Wang Yongli: The profound impact of U.S. stablecoin legislation exceeds expectations
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Wang Yongli: The profound impact of U.S. stablecoin legislation exceeds expectations
Cryptocurrencies cannot become the true currency of the crypto world.
Navigating Web3 tides with focused insightsAuthor: Wang Yongli, China Economic Times
Editor's Note: Just before the implementation of Hong Kong's Stablecoin Ordinance, the U.S. Congress swiftly passed the "Stablecoin Innovation and Leadership through Technology Act," which was signed into effect by presidential executive order. The immediate enactment of this act has drawn significant global attention—what are America's strategic intentions? Will it accelerate the restructuring of global capital flows? Can it drive the evolution of international monetary rules and thereby influence the transformation of the global financial governance system? How will foundational standards such as blockchain play out in great-power competition? To address these complex questions, China Economic Times invited experts in the field to demystify stablecoins and analyze the logical implications of the U.S. Stablecoin Act for all stakeholders.
Core Insights
Legislation on stablecoins and crypto assets will enable widespread participation from banks and other financial institutions. By connecting them with various public blockchains, clients can directly convert off-chain fiat deposits into on-chain tokens or vice versa, reducing the extra steps and costs currently incurred when non-bank payment entities handle conversions between fiat and stablecoins. This will make regulated financial channels a more convenient bridge between the crypto world and the real economy, replacing stablecoins in this role.
Under pressure from former President Trump, the "Stablecoin Innovation and Leadership through Technology Act" (shortened to "U.S. Stablecoin Act") was signed into law by the President on July 18, just ahead of the August 1 effective date of Hong Kong’s Stablecoin Ordinance. This development has triggered intense global discussion and is widely interpreted as a new front in the battle for global monetary power. It is expected to prompt more countries and regions to accelerate their own fiat-backed stablecoin legislation, leading to an explosion of new stablecoins and large-scale expansion that could reshape the international monetary system and financial market rules.
Fiat-backed stablecoins, first introduced by U.S.-based Tether in early 2015 with the launch of the dollar-pegged "USDT," have now been operating for over ten years, spurring rapid growth of other dollar-pegged stablecoins like "USDC" and others. By June 2025, the market capitalization of dollar-backed stablecoins exceeded $250 billion, accounting for over 95% of the total stablecoin market. However, regulatory oversight of stablecoins is only just beginning. The rushed introduction of related legislation still contains areas needing refinement, especially regarding conceptual understanding of stablecoins and crypto assets, which requires breaking free from conventional thinking and adopting a broader, more strategic perspective.
The Most Prominent Feature of Stablecoins Is Being "On-Chain Cryptocurrencies"
A fiat-backed stablecoin is backed by reserves denominated in a specific fiat currency and maintains a stable exchange rate with that currency, but must be converted into a form usable within borderless, global blockchain systems—i.e., into cryptocurrency. Unlike ordinary non-cash digital forms of money (such as funds held in deposit accounts or e-wallets), stablecoins belong to a special category of "on-chain cryptocurrencies."
On-chain cryptocurrencies are no longer physical banknotes or coins; they appear only as strings of characters—representing both the owner’s registered address on the blockchain and their account address (registration equals account opening). Behind these addresses lie elements including identity information, private keys, account balances, and smart contracts. Blockchain platforms use distributed ledger technology to encrypt and protect every aspect of account operations, ensuring authenticity, transparency, and security—marking a fundamental divergence from the form and operation of traditional fiat currencies. Therefore, discussing stablecoins outside the context of blockchain is impractical and misses the essence.
The Fundamental Use Case of Stablecoins Is the "On-Chain Crypto World"
Since 2009, the integration of blockchain and cryptographic technologies has given rise to native on-chain crypto assets—the Bitcoin (Bitcoin) and its blockchain—followed by the Ethereum blockchain and its native asset Ether (Ether). This further catalyzed a wave of derivative crypto assets launched via initial coin offerings (ICOs), raising Bitcoin or Ether and circulating on blockchains (commonly known as "altcoins"), along with crypto asset trading platforms serving these assets. These enable borderless, decentralized, 7×24 global trading, forming what is known as the "on-chain crypto world," which continues to evolve rapidly. The "on-chain crypto world" stands as one of humanity’s most significant innovations using blockchain and cryptography in the 21st century and will profoundly impact society—warranting close attention.
However, developing and operating blockchains and transacting crypto assets require substantial off-chain investment in fiat currency. If income is limited to volatile assets like Bitcoin without easy conversion back to fiat, the needs of the crypto ecosystem cannot be met. Additionally, without attracting fiat investment, the value of crypto assets cannot be fully realized. Especially given the extreme volatility of Bitcoin and similar assets against fiat currencies like the U.S. dollar, using them directly to purchase real-world goods is extremely difficult. These factors created the need for fiat-backed stablecoins—a unique bridge linking off-chain fiat currencies with on-chain native crypto assets. Thus, the "on-chain crypto world" is the primary source of demand and the core application scenario for fiat-backed stablecoins.
Fiat-Backed Stablecoins Strongly Drive the Development of the On-Chain Crypto World
Despite the emergence of native and derivative on-chain crypto assets such as Bitcoin and even non-fungible tokenized digital twins (NFTs) through the deep integration of blockchain and cryptographic technologies, without full participation from fiat currencies, these assets remain largely confined to the on-chain crypto world, limiting their value realization and real-world impact. The advent of fiat-backed stablecoins has created a value conduit between the crypto world and the real economy, meeting the need for continuous 7×24 global on-chain transactions and settlements, significantly supporting the growth of the crypto ecosystem. Moreover, as real-world assets, fiat-backed stablecoins pioneered the successful case of real-world asset tokenization (RWA), catalyzing the emergence of many more RWA products.
However, because stablecoins have emphasized decentralization and resisted regulation, they lacked legal recognition and regulatory protection. This led to serious problems during their development, preventing banks and other financial institutions from active participation and severely constraining the growth of both stablecoins and the broader crypto world. Now, with the legalization of fiat-backed stablecoins and the entire crypto asset sector, legitimacy has been established, paving the way for massive involvement from banks and other financial institutions. This will bring vast quantities of standardized financial assets onto blockchains via RWA, accelerating the on-chain crypto world’s development into an irreversible trend—this is arguably the most significant contribution of U.S. stablecoin legislation.
Fiat-backed stablecoins both respond to and propel the development of the crypto world, creating a mutually reinforcing relationship. Understanding stablecoins solely within the narrow context of monetary finance, rather than within the broader framework of the on-chain crypto world, leads to incomplete and inaccurate comprehension.
Crypto Assets Cannot Become True Money in the Crypto World
Despite being commonly referred to as "coins" (termed "cryptocurrencies" or "digital currencies"), native and derivative on-chain crypto assets like Bitcoin and Ether have proven in practice not to function as real money, but rather as a new type of encrypted (digital) asset. Precisely for this reason, the emergence and support of fiat-backed stablecoins are necessary.
Money has existed in human society for thousands of years, evolving continuously in form and function—from natural commodity money (e.g., seashells), to standardized metal coins (e.g., copper, gold, silver), then to metallic standard paper money, and finally to pure credit money detached from any physical backing, where the money supply adjusts in line with the total value of tradable wealth (moving from tangible to intangible, highlighting its essence). This evolution improves efficiency, reduces costs, strengthens risk control, and enhances the performance of money’s functions.
This evolution is determined by money’s fundamental nature: its essential attribute is value measurement (divisible and aggregatable), its core function is medium of exchange (a tool for transferring and settling value), and its ultimate expression is a highly liquid value token (a transferable claim on value requiring the highest level of trust within its circulation domain). These three elements are indispensable for a complete understanding of money.
In particular, as a measure of value, money fundamentally requires singularity and relative stability in value. This necessitates that the money supply must adjust flexibly and dynamically in response to changes in the total value of tradable wealth. Consequently, any physical commodity previously used as money—such as shells, bronze, gold, or silver—must exit the monetary stage because their supply cannot keep pace with the infinite growth of tradable wealth, returning instead to their original role as tradable commodities. Attempts today to revive the gold standard or to designate new commodities with limited supply (e.g., rare earths) as money or monetary anchors violate monetary principles and are bound to fail. This is why the Bretton Woods system (which sought to return international money to the gold standard) inevitably collapsed, and why Bitcoin (with its fixed, unadjustable total and periodic issuance) and non-fiat-pegged stablecoins cannot succeed as real money. True money must脱离 (detach) from any specific physical commodity and become purely fiat-based credit money, revealing its essential nature.
Here, it is crucial to distinguish between money’s carrier or form and money itself. Shells, coins, and paper bills are merely carriers or representations of money, not money per se. The form and operation of money are advancing toward intangibility, digitization, and intelligence. The share of cash and cash payments in total money and transaction volumes continues to decline. Money is increasingly represented as deposits (identified by account numbers) and deposit transfers/book-entry settlements. Physical cash (paper notes and coins) will ultimately vanish entirely from the monetary system. Equating money with cash is fundamentally wrong. Furthermore, the meaning of "money" or "coin" must be accurately understood—not every on-chain crypto asset should be called a "coin" or described as "tokenization." Bitcoin, altcoins, NFTs, RWA—all are assets, not money.
The On-Chain Crypto World Brings Profound Changes to Finance
Due to various practical constraints, in today’s fiat monetary system, only small amounts of cash can be transferred directly between payer and payee. Increasingly, money is held in banks and other clearing institutions, requiring intermediaries to facilitate value transfers through transfer payments and book-entry settlement. When both parties hold accounts at the same bank, only one intermediary (the bank) is needed. When accounts are at different banks that maintain mutual clearing accounts, two intermediaries are required. If the banks lack a direct account relationship, a third “bridge” bank with shared connections is needed to link the accounts, enabling the transfer. In cross-border payments, three or more intermediaries are typically required, involving different national payment systems, handling diverse languages and rules in payment instructions. The more intermediaries involved and the more complex the payment and clearing systems, the lower the efficiency and higher the cost.
To improve efficiency and reduce costs, most domestic systems adopt centralized account models, where clearing institutions hold accounts at central clearing hubs, minimizing the need for bridge intermediaries. Internationally, the Society for Worldwide Interbank Financial Telecommunication (SWIFT) provides a widely connected, shared network that standardizes payment messaging globally, greatly improving payment and settlement efficiency and cost. Nevertheless, since payment intermediaries cannot be drastically reduced or eliminated, fundamental breakthroughs in cross-border payment efficiency and cost remain elusive.
The emergence of the on-chain crypto world presents a transformative opportunity. On borderless, global public blockchains, rules are embedded in code ("code is law"), and user registration equates to account opening. This enables truly peer-to-peer, intermediary-free payments directly from payer to payee, dramatically improving efficiency and lowering costs—offering clear advantages over traditional cross-border payments. Additionally, financial products placed on public blockchains can be sold and traded globally, vastly expanding beyond the geographical and structural limits of traditional financial markets, attracting larger pools of investors and capital. This will draw more financial products—especially highly digitized and standardized securities (stocks, bonds, money market funds)—onto blockchains via RWA, enriching the variety, liquidity, and impact of on-chain crypto assets.
An even deeper change may be: stablecoin and crypto asset legislation will encourage broad participation from banks and financial institutions, enabling them to connect with various public blockchains and support clients in directly converting off-chain fiat deposits into on-chain tokens or vice versa. This eliminates the extra layers and costs associated with non-bank payment entities handling fiat-stablecoin conversions, making regulated financial institutions a more efficient bridge between the crypto and real worlds—replacing stablecoins in this function. This reduces regulatory complexity caused by multiple stablecoins for a single fiat currency, facilitates on-chain token tracking and compliance with KYC, AML, and CFT requirements, curbs the disruptive expansion of fiat-backed stablecoins into the traditional financial system, and enhances equal access to public blockchains across nations. It will deeply impact the issuers of fiat-backed stablecoins and the existing market structure (including the dominant position of dollar-backed stablecoins), shrink the survival space for unregulated stablecoins and altcoins, challenge SWIFT’s international influence, accelerate the RWA transformation of traditional financial products, attract licensed institutions into crypto trading and exchange operations, and potentially even displace central bank digital currencies (CBDCs).
China should develop a clearer understanding and take more forward-looking actions—not focusing on developing RMB stablecoins (which offer limited potential), but instead accelerating legislative progress, enabling bank participation, and advancing RWA development to achieve a leapfrog transformation.
Regulation of the On-Chain Crypto World Must Be Continuously Strengthened and Improved
The emergence and growth of fiat-backed stablecoins are driving the on-chain crypto world to expand from native (and derivative) assets to include real-world assets (RWA). Global public blockchains are increasingly serving as intermediaries for cross-border settlements and remittances, deepening the integration and amplifying the impact of the on-chain crypto world on the real economy. This poses profound challenges to national monetary sovereignty and financial regulation. The absence of effective oversight is alarming. Robust regulation of the movement of real-world assets (especially fiat money) onto and off blockchains is essential to meet KYC, AML, and CFT requirements.
Currently, regulation of fiat-backed stablecoins and the broader crypto asset sector is only beginning. A balance must be struck between encouraging innovation and managing risks, and between national or corporate interests and humanity’s collective good. Implementation rules must be refined, key risks controlled, and particular vigilance maintained against the U.S. using legislation to fully support the crypto industry while weakening necessary regulatory safeguards. We must transcend traditional real-world thinking, treat the development of the crypto world with seriousness, conduct thorough research, and grasp its dynamics accurately. Responsible major powers must actively participate in shaping the rules and maintaining order in the crypto world and strengthen international cooperation.
The foundation and rules of the crypto world are built on blockchain systems and their embedded protocols. The most extensive and influential are borderless, global public blockchains (today including Ethereum, Solana, Binance Chain, Polkadot, among others). Therefore, the global applicability and fairness of blockchain rules, along with end-to-end transparency and security of blockchain operations, are critical foundations for the on-chain crypto world. The development, fair competition (in terms of efficiency, cost, fairness, and security), natural selection, and continuous improvement of decentralized, non-state-controlled public blockchains should be encouraged. We must guard against control and exploitation of blockchains by individual nations or interest groups.
In summary, the profound impacts of U.S. stablecoin legislation may exceed expectations.
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