Someone has explained stablecoins clearly!

The time window for the rapid expansion of global crypto assets has opened. Whether the RMB can gain a say in the international monetary system in the future, its energy level leap, and its ability to accumulate assets depend largely on this.

Author: Bibi News

Cover: Photo by Shubham Dhage on Unsplash

Liu Yuhui (Deputy Director of the Shanghai Chief Economist Financial Development Center and Director of the China Chief Economist Forum) recently delivered a speech on stablecoins at the 2025 NetEase Economist Annual Meeting Summer Forum, with clear and sharp views.

The following is a summary of the key points of the speech:

1. The United States launched a stablecoin program to address the dollar/U.S. debt crisis, which has shown short-term effectiveness: U.S. debt risks have converged, U.S. stocks have hit new highs, and Bitcoin has exceeded $120,000.

2. The Essence of the Sino-US Game: The Imbalance between China's Industrial Power and the US Dollar's Financial Power

• China's manufacturing output accounts for 35% of the world's total (or 45% by 2030)
• The United States is attempting to reshape financial power through the expansion of blockchain assets (such as Bitcoin) and the legalization of stablecoins, binding blockchain assets to the legal currency system and driving demand for US Treasury bonds through the expansion of stablecoin demand.

3. Important predictions:

• Cryptocurrency assets may have entered a window of exponential growth.
• In the next five years, it is predicted that Bitcoin will reach $1.5 million per coin, and the scale of blockchain assets may jump to the top two of the world's major asset classes, competing with the legal currency system.

4. China needs a two-track response:

The RMB is the second largest currency in the world for trade payments, but only ranks fifth in terms of reserve currency share. Crypto assets may become a new breakthrough point.

① Promote central bank digital currency and improve cross-border payment and clearing networks

② Accelerate the construction of RMB crypto asset market and promote RDA to solve the financial dilemma

Full text of the speech:

The most important event in the past two months has been the stablecoin bill.

The Stablecoin Act is a self-redemption for the United States in the face of a deep crisis in the US dollar and US debt.

This will take time to test, but in the short term, the global capital market has already accepted this logic of self-salvation.

After the Stability Act was introduced on May 16th, the precarious, high-volatility dollar asset market shifted rapidly. U.S. Treasury risks quickly converged, and buying and selling pressures gradually balanced. The U.S. stock market quickly returned from the high volatility seen in April to the familiar low volatility, and recently reached new highs, demonstrating remarkable strength.

Crypto assets, represented by Bitcoin, have recently reached a peak of $120,000, so all this means that the global capital market has begun to accept this logic.

For this era, the most basic scenario is nothing more than a confrontation between two powers.

This is the final showdown between the super-strong industrial power represented by China, a giant in the East, and the financial power represented by the US dollar.

The trade wars and tariff wars we're witnessing are merely superficial. Twenty years ago, these two forces were in sync. That's why 20 years ago, there was a term for globalization called "Chimerica." Over the past two decades, a unique G2 has emerged.

The reason why there is such a sharp confrontation today is that these two powers have gradually gone from matching to serious mismatching in the past 20 years. What is the fundamental reason for this mismatch?

Over the past 20 years, the dominance of the manufacturing industry represented by China, a giant in the East, has been rising rapidly, while the financial power represented by the US dollar has been stagnant and declining, resulting in a huge gap between the two.

By the end of last year, China's manufacturing output was projected to account for 35% of the world's total output in 2024. What a remarkable feat! The second to tenth largest economies combined are still smaller than China.

The key is that this trend is accelerating. International organizations predict that in 2030, five years from now, this proportion may even rise to 45%, and then to 10 percentage points.

From the recent tariff war, we can feel the strength of China's industrial power.

After two rounds of tariff wars between the United States and China, the average tariff rate on China has reached 50%. After another round of reciprocal tariffs imposed by other countries, the average tariff rate is now 20%.

There are only two scenarios for how these two forces will achieve long-term balance in the future.

The first scenario is from the perspective of American interests. Since China's industrial power is so strong, how can we match it in the future? They will try every possible means to undermine China's industrial power.

In fact, this is exactly what Trump did in the 2018 trade war. He attempted to dismantle the globalized industrial, supply, and value chains centered on China, establish near-shore trade, and eliminate China from the new global supply chain system.

However, the results have been far from ideal. Over the past five or six years, China's manufacturing sector's share of total output value has not decreased, but has actually risen by 5 percentage points.

From the perspective of the Chinese people, they certainly look forward to the great cause of national rejuvenation.

For the Chinese, there is only one choice, which is to greatly increase the weight of the RMB and RMB-denominated assets in the future global financial sector, and raise it to a position of equality that matches China's current super-strong position in industrial power.

This means that the right to speak on the future global financial and monetary order is facing an important reconstruction.

Today, the RMB has taken center stage and reached a historical juncture where it is competing with the financial power of the US dollar.

The second scenario: The Americans will never easily take off the crown from their heads and hand it over to China, and they will not easily sign a humiliating treaty.

He will definitely put up a fierce fight, struggle, resist, and redeem himself.

The United States has essentially made a decision. Since there is a mismatch between the two of us and a huge gap, how can we balance it in the future?

It is to allow the financial power of the United States to rise again, become strong again, and stand up to match the powerful industrial power of the Eastern giant.

The Stablecoin Act came into being in this context.

He tried to use the executive power that the Trump administration had already obtained to forcefully promote assets on the blockchain and cause a rapid expansion of the digital asset market.

It connects a rapidly expanding blockchain crypto asset market with the precarious fiat currency system represented by the US dollar and US Treasury bonds.

The connecting link is the stablecoin. One unit of stablecoin must correspond to one unit of fiat currency backing reserves or legally recognized fiat currency assets.

For example, there's a technology called stem cells. 🕸️ A body that's lost its desire to live is suddenly injected with stem cells. Stem cells are living cells that, when injected, can rejuvenate a weakened body in a short period of time.

Today, the foundation of the fiat currency system represented by the US dollar and US Treasury bonds is rotten and even facing collapse. I connect this with the rapidly expanding market for assets on the blockchain.

The reason why the market for blockchain assets is expanding and developing so rapidly is that advancements in technology and breakthroughs in AI supercomputing power have enabled the distributed computing rules built on blockchain to form a new trust mechanism. This trust mechanism is making it possible to replace the traditional fiat currency system backed by government credit.

The reason why Americans are able to push this forward is that breakthroughs in AI computing power have enabled the rapid advancement of blockchain technology.

Faced with this scenario, China must strive for the best outcome. Based on the interests of the Chinese people, we must strive for scenario one, but we must also pay close attention to our strategic opponents, so we must actively respond to scenario two.

From a realistic perspective, I think that cryptocurrency assets may enter a time window of exponential rapid expansion and development in the future.

Recently, a well-known investment fund in the United States released an important report with about 10 predictions, one of which was jaw-dropping.

In 2030, the price of Bitcoin will rise to 1.5 million US dollars per coin. It is currently 120,000 US dollars per coin, which means there is a 13-fold increase in room for growth.

You can imagine what the outcome would be. Bitcoin is already ranked fifth among major global assets, with a value of $2.4 trillion, second only to gold.

Five years later, the entire crypto asset class will be second only to U.S. Treasury bonds, and will compete with the top two assets in the global market.

It is a structure that competes with the fiat currency system. This is a possible important prediction for the next five years.

Judging by the surge in Bitcoin prices over the past two to three years, if blockchain assets and the US Treasury bond market, the largest fiat currency market, become rivals in five years, it's hard to imagine what the future monetary and financial landscape will look like. I'm afraid the time for disruptive change may have already arrived.

Why the global capital market was able to highly recognize and accept this logic in a short period of time? Because the logic of stablecoins is very clear.

As long as the blockchain asset market continues to expand rapidly, demand for stablecoins will continue to rise, and the stablecoin market will rapidly expand. This is because stablecoins are cash in the on-chain asset market. By backing stablecoins with fiat currencies or fiat assets specified by fiat currencies, the rapid expansion of stablecoin demand will also mean a rapid expansion of demand for U.S. Treasury bonds.

The logic behind these two intertwined concepts is easy to understand. The expansion of stablecoins stems not only from the expansion of virtual or crypto assets, but also from the real economy and trade. By tying stablecoins to the US dollar and US Treasury bonds, the ultimate goal is to reshape the foundation of the US dollar's power, reinforcing its position as the world's strongest financial power and solidifying it once again.

The role is to curb the internationalization of the RMB and the industrial power of the Eastern powers, so that the two forces can regain a stalemate.

I think Trump’s current second round of tariff strategy is very likely to be in line with the GENIUS Act. It is integrated, so for China we must respond actively.

As for China, my opinion is that it should walk on two legs. On the one hand, China has also made great efforts in the past few years to promote digital currency with the central bank as the main body, that is, the digitalization of legal currency.

Efforts in this direction will certainly promote the cross-border payment system of the RMB with the central bank's digital currency and improve the global clearing service network of the RMB. This is consistent with our logic of strengthening the dominance of the Chinese-made supply chain.

But this is far from enough. With the passage of the GENIUS Act, China needs to quickly take the next step. We must accelerate the development of the RMB-denominated cryptoasset market and proactively respond to challenges.

The RMB's crypto asset market and the onshore RMB market are still illegal.

We must quickly transform from a state of rejection to one of actively embracing and integrating into the trend.

Today, the RMB's share of global trade payments ranks second, but its share as a reserve currency is only fifth. This gap is huge.

Whether or not a currency can become an international currency depends crucially on its ability to accumulate assets denominated in it. To gain trust in the RMB, we must create sufficiently attractive RMB-denominated assets. Now that the cryptoasset market has opened up this space, it has entered a window of rapid expansion.

China must integrate into this trend; there is no other choice.

Musk made an important speech. He said that in today's AI era, currency has essentially transformed into a certain data structure and information structure used to transfer value in time and space.

Humanity may have really returned to ancient times, to the philosophical understanding of Greek philosophers 3,000 years ago, such as Peter Glass, who said that everything is a number and the origin of the world is numbers.

Because human technology has reached this level, it has become possible that everything is number. This fundamental philosophical proposition may become a reality today.

The time window for the rapid expansion of global crypto assets has opened. Whether the RMB can gain a say in the international monetary system in the future, its energy level leap, and its ability to accumulate assets depend largely on this.

So from another perspective, today's major Western powers are actively embracing RWA, RDA, financial disintermediation, DEFI and NFT. These realistic demands, in a sense, actually have the same purpose, which is to convert debt into debt and resolve the world-class debt dilemma accumulated by the traditional fiat currency system.

Today, China also faces profound challenges to its fiscal foundations. Real estate has entered its fifth year of a clear Kondratieff cycle since 2021. This means that the fiscal structure we established during the era of industrialization and urbanization, based on land premiums and land-based income, faces profound challenges.

Consider the magnitude of the future challenges facing the real estate industry. Therefore, our most pressing need is to quickly find a new source of income from alternative production factors, leverage this new fiscal foundation, and ultimately escape our current financial predicament.

Looking at the current technological era, the only direction for income from new production factors is data.

Data elements need to be monetized and capitalized, quickly, safely, and legally. However, there is only one technical path to capitalization: blockchain.

Through encryption through blockchain technology, data can become a secure asset, an asset that is acceptable in the real world and can be included in the balance sheet.

Therefore, China has found a window of hope to escape from its financial predicament, and this window of hope is RDA.

We acted very quickly. The Shanghai Data Exchange quickly launched the RDA standard last week. RDA is actually the soul of RWA.

China is vigorously promoting the future of RWA assets on-chain. The most important factor is how to effectively implement RDA. The rapid assetization of data revenue will reshape the overall macroeconomic balance sheet. This is likely a key path for China to escape the current deflationary cycle.

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