China’s Dilemma: U.S. Stablecoins, the GENIUS Act, and the Battle for Monetary Sovereignty In "China Is Worried About Dollar‑Backed Stablecoins," Zongyuan Zoe Liu explores how the U.S. GENIUS Act—short for Guiding and Establishing National Innovation for U.S. Stablecoins—is reshaping global monetary dynamics and provoking deep concern in Beijing. The GENIUS Act formalizes a system in which U.S. banks can issue dollar‑backed stablecoins—digital tokens pegged to the dollar and backed one‑to‑one by real reserves. Because these tokens can be redeemed for dollars on demand, they may become cash‑equivalent financial instruments and could circulate outside the traditional banking system, even across borders, while sidestepping capital controls and remaining beyond the full scrutiny of any national government. The potential scale of this shift is striking. Some estimates suggest that up to $1.75 trillion in dollar‑backed stablecoins could enter circulation in the next few years. From China's perspective, these developments represent a serious political and economic threat. Dollar stablecoins offer global liquidity, programmability, and peer‑to‑peer anonymity. They could undermine China’s capital‑control regime and its carefully managed system of state‑directed financial flows. In effect, they may erode Beijing’s ability to enforce financial discipline and protect loyalty among elites. Although China pioneered crypto mining and trading early on, it has since banned most crypto activities citing illicit finance risks. Instead, it has focused on promoting blockchain under state control and launched its digital yuan (e‑CNY)—a highly surveilled, programmable central bank digital currency. In response, China appears to be testing a different model through Hong Kong: legislation now allows licensed entities to issue Hong Kong–dollar or offshore renminbi–pegged stablecoins under regulatory oversight. These tokenized currencies could circulate globally while retaining the reach of Beijing’s stability controls. With real‑name verification, digital ID integration, and programmable features, such stablecoins could preserve capital discipline while allowing offshore liquidity. Ultimately, Liu argues, China sees its digital currency strategy as one of centralized, controlled innovation—an architecture designed to reinforce, not relax, state control. In contrast, U.S. dollar stablecoins, propelled by the GENIUS Act, could gain dominance through scale and openness, posing both a challenge to China’s monetary sovereignty and a reflection of a broader geoeconomic rivalry. Source: This summary is based on the analysis by Zongyuan Zoe Liu, a columnist at Foreign Policy and the Maurice R. Greenberg Fellow for China Studies at the Council on Foreign Relations, in her August 19, 2025 article for Foreign Policy.