Potential Impact of Stablecoins on the Financial System

Stablecoins are cryptocurrencies that peg their value to a specific asset (usually fiat currency), serving as a bridge between decentralized financial systems and traditional financial systems, and are an important infrastructure of decentralized finance. Recently, the United States and Hong Kong have successively passed stablecoin regulatory bills, marking the establishment of regulatory frameworks for stablecoins in some major regions worldwide. This brings development opportunities for decentralized finance, while also potentially deepening its integration with traditional financial systems, posing new challenges and risks to the global financial system.

Abstract

• Recently, the United States and Hong Kong passed stablecoin legislation, filling the regulatory gap and helping cryptocurrency integrate into the mainstream financial system.

• The new legislation establishes regulations targeting industry risk points, including 100% reserve requirements, entry thresholds, anti-money laundering, etc., referencing traditional financial regulations but with stricter liquidity requirements.

• As of May 2025, the market value of major stablecoins is approximately $230 billion, with an annual trading volume reaching $28 trillion, surpassing major credit card organizations.

• Stablecoins may become a lower-cost and more efficient means of international payment, but they also face regulatory challenges.

• Full reserve requirements limit the currency creation function of stablecoins, but may lead to disintermediation effects on bank deposits.

• Stablecoin issuers have become important buyers of US Treasury bonds, which may affect the transmission of monetary policy.

• The price volatility of stablecoins can affect financial markets through various channels.

• Stablecoins have a complex impact on the international monetary order, which may both strengthen the position of the US dollar and serve as a tool for de-dollarization.

• The Hong Kong stablecoin bill provides opportunities for the internationalization of the Hong Kong dollar.

Main Text

Stablecoin Bill: A Milestone in Cryptocurrency Regulation

Recently, the stablecoin bill passed by the United States has filled the regulatory gap, and Hong Kong has also followed suit by passing a similar bill. These bills establish a regulatory framework for stablecoins, marking an important step for cryptocurrencies to integrate into the mainstream financial system.

From "barbaric growth" to gradual standardized development

The new stablecoin legislation establishes a series of regulations targeting industry risk points:

1. Require 100% reserve assets to be pegged to fiat currency or highly liquid assets
2. Set up entry barriers and licensing requirements for issuing institutions
3. Incorporate into the anti-money laundering regulatory framework
4. Strengthen consumer protection
5. Prohibition of stablecoin interest payments

These regulations reference traditional financial supervision, but are stricter in liquidity management. Regulators position stablecoins as "on-chain cash" rather than "on-chain deposits."

The impact of stablecoins on the financial system

1. Lower cost and more efficient means of international payment

Stablecoins have cost and efficiency advantages in cross-border payments, but also face regulatory challenges. In the long term, stablecoins are expected to increase their market share in international payments.

2. Full reserve requirement restricts the currency creation function

The 100% reserve requirement limits the credit expansion ability of stablecoin issuers. In theory, stablecoin issuance does not directly increase the money supply, but it may affect the distribution of money.

3. The Disintermediation Impact on Bank Deposits

Stablecoins may lead to deposit outflows, causing a financial disintermediation effect. Although the current impact is limited, there are risks in the long term. Some traditional banks have begun to explore countermeasures.

4. Undertake government debt and affect the transmission of monetary policy

Stablecoin issuers have become important buyers of U.S. Treasuries, which may increase short-term demand for U.S. Treasuries. This could affect the transmission of monetary policy, and central banks may need to adjust accordingly.

5. The Transmission of Cryptocurrency Price Volatility to Financial Markets

Stablecoins may influence financial markets through channels such as currency creation, market sentiment, and related stocks.

6. The Potential Restructuring Forces of the International Monetary Order

The impact of stablecoins on the status of the US dollar is somewhat contradictory. On one hand, they may reinforce the dominance of the dollar, while on the other hand, they could become a tool for de-dollarization. This poses a challenge to the currencies of emerging economies.

7. Insights on the Internationalization of Currency

The Hong Kong stablecoin bill helps enhance the international competitiveness of the Hong Kong dollar and provides a "testing ground" for the internationalization of other currencies. However, attention must still be paid to financial stability risks.

Risk Warning

• There is uncertainty in the development of the cryptocurrency industry.
• The impact of stablecoins on the traditional financial system may exceed expectations.
• Regulatory policy advancements may fall short of expectations