The whole world is embracing stablecoins. Why is the domestic situation going backwards?

The characterization on the 28th has shattered all the fantasies about stablecoins in the industry over the past few years.

On the surface, it's a regulatory policy, but in reality, it's a statement about monetary power.

The U.S. is using the (GENIUS Act) to turn stablecoins into an extension of the digital dollar. Domestically, this characterization has categorized stablecoins as illegal.

Both sides are very clear about what they are doing.

01 | "Stablecoins are a form of virtual currency."

This is not the first time virtual currency has been mentioned, but for the first time, the authorities have clearly equated stablecoins with Bitcoin and Ethereum.

In recent years, many projects have pinned their hopes on the assumption that 'stablecoins are not considered virtual currencies.' They believed that as long as there are dollar reserves and no volatility, they could tell a story to regulators.

Now, this assumption has completely collapsed. Having reserves also means it is a virtual currency; no volatility also means it is a virtual currency.

What does this mean? It means that cross-border payments, supply chain finance, and on-chain settlements are all marked with red lines domestically.

Is this bad news? It certainly is for many teams. But at least now we don't have to guess anymore.

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02 | The world is embracing stablecoins, so why is the domestic market going backward?

Fast forward to the second half of this year, and you will see a very surreal picture.

In July, U.S. President Trump signed the (GENIUS act). The goal of this act is very direct: to formally bring stablecoins like USDT and USDC into the U.S. financial regulatory system.

At the same time, what is Hong Kong doing? Launching a stablecoin licensing system.
What is the EU doing? Issuing the world's first compliant license to USDC.
Major banks in Japan and Europe are betting on their own fiat stablecoins.

Then in November, the domestic central bank held a meeting and directly announced: stablecoins equal virtual currencies, all illegal.

The world is embracing it, but we choose to go backward.

Why is this?

Because decision-makers have seen a problem: when all countries are competing for stablecoin licenses, it indicates that this thing is no longer just a payment tool, but a new battlefield for currency hegemony.

And the authorities do not want the currency hegemony of others to take root here.

Is this choice right or wrong? We do not evaluate. But as industry practitioners, we must accept this reality.

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03 | The truth about stablecoins: a game about the dollar

First, let's look at a piece of data.

As of the end of November, the total market value of global stablecoins is approximately 300 billion USD. Among them:

USDT: 184 billion, accounting for 60%
USDC: 75 billion, accounting for 25%
All other stablecoins combined: less than 15%

Two American companies control over 80% of the global stablecoin market.

Now let's look at a deeper piece of data.
In the reserves of USDT, there are over 100 billion USD in U.S. Treasury bonds.
In the reserves of USDC, there are over 20 billion USD in U.S. Treasury bonds.
What does this mean?

It means that every issuance of stablecoins is financing the U.S. Treasury.
We thought we were using a 'decentralized digital dollar,' but in reality, we are contributing to U.S. Treasury bonds.

Now looking back at 2020. That year, the global stablecoin market value was only 6 billion USD. By the end of 2021, this number surged to 150 billion, and it has now broken 300 billion.

Where did this explosive growth come from?
It was not spontaneous from the market, but a result of the shift in U.S. policy. Since 2021, the logic in the U.S. has changed: rather than trying to prevent digital currency, it is better to turn digital currency into a digital form of the dollar.

So the core of the (GENIUS act) in July this year is not to regulate stablecoins, but to confirm that stablecoins are a part of the dollar.

Now do you understand why it has to be said that it cannot be done domestically?
Because this is not a technical issue; it is a geopolitical issue.

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04 | The shadow of 2015 still hangs over the decision-makers

The central bank's announcement repeatedly emphasizes: money laundering, fraud, and illegal cross-border fund transfers.

But if these are just the issues, why not leave a loophole like 'personal holding is legal' as with Bitcoin?

The real concern is much deeper: the life and death of the foreign exchange management system.

Imagine this scenario.

If USDT is legally circulating domestically, anyone can open a wallet, exchange RMB for USDT, and then transfer it overseas on-chain.

Without going through banks, without going through the foreign exchange bureau, leaving no record.

What does this mean? It means the entire foreign exchange management system is being bypassed.

Do you remember the story from 2015? Under pressure from the depreciation of the RMB, nearly 1 trillion USD in foreign reserves flowed out in a year.

What means were used for capital flight back then? Underground banks, trade misreporting, overseas insurance policies. Complex, slow, and costly.

If there was USDT, none of this would be needed. A mobile wallet solves everything.

The destructive power of the next crisis will be 10 times that of 2015.

This is what the decision-makers are really trying to prevent.

So why is it that domestically, on one hand, there is a strong push for the digital RMB, while on the other hand, there is a blanket ban on stablecoins?

Because every transaction with the digital RMB is controllable and traceable, but USDT is a black box.

This is the dividing line between the two paths.

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05 | Why can Hong Kong?

On August 1, Hong Kong launched a stablecoin licensing system, and many people think this is a window period.

Don't be too quick to be happy.

The core of Hong Kong's stablecoin license is two words: offshore.

What does offshore mean? It means not touching mainland users, not touching RMB, and not allowing domestic funds and stablecoins to have any relationship.

Some ask: If I register in Hong Kong, have the servers in the U.S., and only do technical outsourcing, is that okay?

No, it is not.

The qualitative statement from November 28 has already blocked this route. Who are your users? Where does your traffic come from? Where does your funding go?

As long as there is one link that is related to the domestic market, this project is high risk.

Who is Hong Kong's license for? It is for major banks like Standard Chartered and HSBC. They are doing offshore dollar settlements, serving overseas multinational companies.

Currently, 80 companies have applied, and the Monetary Authority has said that the first batch will be announced in early 2026, and only a handful will be able to obtain it.

So don't put all your hopes on Hong Kong.

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06 | Two paths for entrepreneurs

The current situation is very clear.

Path One: Completely go offshore
If you want to continue making stablecoins, then you need to be mentally prepared: the entire business chain must be overseas.

It's not enough just to register an overseas entity. Your users must be overseas, your funding must be overseas, and your team is best located overseas.

Don't think that 'I'm just making a wallet' or 'I'm just making an SDK' can bypass this. Stablecoins are now equivalent to virtual currencies; if you provide technology for virtual currencies, you bear this risk yourself.

Path Two: Shift to digital RMB

The digital RMB ecosystem has many opportunities. Payment, wallets, merchant services, scenario applications, cross-border settlements are all directions clearly supported by the authorities.

As for Hong Kong? You can pay attention, but don't hold any illusions. That space is for banks to play in, not for entrepreneurs to find loopholes.

In short, this qualification is telling you: this path cannot work domestically.
If it needs to go offshore, then go offshore; if it needs to transform, then transform. Don't waste time in gray areas.

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In the long run, this is a protracted battle over monetary sovereignty; everyone should be prepared.