therefore, the highly pegged US dollar is not only a mapping of the US dollar on the chain of global financial dominance, but also a "bridge" for the global financial system to lead from US dollar to more diversified new orders. This may explain why the rise and popularity of crypto asset prices in recent years have also been accompanied by the intensification of the trend of anti-globalization. In addition, the EU and Hong Kong, China have also opened up space for the issuance of non-USD stablecoins and competed for the dominance of the US dollar in the stablecoin field. In the long run, whether the US dollar's status is to continue to strengthen under the guidance of a new regulatory framework, or to be challenged by other currencies and crypto assets themselves, remains to be continued to be observed in the development of the industry. For emerging economies, because stablecoins are competitive for local currencies, if local residents and corporate departments use stablecoins to settle, the local currency will actually be converted into US dollars, resulting in currency depreciation and inflation. Therefore, for financial security reasons, multiple economies have introduced restrictions on the use of stablecoins.

The inspiration for internationalization of currency. For the Hong Kong dollar, by standardizing the issuance of stablecoins, especially the Hong Kong dollar stablecoin , it will help enhance the influence of the Hong Kong dollar in cross-border payments, crypto assets and other fields, enhance the international competitiveness of the Hong Kong financial industry and the Hong Kong dollar, and consolidate the status of China's Hong Kong international financial center. At the same time, Hong Kong can use its own financial market advantages and institutional innovation brought by the Stable Coin Act to provide a "test field" for the internationalization of other currencies. The bill allows the issuance of non-USD stablecoins, which can expand the use of non-USD currencies in international payment, settlement, investment and financing scenarios, and accelerate the internationalization process . In short, the Hong Kong Stable Coin Act has a profound impact on the internationalization of the currency, but this process still requires continuous attention to financial stability risks and timely optimization and adjustment of relevant policies.

risk

The development risks of the cryptocurrency industry, the impact of stablecoins on the traditional financial system exceeds expectations, and the promotion of regulatory policies is lower than expected.

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Stablecoin Act: Milestones for cryptocurrency regulation

The EU, the United States, and Hong Kong have successively established stablecoin regulatory frameworks

Stable coins are cryptocurrencies with currency values ​​anchoring specific assets (usually fiat currencies), a bridge connecting the decentralized financial system (Defi) and the traditional financial system, and an important infrastructure for the decentralized financial system (Defi). Recently, the United States passed the stablecoin bill, becoming the first bill in the United States to establish a regulatory framework for stablecoins, filling the regulatory gap in this area. After only two days, Hong Kong, China also passed a stablecoin bill with similar functions, which will help Hong Kong participate in the competition for global digital financial centers and consolidate its position as an international financial center. Stablecoins are the "bridge" between the traditional financial system and the decentralized financial system (Defi). After the EU, the United States and Hong Kong, China have launched regulatory frameworks for stablecoins, becoming an important step for cryptocurrencies to integrate into the mainstream financial system.

Figure 1: Characteristics of crypto assets that begin to take shape and financial systems

Source: CICC Research Department

Figure 2: Principles of mainstream stablecoins

Source: Tether, MakerDao, CICC Research Department

Chart 3: Dollar stablecoins based on high liquidity assets dominate among stablecoins

Note: The data is as of May 31, 2025
Source: CoinGecko, CICC Research Department

From "wild growth" to gradually moving towards standardized development

Previously, there have been many major risks and regulatory events in the stablecoin field, including the collapse of TerraUSD (UST) in 2022, the unclear underlying assets of Tether (USDT) have led to regulatory restrictions in the EU in 2024, and the New York financial regulation requires Binance USD ( BUSD ) to stop minting, etc. The stablecoin-related bills in the United States and Hong Kong, China mainly target the risk points that have appeared in the industry before, including opaque reserve assets, liquidity management risks, unstable algorithm stablecoin currency value, money laundering and illegal financial activities, and insufficient consumer protection, and formulate a series of regulations, including:

1. In terms of liquidity, stablecoin reserve assets are required to be 100% anchored to fiat currency or high-liquidity assets, including cash, demand deposits, short-term US Treasury bonds, etc. The reserve assets need to be isolated from operating funds to prevent misappropriation;

2. In terms of access qualifications, issuing institutions are required to obtain regulatory license authorization and set a minimum capital entry threshold;

3. Require stablecoins to be included in the existing anti-money laundering regulatory framework and set customer identity identification requirements;

4. In terms of consumer protection, it is required to ensure that users can redeem them at face value, and that customers' funds have priority repayment rights when bankruptcy;

5. Clearly prohibit the payment of interest on stablecoins to reduce the impact on the traditional financial system.

In fact, the above stablecoin bills refer to the regulatory framework for traditional financial institutions and set up similar requirements for licenses, capital, liquidity management, anti-money laundering, consumer protection, etc., but the liquidity management is more stringent. The statutory reserve ratios for banks in the United States, the EU and Hong Kong, China are all close to 0%, but the reserve ratio required for stablecoins is 100%. We believe that the main reason is that there is already relatively mature and strict supervision for banks, and bank customer deposits are generally due to the savings and physical operation needs of residents and enterprises, and banks also pay interest on deposits, so deposit liquidity is relatively stable; however, stablecoins require no interest payment, transactions are more frequent, and liquidity is unstable. Moreover, as an important infrastructure of decentralized finance (Defi), stablecoins anchor fiat currencies such as the US dollar, also need stronger reserve assets as the underlying support. To sum up, overseas regulation’s positioning of stablecoins is not “on-chain deposit”, but “on-chain cash” (although the issuer is a commercial institution, which is different from the central bank’s digital currency), thereby building a solid foundation for the decentralized financial system.

Figure 4: Stablecoin regulatory framework tends to be perfect

Source: US Senate, Hong Kong Monetary Authority, EU Parliament, CICC Research Department

How to understand the impact of stablecoins on the financial system?

In terms of scale, as of the end of May 2025, the total market value of mainstream stablecoins was about US$230 billion, an increase of more than 40 times compared with the scale at the beginning of 2020, with a relatively fast growth rate. However, compared with the mainstream financial system, the scale is still smaller, such as US dollar deposits (about 19 trillion US dollars onshore deposits [6]), US Treasury bonds (about 37 trillion US dollars [7]), which are also smaller than mainstream cryptocurrencies (the market value of Bitcoin is about 2 trillion US dollars [8]). However, in terms of transaction volume, stablecoins have a significant role as an important payment means and infrastructure for the cryptocurrency system. According to institutions, the annual transaction volume of mainstream stablecoins (USDT and USDC) reaches US$28 trillion [9], exceeding the annual transaction volume of credit card organizations Visa and Mastercard [10] (about US$26 trillion, although the large number of high-frequency transactions in stablecoins may cause this data to be incomparable); this data is also higher than the transaction volume of Bitcoin in 2024 (US$19 trillion). With the inclusion of stablecoins in the financial regulatory framework, decentralized finance is expected to usher in development opportunities and deepen its integration with the traditional financial system, which also brings new challenges and risks to the global financial system.

1. Lower cost and more efficient international payment methods

According to the World Bank, the average global remittance fee rate as of the third quarter of 2024 was 6.62%, and the United Nations 2030 Sustainable Development Goals require that the fee be reduced to no more than 3%, and the arrival time will take 1-5 working days. The efficiency of traditional financial systems is mainly affected by the SWIFT network that requires multiple transit banks. In contrast, the transaction cost of using stablecoin remittance rates is generally less than 1%, and the time is generally within a few minutes. But it is worth noting that stablecoin payments have not been included in KYC and anti-money laundering supervision before the bill was introduced, which also poses a challenge to the regulation of cross-border capital accounts in emerging markets. Therefore, although the technically efficient use of stablecoins for cross-border payments, this difference actually comes from regulatory differences to some extent, and the compliance cost of stablecoins may also increase as regulatory regulation is regulated. Due to the potential impact on emerging market capital accounts and currency sovereignty, stablecoins also have regulatory restrictions in some countries and regions. In the long run, with the improvement of the regulatory framework, we expect the market share of stablecoins in international payments to increase, although this process is still accompanied by industry development and regulatory improvement.

Figure 5: Comparison of traditional cross-border payments and stablecoin payment models

Source: SWIFT, CICC Research Department

2. Full reserve requirement limits currency creation function

In theory, 100% of reserve assets requirements limit the ability of stablecoin issuing institutions to expand their credit. The process of converting deposits into stablecoins is actually a transfer of bank deposits rather than creation. Therefore, the issuance of stablecoins does not theoretically affect the supply of US dollar currency, specifically:

1. If the reserve assets are used for deposits, the money supply remains unchanged, and the residents' deposits are converted into equal amounts of stablecoins and interbank deposits; if the reserve assets are used to purchase treasury bonds held by residents, enterprises and non-bank institutions, the money supply remains unchanged, and the market circulation of treasury bonds is converted into stablecoins. However, when funds continue to flow out of deposits, it may lead to bank balance sheet reduction and money supply decrease.

2. The US dollar stablecoin has an attractive effect on other currencies. The process of converting other currencies into US dollar stablecoins actually produces the effect of foreign exchange conversion, but this is reflected in the flow of the US dollar across borders or cross-accounts, and does not affect the total US dollar currency supply.

3. Lending platforms that use cryptocurrencies as collateral actually play a role similar to bank credit creation, which can increase the scale of "quasi-currency" (i.e. stablecoins) in the decentralized financial system, but do not affect the supply of traditional money. Since the application scenarios involved in the crypto asset financial system are mainly concentrated in the fields of payment and investment, there are fewer lending scenarios. As of the end of 2024, the scale of the crypto asset lending platform is about US$37 billion, which is relatively small.

Figure 6: Mechanism of influence of stablecoins on traditional currency supply

Source: US Treasury Department, CICC Research Department

Chart 7: Impact of stablecoin issuance on money supply

Source: CICC Research Department

3. Impact on bank deposit disintermediation

The impact of stablecoins on the banking system is mainly reflected in the financial disintermediation effect (i.e., de-mediation), and the exchange of deposits into stablecoins may lead to deposit outflows. Although stablecoin issuing institutions purchase assets such as treasury bonds and reverse repurchases will cause deposits to return to banks, in the long run, it will lead to the replacement of bank liabilities from savings deposits to interbank liabilities, or may cause banks to reduce their holdings of bonds, resulting in pressure on bank interest rate spreads and erosion of profits. This effect is similar to the impact of money funds and high-yield bond markets on the banking system. For example, since 2022, deposits flowed to money market funds in a high-interest rate environment in the United States, becoming one of the triggers of Silicon Valley banking risk events.

From the perspective of the stablecoin bill, the US regulatory bill clearly requires that stablecoins do not pay interest, which can reduce the attraction of stablecoins to deposits to a certain extent; the vast majority of deposits are used for daily fund clearing, which is sticky; although the scale of stablecoins has grown rapidly, it is only about 1% compared to the scale of bank deposits in the United States. Assuming that the scale of stablecoins maintains an annualized growth rate of 15% in the past three years, by 2030, the attraction of deposits will be about US$200-300 billion, accounting for about 1% of deposits [11], with a relatively limited impact. But in the long run, there are two risks:

1. The development speed of stablecoins exceeds expectations. For example, the market forecast cited by US Treasury Secretary Becente believes that by 2028, the scale of stablecoins will increase from the current US$200-300 billion to US$2 trillion, implying an 8-fold growth rate within three years, significantly higher than the annualized growth rate of 15% in the past three years;

2. It is more convenient for stablecoins to obtain investment returns through indirect forms, such as investing in Tokenized MMF (tokenized money market fund), RWA (real-world assets that can generate returns), Staking Derivatives (staking derivatives), etc., making stablecoins that do not pay interest generate returns and their attractiveness to deposits increases.

According to statistics from the Federal Deposit Insurance Company of the United States, as of the end of 2024, about $6 trillion of the approximately $18 trillion in the US banks were transactional deposits, which were classified by the US Treasury Department as a theoretical deposit with the risk of loss. However, we believe that considering that the development of stablecoins has been included in the government regulatory framework, the impact on the financial system is also included in the scope of policy timely decisions, making the impact relatively controllable.

At the same time, traditional banks have also made some explorations in order to adapt to the development trend of stablecoins and respond to the challenges of deposit diversion. For example, JPM Morgan Chase launched the US dollar tokenization, serving cross-border payments and securities transactions for institutional customers; Societe Generale launched the US dollar stablecoin USD CoinVertible and the euro stablecoin EUR CoinVertible for institutions and investors; Standard Chartered Bank established a joint venture to issue Hong Kong dollar stablecoins and applied for a Hong Kong Monetary Authority license, etc.

Figure 8: Deposits facing the risk of churn are mainly transaction-type interest-free deposits

Source: FDIC, CICC Research Department

Figure 9: U.S. deposit disintermediation in high interest rate environments

Source: Federal Reserve, FDIC, CICC Research Department

4. Absorb government debt and affect monetary policy transmission

Stablecoin issuers become buyers of US bonds. USDT and USDC reserve assets are mainly short-term US Treasury bonds and reverse repurchase agreements, and short-term US Treasury bonds account for 66%/41% of USDT/USDC reserve assets respectively. As of the first quarter of 2025, USDT and USDC issuers held a total of about US$120 billion in U.S. bond reserves. If they were merged as an "economy", they ranked 19th in the overseas US bond-holding economy, between South Korea and Germany's holdings.

How to understand the role of stablecoins in taking over government debt? As the market value of stablecoins rises, we expect demand for U.S. Treasury bonds as reserve assets may increase. If the market forecast cited by US Treasury Secretary Becente believes that the scale of stablecoins will rise from the current US$200-300 billion to US$2 trillion by 2028, exceeding Japan's largest US bond holding region. But it is worth noting that stablecoins can mainly accept short-term US bonds within three months. We expect that the ability to absorb long-term US bonds is relatively limited, while short-term US bond interest rates are regulated by the central bank's monetary policy, depending on real economy factors such as inflation and employment. The central bank can hedge by reducing or increasing base currency injections.

Impact on monetary policy transmission. As mentioned earlier, stablecoin issuers buy US bonds, lowering short-term interest rates, which makes the central bank need to recover currency hedging; in the long run, the attraction of stablecoins to deposits may lead to financial disintermediation, and the migration of financing from the traditional financial system to the decentralized financial system may also weaken the effect of central bank monetary policy regulation.

Chart 10: USDT and USDC reserve assets are mainly short-term Treasury bonds and reverse repurchases

Note: As of the first quarter of 2025

Source: Tether, Circle, CICC Research Department

Chart 11: In the long run, stablecoins may undertake some demand for U.S. Treasury bonds

Note: The scale of US Treasury holdings in 2030 comes from market forecasts cited by US Treasury Secretary Bescent

Source: U.S. Treasury Department, Tether, Circle, CICC Research Department

Figure 12: Mainland China holds US Treasury Decline in recent years

Source: US Treasury Department, CICC Research Department

5. Conduction of crypto asset price fluctuations to financial markets

The impact of stablecoins on the financial market is mainly in three aspects:

1. From the perspective of currency creation, as mentioned above, lending behaviors within the decentralized financial system realize the creation function of "quasi-money", especially when purchasing tokenized stock assets through stablecoins, funds will flow directly into/out of the stock market;

2. From the perspective of market sentiment, cryptocurrency prices fluctuate greatly, affecting stock market expectations. Historically, the Nasdaq index and Bitcoin prices showed certain correlation;

3. Indicators related to crypto assets and stablecoins in the stock market, such as crypto asset exchanges, financial institutions, etc., affect stock prices through changes in fundamentals.

Chart 13: The price of cryptocurrencies correlates with the Nasdaq Index

Source: Bloomberg, China Financial Research Department

6. The potential reconstruction force of the international monetary order

For the US dollar, the impact of stablecoins is more "contradictory":

On the one hand, since 99% of fiat stablecoins are currently pegged to the US dollar, the development of stablecoins seems to be able to consolidate the US dollar's dominance in the global financial system;

But on the other hand, the international background of the development of stablecoins and crypto assets is actually based on the increasing risk of geopolitical restrictions and weakened fiscal discipline in the financial field under the trend of anti-globalization, and the demand for de-dollarization in some economies.

Therefore, the highly pegged US dollar is not only a mapping of the US dollar on the chain of global financial dominance, but also a "bridge" for the global financial system to lead from US dollar to more diversified new orders. This may explain why the rise and popularity of crypto asset prices in recent years have also been accompanied by the intensification of the trend of anti-globalization. In addition, the EU and Hong Kong, China have also opened up space for the issuance of non-USD stablecoins and competed for the dominance of the US dollar in the stablecoin field. In the long run, whether the US dollar's status is to continue to strengthen under the guidance of a new regulatory framework, or to be challenged by other currencies and crypto assets themselves, remains to be continued to be observed in the development of the industry.

For emerging economies, because stablecoins are competitive for local currencies, if local residents and corporate departments use stablecoins to settle, the local currency will actually be converted into US dollars, resulting in currency depreciation and inflation. Therefore, for financial security reasons, multiple economies have introduced restrictions on the use of stablecoins.

Chart 14: The US dollar dominates the major financial systems

Note: The data is as of the end of 2024
Source: Brookings, U.S. Treasury, CICC Research Department

7. Inspiration to internationalization of currency

For the Hong Kong dollar, by standardizing the issuance of stablecoins, especially the Hong Kong dollar stablecoin, it will help enhance the influence of the Hong Kong dollar in cross-border payments, crypto assets and other fields, enhance the international competitiveness of the Hong Kong financial industry and the Hong Kong dollar, and consolidate the status of China's Hong Kong International Financial Center. At the same time, Hong Kong can take advantage of its own financial market advantages and institutional innovation brought by the Stable Coin Act to provide a "test field" for the internationalization of other currencies. The bill allows the issuance of non-USD stablecoins, which can expand the use of non-USD currencies in international payment, settlement, investment and financing scenarios, and accelerate the internationalization process. In short, the Hong Kong Stablecoin Act has a profound impact on the internationalization of currency, but this process still requires continuous attention to financial stability risks and timely optimization and adjustment of relevant policies.

Figure 15: The proportion of RMB in global foreign exchange reserves has room for improvement

Source: IMF, Barry Eichengreen, CICC Research Department

Risk warning

1. Risks in the development of the cryptocurrency industry: At present , the regulation of the cryptocurrency industry is in its infancy, and there is still great uncertainty in the development of the industry. Potential risks include opaque reserve assets, liquidity management risks, unstable algorithmic stable currency currency value, money laundering and illegal financial activities, and insufficient consumer protection.

2. The impact of stablecoins on the traditional financial system exceeds expectations: the cryptocurrency industry is developing at a faster pace, and the development of stablecoins may have an impact on the traditional financial system and affect the business development of traditional financial institutions.

3. The regulatory policy is not as expected: The current stablecoin regulatory framework still needs to be improved, and it will take time for regulatory policies to be launched to be implemented. There is a risk that the policy will not be as expected in the future.