Trump’s Gambit Becomes Apparent

In a flurry of activity that signals a new front in the global monetary landscape, the U.S. Senate passed the “GENIUS Act” aimed at regulating stablecoins on May 19th. Just two days later, the Hong Kong Legislative Council followed suit, greenlighting its own stablecoin regulations.

This rapid-fire legislative push, focused on the very foundations of stablecoins, suggests that a silent battle is already raging. This is a fight with potentially far-reaching implications for the future of money and global economic power.

At their core, stablecoins can be thought of as digital reflections of traditional fiat currencies within the virtual realm.

Just as nations have historically vied for dominance in the real world through financial architectures, a similar game is now unfolding in the digital space. Major players are jockeying for position, aiming to build stablecoin-based ecosystems, and possibly replicate a system akin to the Bretton Woods framework within the crypto world.

Behind this lies a fierce competition for control over the narrative and influence in the global flow of money – a modern-day version of the battle for monetary primacy.

So, what exactly are stablecoins, and why are they so crucial?

I. The Shadow Fiat

To understand the rising significance of stablecoins, it’s worth revisiting the historical ascent of the U.S. dollar. The dollar’s ascendancy wasn’t overnight. Its journey to global reserve currency status involved several key steps.

One crucial element was the initial backing of the dollar with gold within the Bretton Woods system. Then, the dollar survived the gold standard, thanks to its influence over consumer markets and global trade. After that, it had oil, and it still has it… The so-called “petrodollar” system, where oil transactions were priced in dollars, further cemented its dominance.

In the 1970s, the U.S. secured agreements with Saudi Arabia and other major oil exporters to price and settle oil trades in dollars.

Furthermore, post-World War II, the United States emerged as the world’s foremost economic force. As a result, the U.S., being the largest consumer market, needed to supply the world with dollars for transactions, which meant the United States had to use the dollar to carry out the trade, and the world needed dollars to trade with the U.S.. That’s where the cycle came in — after securing US dollars, other countries would then circulate them back to the U.S. for purchase of U.S. Treasury bonds and stocks, thereby creating a “dollar loop.”

This means that any shift or change in US monetary policies can deeply and directly impact international economies.

Consider the impact of the Federal Reserve raising interest rates between late 2015 and 2018. This prompted capital flight from emerging markets, putting strain on borrowers with dollar-denominated debts, compelling some to cut back on investments and output.

Now, the virtual economy requires equivalent mechanics of exchange. Stablecoins have emerged as a potential solution.

Stablecoins could be looked at as a bridge, connecting the traditional financial world of fiat currencies with the dynamic world of crypto. They’re designed to maintain their value against a more traditional asset like the U.S. dollar or the Hong Kong Dollar, rather than the volatility of something like Bitcoin.

Therefore, stablecoins possess the attributes of any other currency: a store of value, a medium of exchange, and a unit of account. But they are far from risk-free. Their value is entirely dependent on the assets that back them. If the issuer mismanages its reserves or those reserves falter, problems will follow.

The United States, seeing the potential of stablecoins as tools of global expansion, has been aggressively pursuing regulatory frameworks. What currency these stablecoins are anchored to will influence the digital economic landscape and will eventually form a system analogous the real world’s Bretton Woods agreement.

Other governments, and major players in the private sector, are also vying for position.

Mastercard announced on April 28, 2025, that clients can use stablecoins for payments, including merchants. PayPal is steadily expanding its stablecoin, PYUSD.

II. A New Battleground

The concurrent announcements of the “GENIUS Act” and Hong Kong’s stablecoin regulations signal a new phase of regulatory competition. Stablecoins are, for all intents and purposes, now political tools.

At its core, this legislative showdown is about reshaping monetary power in the digital age.

From the surface, the strategy may look like a structure to oversee U.S. stablecoins, but it’s a plan to have stablecoins manage the “abandoned” U.S. debt to maintain U.S.-denominated influence.

The “GENIUS Act” mandates that stablecoins be fully backed by cash, demand deposits, or short-term U.S. Treasury securities, effectively linking them to U.S. debt vehicles.

The intentions here are abundantly clear.

Stablecoins should turn into potential buyers of U.S. debt, therefore avoiding the impending collapse. The U.S. could still collect globally. If U.S. debt defaults, stablecoins tied to it will also depreciate.

Similar to the article, “Trump is Being Pushed Around by U.S. Debt,” the credit of the dollar deteriorated. Capital markets no longer see U.S. debt as a means of stability.

The U.S. continues to use the supremacy of the dollar to destabilize other economies, including sanctions and freezing assets. The economic conflicts between Russia and Ukraine led the world to think twice about the dollar. The crisis damaged global economies, and many countries with strong trade balance surpluses are getting rid of their U.S. debt.

The U.S. national debt crossed 36 trillion dollars, and its debt-to-GDP ratio has ballooned to more than 120%. Analyst Larry McDonald pointed out that if the interest rate remains at 4.5% in 2026, U.S. debt interest payments could reach 1.2 to 1.3 trillion dollars, which is more than the country’s defense spendings and is making its deficit unsustainable.

China, on the other hand, is using Hong Kong as a test case for stablecoins. Compared to U.S. stablecoins, the Hong Kong stablecoins are more flexible; they can be connected to fiat currencies, are not limited to bottoms, and aren’t defined on the nature of the funds.

The U.S.’s “GENIUS Act” is limited to “payment stablecoins” and profit earnings. It should limit profit growth and limit stablecoins’ innovation in their profitability.

Generating profit is a key motivator.

Hong Kong’s stablecoin hasn’t limited profit possibilities and has provided financial institutions with more freedom in profit innovation and design. It has a higher degree of attraction..

Also, the wider use of stablecoins is a key battleground.

Major technology companies within China have already started integrating the use of stablecoins, and they are vying for control of the way people pay in the Web3 era.

Currently, China is in the technical assessment and regulatory cooperation stage, but it has achieved some accomplishments.

On May 23rd, the CEO of Jingdong Blockchain Technology, Liu Peng, said that Jingdong Stablecoins have entered the second stage of the sandbox test, and they will provide mobile and PC applications for retail and institutional markets. It will consist of cross-border payments, investing transactions, and retail payments.

Ant Group is exploring the linking of Real World Assets through renewable energy projects. Through the guidance of the Hong Kong Monetary Authority’s Ensemble Sandbox project, Ant Group supported the first overseas financing transaction of a renewable energy public company in mainland China, which was approximately 100 million RMB.

Of course, this is not enough. More case studies are needed for users to choose Hong Kong stablecoins. After all, U.S. stablecoins are ahead in the digital cryptocurrency market.

The race of the dollar and RMB internationalization continues, and the laws that have been imposed on the market are only the preliminary steps in the battle.

III. Conclusion

With $36 trillion in U.S. debt funneling through USDT into the blockchain, and with Hong Kong leveraging its Hong Kong dollar stablecoins for cross-border payments, the secrets to personal wealth are encoded into the underlying logic of national competition.

The outcome of this particular competition could be hidden in the code of Jingdong’s sandbox test, or within the U.S. debt holdings backing USDC.