Opinions presented in this article represent diverse viewpoints and do not reflect the position of “WEB3+”
Battle for the Throne of Digital Currency
Four hundred years ago, Spain’s silver conquest of global trade established a currency hegemony, dominating the world! Today, stablecoins, the “digital cash,” have seen their market value soar to $200 billion, transforming global transactions. The US dollar stablecoin took the lead, capturing 80% of the market! China, not to be outdone, launched the digital yuan stablecoin and Hong Kong dollar stablecoin, challenging the US dollar’s digital throne!
As a novice investor in Hong Kong or Taiwan, are you curious: How will China’s strategy disrupt the market? How will this digital currency war shape the future? Join us as we explore this ultimate chess match, from history to the future! This article is for informational purposes only, not investment advice.
Challenges to the US Dollar Stablecoin: Why the Need for Digital Yuan and Hong Kong Dollar Stablecoins?
US dollar stablecoins (such as USDT, USDC) dominate 80% of market transactions, but they present three major problems for China and Hong Kong:
- Transactions are controlled by the US: Companies using US dollar stablecoins may be subject to US regulations (such as OFAC sanctions). If accounts are frozen due to political reasons, transactions come to a halt. It’s like using someone else’s bank card, and it could be locked at any time.
- Conversion is costly and troublesome: Hong Kong companies receiving USDT must first convert to US dollars and then to Hong Kong dollars, incurring fees as high as 0.7-1%, and it may take 2-3 days. For example, if an e-commerce business in Hong Kong receives USDT as payment and converts it to pay rent, the costs are high and the time is long.
- The yuan is hard to internationalize: The US dollar accounts for 58% of global foreign exchange reserves ([International Monetary Fund – Currency Composition]), while the yuan only makes up 2.5%. Chinese businesses are often forced to use US dollars, increasing fees and exchange rate risks. It’s like trying to buy something with Hong Kong dollars, but the store only accepts US dollars.
The digital yuan stablecoin and Hong Kong dollar stablecoin can solve these problems. The digital yuan stablecoin will facilitate faster and cheaper “Belt and Road” transactions, while the Hong Kong dollar stablecoin, backed by Hong Kong’s international trust, will attract global users and reduce US dollar control. But how can these two stablecoins gain global acceptance? Let’s look for answers in history.
Lessons from History: The Secrets to Resource and Network Hegemony
How does currency hegemony come about? Let’s look at three historical stories:
- 400 years ago, Spain controlled the silver mines of South America, producing 80% of the world’s silver, promoting silver coins via Manila galleons, and even the Ming dynasty in China used them for tax collection.
- In the 1800s, Britain used textile and railway technology to promote the British pound through London banks and colonies, backed by gold.
- Since the 1900s, the US has dominated global reserves, with the US dollar accounting for 58% of foreign exchange reserves through oil trade and military power.
The secret? Control key resources (like silver, machinery, oil) and trading networks (like galleons, colonies). Today, what resources and networks can China leverage to build a stablecoin hegemony?
China’s 3 Key Strategies: Rare Earths, the “Belt and Road” Initiative, and Hong Kong Blockchain Finance
We suggest that China can use three strategies to promote the digital yuan and Hong Kong dollar stablecoins, challenging the US dollar stablecoin hegemony. Each strategy focuses on controlling key resources or trading networks:
Rare Earth Trading:
- Key Resource: According to the 2024 International Energy Agency (IEA) report, China controls 90% of the world’s rare earth refining, supplying core materials for electric vehicles and AI chips, comparable to Spain’s silver.
- Why it Works: Rare earths are the lifeblood of technology. Offering settlement discounts will attract buyers and increase stablecoin usage.
- How it Works: If using digital yuan stablecoins for settlement, a 0.5-1% discount could be offered. For example, a Malaysian company buying rare earths using digital yuan stablecoins would pay only 0.1% in transaction fees, compared to 0.7% for US dollar settlements. The Hong Kong dollar stablecoin could help attract buyers unwilling to use yuan.
“Belt and Road” Initiative:
- Trading Network: The “Belt and Road” Initiative is expected to reach $2.5 trillion in transactions by 2024, covering over 140 countries, akin to Spain’s galleon network.
- Why it Works: The vast trade volume provides ample opportunities for stablecoin applications, and low-cost settlements increase circulation.
- How it Works: Primarily using digital yuan stablecoins for large projects. For example, a Pakistan “Belt and Road” port project pays Chinese companies with digital yuan stablecoins at a cost of 0.1%; the Hong Kong dollar stablecoin supports small transactions for Hong Kong enterprises.
Hong Kong Blockchain Finance:
- Trading Network: According to the 2024 Hong Kong Monetary Authority report, Hong Kong is the world’s third-largest financial center, processing 4% of cross-border payments. Its international network connects Asia with Europe and the Americas, similar to London’s global influence, offering efficient settlement (real-time payments) and high trust (currency peg system).
- Why it Works: As the third-largest global financial center, Hong Kong has a large user base and international network. Introducing traditional financial products (like bonds, trade finance) to blockchain and offering incentives for using the Hong Kong dollar stablecoin will attract global users and significantly increase its usage.
- How it Works: International investors can purchase Hong Kong digital bonds using Hong Kong dollar stablecoins, enjoying stable returns without the need to exchange into USDT. Hong Kong businesses can pay Southeast Asian suppliers with Hong Kong dollar stablecoins, with a transaction fee of just 0.3%.
Summary: Three Strategies to Promote Digital Yuan and Hong Kong Dollar Stablecoins
These three strategies, using rare earths (key resources) and the “Belt and Road” and Hong Kong’s financial network (trading networks), work together to promote the digital yuan and Hong Kong dollar stablecoins, replicating the historical model of currency hegemony.
How Digital Yuan and Hong Kong Dollar Stablecoins Support China’s Strategy
How do digital yuan stablecoins and Hong Kong dollar stablecoins complement China’s three major strategies? Here’s their role and complementarity:
Digital Yuan Stablecoin: Driving Rare Earths and the “Belt and Road” Initiative:
- Why Use for Rare Earths and “Belt and Road”? Backed by China’s economy (2024 GDP around $18 trillion), it is suitable for large-scale trade settlements. The 0.5-1% discount promotes internationalization of the yuan, reducing reliance on the dollar (58% of foreign reserves, [International Monetary Fund – Currency Composition]). Rare earths and “Belt and Road” require strong economic backing, and digital yuan stablecoins are the most suitable.
- Example: A Pakistani company uses digital yuan stablecoins to pay for a “Belt and Road” railway project, at a cost of 0.1%; a Malaysian company uses digital yuan stablecoins to buy rare earths, saving 0.7% compared to US dollar settlement fees.
- Limitations: The yuan accounts for only 2.5% of foreign reserves, and political resistance from Europe and the US makes it difficult to use.
Hong Kong Dollar Stablecoin: Promoting Hong Kong Blockchain Finance:
- Why Use for Hong Kong Blockchain Finance? As the world’s third-largest financial center, Hong Kong has a vast international trading network and 4% of cross-border payment share. Its currency peg system (HKD/USD 7.75-7.85) ensures currency stability, and its independent judicial system enhances international trust. After stablecoin regulation improves in 2025, using Hong Kong dollar stablecoins for digital bonds and trade finance with just a 0.3% transaction fee will attract global investors and enterprises.
- Example: International investors use Hong Kong dollar stablecoins to buy Hong Kong digital bonds, enjoying stable returns without converting to USDT; Hong Kong companies use Hong Kong dollar stablecoins to pay Southeast Asian suppliers with a transaction fee of just 0.3%.
- Limitations: Hong Kong’s small economy (2024 GDP about $400 billion) and limited Hong Kong dollar circulation (foreign reserves 0.1%) make it less suitable for large-scale trade.
Complementary Relationship: Together Overthrowing Hegemony:
The digital yuan stablecoin focuses on rare earths and large “Belt and Road” trade, providing transaction scenarios; the Hong Kong dollar stablecoin promotes blockchain finance, attracting international financial users. Funds flow between the two, expanding their influence together.
Hong Kong dollar stablecoins, with Hong Kong’s neutrality (independent judiciary), can bypass political resistance to the yuan and attract European and American users, indirectly supporting “Belt and Road” and rare earth trade.
Conclusion: Who Will Be the New Ruler of Digital Currency?
China is using rare earths, the “Belt and Road” initiative, and Hong Kong blockchain finance to push the digital yuan and Hong Kong dollar stablecoins, challenging the US dollar’s 80% market dominance! The digital yuan focuses on trade, while the Hong Kong dollar leads financial innovation, rewriting the future of currency. History teaches us that resources and networks determine victory. Will China become the new ruler? Novice investors, explore the stablecoin trends and catch the digital wave! Who will reign supreme? Leave a comment, share with friends, and let’s debate!