Stablecoins as Global Plumbing: The Strategic Tug-of-War Between US and China
Industry leaders Gary Liu and Liu Xiaochun examine the evolving role of stablecoins as the 'plumbing' of digital finance. As Hong Kong prepares to issue its first stablecoin licenses, the dialogue reveals a deepening strategic divide between the US and Chinese approaches to digital asset sovereignty.
Key Takeaways
- Industry leaders Gary Liu and Liu Xiaochun examine the evolving role of stablecoins as the 'plumbing' of digital finance.
- As Hong Kong prepares to issue its first stablecoin licenses, the dialogue reveals a deepening strategic divide between the US and Chinese approaches to digital asset sovereignty.
Mentioned
Key Intelligence
Key Facts
- 1Approximately 90% of current stablecoin use is dedicated to 'plumbing' for DeFi and digital asset trading.
- 2Hong Kong is set to issue its first batch of official stablecoin licenses to regulated entities.
- 3Derivative trading is identified as the primary 'killer use case' for blockchain technology today.
- 4Gary Liu serves as the chair of Web3 Harbour, a key industry association for the digital asset economy in Asia.
- 5Professor Liu Xiaochun holds senior roles at the Shanghai Advanced Institute of Finance and the China Academy of Financial Research.
Who's Affected
Analysis
The global financial landscape is witnessing a fundamental shift as stablecoins transition from speculative instruments to the essential 'plumbing' of the digital asset economy. In a recent dialogue hosted by the South China Morning Post, Gary Liu, CEO of Terminal 3, and Professor Liu Xiaochun of the Shanghai Advanced Institute of Finance, articulated a vision where stablecoins represent more than just a payment method—they are the foundational infrastructure for the next generation of finance. Currently, an estimated 90% of stablecoin volume is utilized for 'plumbing' within decentralized finance (DeFi), serving as the necessary pairing for nearly every digital asset transaction. This utility is driven by what Gary Liu identifies as the current 'killer use case' for blockchain: derivative trading and the ability to compose diverse, tradable assets on-chain.
The strategic importance of this technology cannot be overstated, particularly as Hong Kong nears a milestone in its regulatory journey. The city is expected to issue its first batch of stablecoin licenses, a move that signals a sophisticated approach to digital asset integration. For China, Hong Kong serves as a critical sandbox. By establishing a regulated stablecoin framework in the city, Beijing can observe the efficiencies of blockchain-based settlement and asset composition without immediately exposing the mainland's closed capital account to the volatility of the broader crypto market. This 'one country, two systems' approach to finance allows for the development of a digital yuan-adjacent ecosystem that could eventually challenge the dollar-denominated dominance of existing stablecoins like USDT and USDC.
Currently, an estimated 90% of stablecoin volume is utilized for 'plumbing' within decentralized finance (DeFi), serving as the necessary pairing for nearly every digital asset transaction.
Conversely, the United States continues to grapple with a fragmented regulatory environment, even as the majority of the world's stablecoin supply remains pegged to the US dollar. This creates a paradox where the US benefits from the increased demand for dollar-backed assets in the digital realm, yet lacks the comprehensive federal framework that jurisdictions like Hong Kong are rapidly deploying. The competition is no longer just about which technology is superior, but which regulatory regime can provide the most stability and trust for institutional players. As stablecoins move beyond the crypto-native 'plumbing' phase, they are poised to enter the realm of international trade and cross-border settlements, where speed and cost-efficiency offer a significant advantage over the traditional SWIFT system.
What to Watch
Professor Liu Xiaochun’s perspective highlights the academic and institutional caution prevalent in mainland China, where the focus remains on financial stability and the prevention of systemic risk. However, the recognition of stablecoins' potential in asset composition suggests that even conservative financial circles are beginning to value the programmability of money. The ability to 'wrap' real-world assets into digital tokens that can be traded 24/7 with instant settlement is a value proposition that traditional finance cannot ignore. This 'composability'—the ability for different financial protocols to interact seamlessly—is what will likely drive the next wave of adoption.
Looking forward, the industry should watch the performance of the first licensed stablecoin issuers in Hong Kong as a bellwether for global adoption. If these regulated entities can successfully bridge the gap between traditional banking and digital assets, it will provide a blueprint for other jurisdictions. The long-term implication is a bifurcated digital currency landscape: one side led by US-dollar-backed private stablecoins and the other by state-sanctioned or heavily regulated frameworks in Asia. The winner of this race will not necessarily be the one with the most volume today, but the one that successfully integrates stablecoins into the 'real economy' of global trade and investment.
Cite This Page
"Stablecoins as Global Plumbing: The Strategic Tug-of-War Between US and China." Crypto Intelligence Brief, March 25, 2026. https://getcryptobrief.com/story/stablecoin-regulation-china-us-hong-kong-analysis
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