Stablecoins, cryptocurrencies pegged to traditional assets, are at the heart of a global debate over financial stability and national currency dominance.
Global Push for Stablecoin Regulation
The year 2025 has seen significant movement in the world of stablecoins. These digital assets, often linked to the US dollar, are now attracting serious attention from lawmakers worldwide.
In June, the US Senate passed the GENIUS Act, while South Korea’s National Assembly introduced a bill allowing won-pegged stablecoins. Hong Kong also moved forward with legislation to license ‘fiat-referenced stablecoins’ issuers.
These legislative efforts aim to protect the public and ensure compliance with anti-money laundering rules. Hong Kong Monetary Authority chief Eddie Yue emphasized that robust regulation is crucial for a healthy and sustainable stablecoin ecosystem.
Are Stablecoins Sound Money?
Despite the regulatory advancements, not everyone is convinced about stablecoins’ long-term value. The Switzerland-based Bank for International Settlements (BIS) issued a stern warning, suggesting stablecoins fall short of being true money.
The BIS argues that stablecoins are “unsound money” with potential “societal costs.” They fail tests of singleness, elasticity, and integrity, and face an “inherent tension” between promising stability and pursuing a profitable business model.
Experts in South Korea, for instance, question the immediate need for won-backed stablecoins, given the limited global role of the Korean won and the country’s strong existing payment infrastructure.
The Geopolitics of Digital Currency
Beyond simply boosting crypto, many lawmakers see stablecoins as tools in a larger geopolitical game: the fight for global currency dominance. Countries are increasingly looking to stablecoins to expand the reach and demand for their national currencies.
For example, Hong Kong’s stablecoin push is seen by some as an effort to elevate the Chinese renminbi’s global status. The development of Hong Kong dollar-connected stablecoins could complement the renminbi’s internationalization.
Meanwhile, the US, where dollar-pegged stablecoins Tether and USDC dominate 83% of the market, views them as a way to reinforce the dollar’s global supremacy. US Treasury Secretary Scott Bessent highlighted that a thriving stablecoin ecosystem could drive demand for US Treasuries, potentially lowering government borrowing costs.
- Stablecoin regulations are rapidly advancing globally, with major legislative moves in the US, South Korea, and Hong Kong.
- The Bank for International Settlements (BIS) and some experts question stablecoins’ fundamental soundness and practical use cases.
- A key driver for stablecoin adoption is their potential to boost national currencies and challenge existing global financial hierarchies.
India’s Unique Approach
Not all nations are embracing private stablecoins. India, for one, stands in stark contrast. The Reserve Bank of India (RBI) strongly opposes private cryptocurrencies, fearing a “dollarisation” of the Indian economy if US dollar-linked stablecoins gain traction.
This “dollarisation” could weaken the rupee and limit the effectiveness of domestic economic policies. Instead, India is championing its own payment solutions, like the UPI (Unified Payments Interface), on a global scale. It’s also pushing for international trade settlement in rupees and aggressively developing its Central Bank Digital Currency (CBDC) for various uses.
This differs significantly from South Korea, which has paused its CBDC test project while simultaneously promoting private stablecoin legislation.
