ByCoinGape
Stablecoins Dilemma – The tactical warfare between China and the US has found two new emerging battlegrounds in Artificial Intelligence and Cryptocurrencies. While China is following a more centralized approach to the adoption of cryptocurrencies, the US, with the coming up of the Trump administration, is making significant strides in the pro-crypto regulatory jurisdictions.
Since 2021, China has enforced a blanket ban on cryptocurrency mining and trading, implying no stablecoin or crypto transactions. The Chinese government has been focusing solely on promoting its central bank digital currency (CBDC), the Digital Yuan, also known as digital renminbi.
The creation of US Crypto Strategic Reserve and the perceived fear of “US dominance in global finance with dollar-pegged stabelcoins”, as Ming Zhang reflects, have left Chinese Communist Party (CCP) sweating bullets. But that is evident as the emergence of Chinese startup, DeepSeek-V3, is the only recent instance we have of any signficant stride by the United States’ long-considered foe, the China.
And now in a recent Study Times article that CoinGape got access to, Ming Zhang, the deputy director of the Chinese Academy of Social Sciences clearly reflects on the Communist Party’s thoughts on digital currencies led by Bitcoin, Central Bank Digital Currencies (CBDCs) and Stablecoins. Notably, CASS is a state-backed research institute and a ministry-level institution under the State Council of China, meaning its reports often align with the government’s broader economic and financial policies.
Here’s all Zhang Ming and Chinese Communist Party (CCP) have to say after making first such public mulling on cryptocurrencies.
The value of cryptocurrency is determined neither by the sovereign credit of a country nor by other currencies or financial assets linked to the currency, but by a set of rigorous computer algorithms. But the biggest problem with Bitcoin is that its price fluctuates greatly. The price peak of a Bitcoin once reached more than $100,000, and it fell to around $86,000 in early March 2025.
Apart from stablecoins’ growing dominance, Bitcoin (BTC) maintains its dominance in the crypto market with a market cap of around $1.67 trillion. This represents 58.27% of the total crypto market followed by Ethereum.
China has officially banned Bitcoin trading and mining, but its connection to BTC remains complex yet significant. Notwithstanding the ban, China still influences Bitcoin. There are reports that reveal Chinese miners secretly operating using VPNs and off-grid setups and the country likely holding on 194,000 BTC. Thus, even though the public crypto use is restricted, underground trading persists through peer-to-peer (P2P) markets and offshore exchanges.
However, China is still not ready to accept the potential of Bitcoin with Ming Zhang arguing,
Although Bitcoin is a type of digital currency, it cannot truly perform the functions of currency due to the following two characteristics.
On the one hand, the huge fluctuations in Bitcoin prices make it difficult for Bitcoin to be used as a pricing scale for other commodities or as a monetary medium for transactions between other commodities; on the other hand, due to the limited total amount of Bitcoin, it is difficult for Bitcoin to be used as a currency to regulate economic operations.
Therefore, the nature of Bitcoin is not a real currency, but a peculiar financial asset, which itself has investment value. There is a great deal of controversy in the market as to whether Bitcoin is a risky asset or a safe-haven asset. In terms of the huge price fluctuations of Bitcoin itself, it is more like a risky asset. However, in terms of the fact that the price trend of Bitcoin is largely inversely correlated with the trend of the US dollar exchange rate, it is like a safe-haven asset that can hedge against the fluctuations of the US dollar exchange rate.
Thus, it seems that for China, Bitcoin only remains a mere geopolitical tool. Further, some believe that China views BTC as a strategic hedge against the U.S. dollar dominance, even while banning its use domestically. This paradox nonetheless highlights China’s complex stance—publicly anti-Bitcoin but strategically engaged with it behind the scenes. And now these remarks by Ming further highlights the reasons for China not accepting Bitcoin.
Stablecoins have been experiencing significant developments recently with their market cap surpassing $230 Billion on 21 March. As per the data from DefiLlama, the current total market cap of stablecoins stands at $230.45 billion which is 56% more compared to the previous year for the same time period.
Another significant development includes the US Senate Banking Committee recently passing bipartisan legislation, GENIUS Act. Notably, the act aims at establishing a regulatory framework for stablecoins, and signals a remarkable shift in the United States towards integrating digital assets into traditional finance. Their dominance is something Ming Zhang calls as a danger for China, saying,
Among the three digital currencies, the one that may have a significant impact on the international financial system is actually the stablecoin. The US dollar stablecoin not only strengthens the connection between the traditional currency circulation domain and the virtual world currency circulation domain, but also fills the gap in the demand for US dollars by households and enterprises in some developing countries.
Therefore, this digital currency is likely to strengthen the international currency status of the US dollar in the international financial system. Once the US dollar stablecoin links the international credit of the US dollar with the application scenarios of the virtual world more closely, it may greatly consolidate the hegemony of the US dollar.
Ming Zhang to counter its influence suggests, “promote the construction of China’s stable currency. Expand the use of digital tokens on Internet platforms and better combine the sovereign credit of RMB with the global application scenarios of Chinese platforms.”
Notably, in response to the global proliferation of U.S. dollar-pegged stablecoins, Chinese authorities are accelerating the development and expansion of the digital yuan (e-CNY) to maintain financial sovereignty and counter the influence of these foreign digital currencies.
China’s central bank digital currency (CBDC), known as the Digital Yuan (e-CNY), is one of the most advanced and widely tested CBDCs globally. The People’s Bank of China (PBOC) has been developing and piloting it since 2014, aiming to modernize the financial system, reduce reliance on cash, and counter the dominance of private payment platforms like Alipay and WeChat Pay.
Ming believes that the central bank’s digital currency is actually a sovereign currency in the virtual world since it has a stronger reputation and lower risks, but it ultimately depends on the competitiveness of the country’s real currency. He also asks government to take a three-ponged approach towards the development of digital currency in the country.
At present, there are three development directions of digital currency in the world: cryptocurrency, stablecoins and central bank digital currency, each with its own advantages and disadvantages, development prospects and application directions. It is best not to bet on only one side, but to take a three-pronged approach and bet at the same time to maximize the dividends of digital currency or digital asset development.
On the one hand, the replacement range of digital RMB should be expanded from M0 (cash) to M1 (cash plus demand deposits) and even M2 (cash plus all deposits) as soon as possible. Only by upgrading the replacement range of digital RMB from M0 to M1 or even M2 can the application scenarios of digital RMB be fully expanded, the use of digital RMB at home and abroad can be promoted, and the internationalization of RMB can be promoted.
The flourishing of various digital currencies is naturally better than the U.S. dollar monopolizing the development track of digital currencies. e-SDR can expand the use of supranational reserve currencies in the digital field and virtual space, and also help promote the diversification of the international monetary system.
Note: All the mentioned opinions of Ming Zhang are sourced from a recent article authored by him for StudyTimes, the official publication of the Central Party School (CPS) of the Communist Party of China (CPC).
Sneha Agrawal More Stories
Share