In 2025, China and the United States are deepening their rivalry in a new arena: digital currency infrastructure.
In May, Hong Kong passed landmark legislation to regulate fiat-referenced stablecoins, underscoring its ambition to become a digital finance hub and align with Beijing’s broader strategy to promote the digital yuan (e-CNY) as an alternative to the U.S. dollar.
Meanwhile, U.S. policymakers and fintech firms are ramping up efforts to expand the reach of dollar-backed stablecoins, reflecting a growing competition over who sets the rules of the emerging digital monetary order.
China’s Push for a Multipolar Currency System
China has been actively promoting the e-CNY, with the People’s Bank of China (PBOC) announcing plans to establish an international operation center for the digital yuan in Shanghai. This initiative aims to enhance the global presence of the e-CNY and reduce reliance on the U.S. dollar in international trade. The PBOC aims to integrate the e-CNY into supply chain financing and cross-border payments – particularly between mainland China and Hong Kong – where projected usage is expected to reach $8 billion in 2025.
Yet, analysts at J.P. Morgan maintain that the e-CNY is unlikely to erode the U.S. dollar’s dominance in global transactions, and the data tells a clear story. In 2022, the U.S. dollar accounted for 88 percent of global FX transactions, 70 percent of foreign currency debt issuance, and 48 percent of cross-border liabilities, while the Chinese yuan made up just 7 percent of FX turnover.
However, the e-CNY’s role in facilitating trade within the BRICS bloc and other emerging markets could gradually erode the dollar’s influence in specific regions. At the 2025 BRICS summit in Rio de Janeiro, leaders reaffirmed their commitment to de-dollarization, calling for alternative payment systems and criticizing unilateral dollar-based trade measures. The bloc has condemned unilateral tariffs, viewing them as harmful to global economic stability.
BRICS is actively exploring alternative payment systems, a strategy reflected in several concrete mechanisms. The New Development Bank has issued more than $2.1 billion in local currency loans to finance infrastructure and sustainable projects, reducing reliance on dollar funding, while the $100 billion Contingent Reserve Arrangement provides member countries with liquidity support in currencies other than the dollar, enhancing financial resilience.
Complementing this shift, China’s Cross-Border Interbank Payment System (CIPS) has expanded significantly, facilitating yuan-denominated trade settlements and interoperating with Russia’s SPFS system, thereby enabling some nations to circumvent the dollar-based SWIFT network. Trade data reinforces this trend: in 2024, China-Russia bilateral trade reached $218 billion, with a growing share settled in yuan and rubles, while India-Russia trade totaled $66 billion, much of it bypassing the dollar through local currency arrangements.
U.S. Stablecoins: Regulatory Clarity and Global Reach
In response to the rising importance of digital currencies, the U.S. Senate passed the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins) on June 17, by a bipartisan vote of 68-30, marking the first federal legal framework for payment stablecoins. This landmark legislation mandates that issuers fully back stablecoins with liquid assets, register with regulators, and meet transparency and audit requirements. Its passage is widely seen as solidifying the U.S. dollar’s dominance in the digital payments domain by ensuring regulated access to dollar-pegged stablecoins.
Meanwhile, Circle – the issuer of USDC, a stablecoin pegged to the U.S. dollar – is expanding globally. According to its 2025 State of the USDC Economy report, USDC circulation surged 78 percent year-over-year, surpassing $60 billion in active supply by early 2025, while total lifetime transactions exceeded $20 trillion, with a record $1 trillion in monthly volume in November 2024. USDC is now accessible to over 500 million users through more than 180 countries, supported by a growing network of global banking partnerships and cross-chain transfer protocols that facilitated over $20 billion in transfers across blockchains.
In a notable move, Ant International, the overseas arm of Jack Ma-backed Ant Group, is preparing to integrate USDC into its AntChain platform once the token meets U.S. regulatory standards under the GENIUS Act. That integration would connect USDC to Alipay’s massive 1 billion-plus user base and unlock new cross-border transaction capacity for regulated digital dollars.
This rapid growth – with regulatory clarity following the GENIUS Act – positions USDC as a powerful means of reinforcing the U.S. dollar’s digital supremacy across borders and industries. Its rising adoption among institutions and interoperability with platforms like Alipay and AntChain signal a convergence of U.S. stablecoin infrastructure with Chinese fintech reach, underpinning the dollar’s competitive edge in the emerging digital economy.
Implications for Global Finance
The escalating digital currency rivalry between the United States and China underscores a strategic contest for influence over the future of global finance. While China’s promotion of the e-CNY aims to establish a multipolar currency system, the U.S. is leveraging stablecoins to reinforce the dollar’s dominance in digital transactions.
This competition contributes to a fragmented global monetary landscape, where multiple digital currencies coexist, each backed by different geopolitical blocs. Such fragmentation may increase transaction costs and complicate international trade; however, it also reflects the evolving nature of global economic power structures.
Recent data illustrates this shifting landscape. The U.S. dollar’s share of global foreign exchange reserves declined from over 70 percent in the early 2000s to approximately 59 percent by the end of 2021, according to IMF COFER data, as countries – particularly within the BRICS bloc – pursue reserve diversification strategies. For example, central banks in emerging markets purchased over 244 metric tons of gold in the first quarter of 2025 alone, the highest quarterly volume in recent years, signaling a concerted effort to hedge against dollar dependence and enhance resilience against geopolitical and monetary shocks.
These reserve shifts point to deeper structural changes in global finance. Institutions like the IMF have cautioned that the payment efficiency gains of digital money may be “offset by financial safety-net challenges under stress,” especially in a world of diverging digital currency regimes. As the IMF warned in a 2024 policy note, “a shift to a multipolar reserve configuration may require global reserve issuers to expand liquidity backstops” – underscoring how digital fragmentation could undermine the very stability such technologies aim to enhance. S. Yash Kalash from the Center for International Governance Innovation similarly warned that diverging digital financial infrastructures could foster “fragmentation, capital flow volatility, and regulatory disjunctures,” particularly as countries build alliances around competing monetary technologies.
Empirical research supports this trend. A 2025 study by Antonis Ballis found that rising exposure to sanctions and declining trust in Western payment networks are accelerating adoption of systems like CIPS and bilateral central bank digital currency rails, reinforcing “digital fragmentation along geopolitical lines.” The study highlights that such networks are increasingly used not just for efficiency, but as hedges against dollar-denominated risk.
Echoing this, economist Kenneth Rogoff, Harvard professor and former chief economist of the IMF, sees today as the most significant inflection point in the global currency system since the end of the gold standard. He emphasized that, while the U.S. dollar is likely to lose market share – primarily to the yuan and to a lesser extent the euro – cryptocurrencies are already chipping away at the dollar’s underground economy dominance. This shift has been unfolding for over a decade due to the yuan’s increased flexibility and China’s development of alternative settlement systems. These trends have been accelerated by the Trump administration’s policies.
Rogoff suggested in an interview with Financial Times that the dollar will likely remain dominant in the short term but will face increasing challenges as the global monetary order evolves.
This transition is not without cost. For financial institutions, rising fragmentation may increase settlement frictions, heighten currency risk, and complicate regulatory compliance across jurisdictions. For emerging markets, it presents a dual-edged dynamic: the opportunity to bypass dollar-dominated chokepoints, but also the risk of entrenching new dependencies – this time on regional digital infrastructure and dominant tech-finance platforms. Global financial governance institutions such as the IMF have consistently warned that the uncoordinated proliferation of digital currencies could exacerbate liquidity mismatches and undermine systemic stability during times of geopolitical stress.
Ultimately, the digital currency race between the U.S. and China is more than a technological arms race – it represents the reordering of global monetary governance. As competing infrastructures harden into geopolitical blocs, the future of cross-border finance will likely be shaped not just by efficiency or innovation, but by which networks the world’s economies choose to trust. In this emerging era, the politics of interoperability, access, and sovereignty will define the contours of global finance more than ever before.
