Stablecoins could transform how we exchange money. The United States and China want to take care of

Like a spatial race of the 21st century, the largest economic powers in the world are exercised in a little -known type of digital currency which could revolutionize – or seriously disturbed – the way people, businesses and countries exchange money.

Stablecoins are a type of cryptocurrency fixed to the national currency of a country or to products like gold. The idea is that their value is linked to a stable asset and is therefore less subject to volatility than ordinary crypto.

Consider it as a “digital dollar”: Stablecoins have a exchange rate one for one with their real twins, which investors keep in a reserve as guarantee against more volatile crypto types. Digital documents are designed to be converted into a material assets to which they are linked at any time, anywhere in the world and without additional costs.

“For the moment, obviously, the Stablecoins are not super popular. You cannot enter a loblaws and pay your races with stablecoins,” said Claire Wilson, Policy and Research Analyst at the Canadian Innovators Council.

“But it is conceivable that in the future, because they allow faster transactions and have lower transaction costs, that they could be more widely used.”

Months after the United States has adopted a regulatory framework giving companies clarity on how to issue and accept Stablecoins, China would have sought to do the same – expand the use of its own currency in the world and question the domination of the US dollar.

An emerging technology

Stablecoins have existed since 2014, when the American company Tether launched the first of its kind, linked to the US dollar. Although the currency has not yet entered the consumer use, “one of the largest use cases that supporters often mention is the funding of funds”, according to Wilson.

Champions say that stablecoins will make international money transfers less expensive – including immigrants who, while sending back funds to family members to their country of birth, are struck by Cross -border crossover costs.

“So, normally, if you often send money to Latin America (or) to Africa, banking costs are much less insignificant than sending money between, let’s say Canada and Germany,” said Wilson.

Stablecoins exist on a blockchain, which is a decentralized system that records and checks transactions between computers. Unlike traditional payment methods, there is no bank as an intermediary between point A and point B.

This makes the transfer of payments more quickly and more fluid – but criticism fear that stabrins, like other forms of crypto, can be used for illegal financial transactions because they bypass the traditional infrastructure that financial systems use to protect themselves against illegal activity.

It is also feared that coins, still largely not tested in public waters, could lead to an accident similar to a bank race. If Stablecoins has lost its value one by one, customers could lose confidence and rush to withdraw the stablecoins in physical dollars, which caused an accident. This is what happened with The collapse of the stable la terra-luna in 2022.

It is only recently that large countries have established regulatory executives to supervise the dissemination of stablecoins. The American President Donald Trump’s engineering law was adopted in July, opening the door to private companies to issue and accept stablecoins – but the legislation was also criticized by Democrats so as not to have measures to protect adequate fraud and corruption.

Now Amazon and Walmart are would have considered developing Their own stablecoins, just like large American banks like Jpmorgan Chase and Citigroup. Through the pond, the EU passed its own framework with Mica, or markets in the regulation of cryptocurrency, in 2023.

The case for the sovereignty of the stablescoin

The stablecoins are similar but distinct from the digital currencies issued by the central bank, which are issued by the central bank of a country and supported by the government. Nor are they the same as shares, such as the shares on Amazon or Apple, because they do not generate benefits over time.

In Europe and the United States, stablecoins have been classified as electronic coins, rather than titles, in their regulatory executives. Canada, on the other hand, recognizes digital parts as titles – which some consider a regulatory error that makes people difficult to issue stablecoins supported by Canadian assets.

“Canada, in general, is a completely suitable country for Fintech, but it is also cautious,” said Katrin Tinn, an associate professor of finance at McGill University. “Regarding discussions on the digital currencies of the Central Bank, it was among the very first central banks to explore and investigate it.”

But the Bank of Canada discreetly abandoned its Central Bank digital currency project last year, saying that it would rather focus on preparing payments’ evolution in Canada and all over the world by political research and analysis.

Currently, the majority of stablecoins are set to the US dollar, According to recent research of the bank for international regulations.

Other countries rush to regulate stablecoins so that they can go to bed against the domination of American frames as a question of national sovereignty, said Wilson.

The US dollar has been the global reserve currency of choice for years, but this reputation has been questioned earlier this year when foreign investors seemed to be withdrawn of the US Treasury obligations market. The secretary of the Treasury of the country Scott Bessent said That he thinks that stablecoins will strengthen the appeal of treasure bills.

This is where the problem of Canada countries towards China resides. “If you just have floors that are supported by the US dollar, people will want to buy them and they will withdraw money from your banking system and they will be stored in American reserves,” she said.

What could mean for the global economy

China made a big bet when it launched its digital part of the central bank in 2019, questioning private companies like Alipay and WeChat while they joined their complaint on the country’s digital payments market, according to Christian Catalini, the founder of the MIT cryptocurical laboratory and former Meta Fintech chief economist.

Now, the United States having adopted a regulatory framework for private companies to experience Stablecoins, “China probably realizes that the digital currencies of the Central Bank are perhaps not the right technological platform and they could be too slow (to develop),” said Catalini, who was part of the team behind the now deceased stable of Facebook, half.

“No government wants to use the infrastructure of another government,” he said.

Catalini argues that the United States has shaped the last decades of foreign policy and geopolitics with institutions such as the Society for Worldwide Interbank Financial Telecommunication (SWIFT) and by imposing sanctions on its opponents.

“But of course, China has greater ambitions and therefore that the role of China changes, I think you should expect more and more technologies from the East,” he said.

Could the China Yuan really question the domination of the US dollar? It’s extremely improbable – but “foreign things have happened,” said Catalini.

“As a rule, we have seen with major wars, with a major reshuffle of world economic order, new currencies can emerge as the norm.”