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

Opinions presented in this article reflect diverse views and do not represent the position 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—these “digital cash” currencies—have surged in market capitalization to $200 billion, transforming global transactions. The US dollar stablecoin seized the lead, capturing 80% of the market! China, not to be outdone, has launched its own challenge, introducing the digital yuan and Hong Kong dollar stablecoins to dethrone the digital dollar.

As a novice investor from Hong Kong or Taiwan, you may be curious: How will China’s strategy disrupt the market? How will this digital currency war reshape the future? Join us as we uncover this ultimate game from the past to the future! This article is for informational purposes only and does not constitute investment advice.

The Challenge of the US Dollar Stablecoin: Why is the Digital Yuan and Hong Kong Dollar Stablecoin Needed?

The US dollar stablecoin (such as USDT and USDC) dominates 80% of the market, but it presents three significant challenges for China and Hong Kong:

• Transactions controlled by the US: When businesses use the US dollar stablecoin, they may be restricted by US regulations (such as OFAC sanctions). Once accounts are frozen due to political reasons, transactions come to a halt. It’s like using someone else’s bank card, and it could be locked at any time.
• Exchange hassle and cost: Hong Kong companies that receive USDT must first convert it to USD and then to HKD, with transaction fees as high as 0.7-1%, and the process can take 2-3 days. For instance, when an e-commerce company in Hong Kong receives USDT payments, converting to HKD for rent payments becomes costly and time-consuming.
• Challenges with the yuan going global: The US dollar makes up 58% of global foreign exchange reserves ([International Monetary Fund – Currency Composition]), while the yuan only accounts for 2.5%. Chinese companies are often forced to use USD, adding exchange rate risk and high transaction costs. It’s like wanting to buy something with Hong Kong dollars but only being able to pay in US dollars.

The digital yuan and Hong Kong dollar stablecoins could solve these problems. The digital yuan would speed up and reduce the cost of “Belt and Road” transactions, while the Hong Kong dollar stablecoin would leverage Hong Kong’s international trust to attract global users and reduce the dominance of the dollar. But how can these stablecoins gain global acceptance? Let’s look to history for answers.

Lessons from History: The Secret of Resource and Network Hegemony

How does monetary hegemony come to be? Here are three historical examples:

• 400 years ago, Spain controlled the silver mines of South America, producing 80% of the world’s silver. They used Manila galleons to spread silver coins, which were even used by the Ming Dynasty in China to collect taxes.
• In the 1800s, Britain promoted the British pound through the London banking system and its colonies, backed by gold to ensure value.
• Since the 1900s, the US has maintained its dominance through oil trade and military power, with the dollar accounting for 58% of global foreign exchange reserves.

What’s the secret? Controlling key resources (like silver, machinery, and oil) and transaction networks (like ships and colonies). Today, what resources and networks can China leverage to build a stablecoin hegemony?

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

We propose that China use three strategies to promote the digital yuan and Hong Kong dollar stablecoins and challenge the US dollar stablecoin hegemony. Each strategy targets key resources or transaction networks:

Rare Earth Trade:

Key resource: According to the International Energy Agency’s (IEA) 2024 report, China controls 90% of global rare earth refining, providing the essential materials for electric vehicles and AI chips, akin to Spain’s silver.

Why effective: Rare earths are critical for technology; subsidizing settlement would attract buyers, boosting stablecoin usage.

How to implement: Offering a 0.5-1% discount for settling with digital yuan stablecoin. For example, a Malaysian company purchasing rare earths with digital yuan stablecoin could pay a transaction fee of just 0.1%, far lower than the 0.7% fee for USD settlements. The Hong Kong dollar stablecoin can assist to attract buyers who are hesitant to use the yuan.

The Belt and Road Initiative:

Transaction network: In 2024, the Belt and Road trade reached $2.5 trillion, spanning over 140 countries, similar to Spain’s galleon network.

Why effective: The massive trade volume provides a practical scenario for stablecoin usage, and low-cost settlements increase circulation.

How to implement: Primarily use digital yuan stablecoin to settle large projects. For instance, the Pakistan Belt and Road port project could use digital yuan stablecoin to pay Chinese companies, with a fee of 0.1%, while Hong Kong dollar stablecoins could be used for smaller transactions involving Hong Kong enterprises.

Hong Kong Blockchain Finance:

Transaction network: According to the 2024 report by the Hong Kong Monetary Authority, Hong Kong is the third-largest global financial center, handling 4% of cross-border payments. Its international network links Asia with Europe and the US, similar to London’s global influence, offering efficient settlement (instant transactions) and high trust (peg to the exchange rate system).

Why effective: Hong Kong’s status as the third-largest financial center provides a vast user base and international network. If traditional financial products (such as bonds and trade finance) are introduced onto the blockchain and incentives are offered for settling with Hong Kong dollar stablecoins, global users would be attracted, significantly increasing stablecoin usage.

How to implement: For example, international investors could buy Hong Kong digital bonds with Hong Kong dollar stablecoins, enjoying stable returns without needing to exchange into USDT. Hong Kong companies could use Hong Kong dollar stablecoins to pay Southeast Asian suppliers, with a transaction fee of just 0.3%.

Summary: These Three Strategies Utilize Rare Earths (Key Resources) and the Belt and Road and Hong Kong Financial Networks (Transaction Networks) to Jointly Promote Digital Yuan and Hong Kong Dollar Stablecoins, Replicating Historical Monetary Hegemony Models.

How Digital Yuan and Hong Kong Dollar Stablecoins Support China’s Strategy

How do digital yuan stablecoins and Hong Kong dollar stablecoins contribute to China’s three key strategies? Below are their roles and how they complement each other:

Digital Yuan Stablecoin: Drives Rare Earths and the Belt and Road Initiative:

Why used for rare earths and Belt and Road? With China’s economic backing (2024 GDP around $18 trillion), it is ideal for large-scale trade settlements. The 0.5-1% discount promotes the internationalization of the yuan, reducing dependence on the dollar (which accounts for 58% of foreign reserves, [International Monetary Fund – Currency Composition]). Both rare earths and the Belt and Road need strong economic backing, making digital yuan stablecoin the most suitable.

Example: A Pakistani company paying for Belt and Road rail projects with digital yuan stablecoin incurs a 0.1% fee, while a Malaysian company buying rare earths with digital yuan stablecoin saves 0.7% compared to USD settlements.

Limitations: The yuan accounts for just 2.5% of foreign reserves, and political resistance from Europe and the US may hinder usage.

Hong Kong Dollar Stablecoin: Promotes Hong Kong Blockchain Finance:

Why used for Hong Kong blockchain finance? Hong Kong, as the third-largest global financial center, has an extensive international network and handles 4% of cross-border payments. Its linked exchange rate system (peg between HKD and USD at 7.75-7.85) ensures currency stability, and its independent judicial system enhances international trust. After stablecoin regulations are perfected in 2025, Hong Kong dollar stablecoin settlements for digital bonds and trade finance, with a fee of just 0.3% and instant transactions, will attract global investors and businesses.

Example: International investors use Hong Kong dollar stablecoins to buy Hong Kong digital bonds, enjoying stable returns without the need to convert to USDT. Hong Kong companies use Hong Kong dollar stablecoins to pay Southeast Asian suppliers, with a transaction fee of just 0.3%.

Limitations: Hong Kong’s economy is small (2024 GDP around $400 billion), and the Hong Kong dollar is less widely circulated (foreign reserves of 0.1%), making it unsuitable for large-scale trade.

Complementary Relationship: Jointly Overturning Hegemony:

Digital yuan stablecoin targets large trade volumes in rare earths and the Belt and Road Initiative, providing transaction scenarios, while Hong Kong dollar stablecoin promotes blockchain finance, attracting international financial users. Capital flows between the two, expanding their combined influence.

Hong Kong dollar stablecoin, benefiting from Hong Kong’s neutrality (independent judiciary), avoids political resistance to the yuan and attracts European and American users, indirectly supporting Belt and Road and rare earth trade.

Summary: The Two Stablecoins Support China’s Efforts to Reduce US Transaction Restrictions, Lower Conversion Costs, Promote Yuan Internationalization, and Strengthen Financial Autonomy and Global Influence. Hong Kong Blockchain Finance Not Only Supports International Settlements but Also Opens Up New Opportunities for Investors, Worth Paying Attention to for Novice Investors.

Investment Potential of Hong Kong Blockchain Finance

Hong Kong blockchain finance offers new opportunities for investors, especially attractive to newcomers. Hong Kong investors should pay attention to which traditional financial products the Hong Kong Monetary Authority and financial institutions introduce to blockchain, seizing potential opportunities. Here are three possible products:

• Digital Bonds: Issued by banks, with stable returns (around 3-5% annualized), settled with Hong Kong dollar stablecoins, with a transaction fee of just 0.3%. For example, you invest in digital bonds through a regulated exchange and save on USD conversion fees.
• Trade Finance Tokens: Provide short-term financing for small and medium enterprises, offering high liquidity and moderate risk, suitable for stable returns.
• Real Estate Tokens (RWA): Divide Hong Kong properties into digital assets, with low entry thresholds (starting from a few thousand HKD), allowing participation in property appreciation.

How will these opportunities affect you? New investors can explore blockchain finance trends in the following directions.

What Can Novice Investors Focus On?

This article is for informational purposes only and does not constitute investment advice.

Try focusing on these:

• Hong Kong Regulatory Developments: The 2025 stablecoin laws may bring new projects, so keep an eye on announcements from the Hong Kong Monetary Authority ([Hong Kong Monetary Authority – Stablecoin Issuers]) or news.
• Chinese Market Trends: Rare earth incentives or the Belt and Road Initiative could boost stablecoin demand.
• Hong Kong Blockchain Finance: Study digital bonds, trade finance tokens, or real estate token projects on regulated exchanges to understand the application scenarios of Hong Kong dollar stablecoins.

Conclusion: The New King of Digital Currency?

China, through rare earths, the Belt and Road Initiative, and Hong Kong blockchain finance, is promoting digital yuan and Hong Kong dollar stablecoins, challenging the US dollar’s 80% market dominance! The yuan focuses on trade, while the Hong Kong dollar leads financial innovation, jointly rewriting the future of currency. History teaches us that resources and networks determine victory—will China be the new king? Novice investors, explore stablecoin trends and ride the digital wave! Who will dominate? Share your thoughts and pass it on to your friends for a lively debate!

Opinions presented in this article reflect diverse views and do not represent the position of “WEB3+”