The Stablecoin Dilemma Facing Every Non-US Economy

Hong Kong’s largest English-language newspaper published a pointed debate on stablecoins on March 25, as the city’s self-imposed March deadline for its first stablecoin licenses nears its end with no official word.

The conversation raises a question that every non-US jurisdiction now confronts: Does embracing dollar stablecoins deepen dependence on the very system many governments want to diversify away from?

The Dollar Paradox

The South China Morning Post paired Gary Liu, co-founder of Terminal 3 and former SCMP chief executive, with Liu Xiaochun, an economist at Shanghai Jiao Tong University.

Gary Liu argued that the GENIUS Act may have been the most consequential digital-asset policy move to date. With 99% of the $300 billion stablecoin market denominated in US dollars, legalization opened the door to institutional capital. Countries seeking to build parallel systems “are now facing a fast-closing window,” he said.

Liu Xiaochun offered a blunter reading. Washington banned CBDCs while legalizing stablecoins specifically to protect the crypto constituency’s revenue, he argued. A government digital dollar would have rendered private stablecoins redundant. He compared stablecoins to cheques or casino chips — representations of currency that still require conversion to fiat for real settlement.

Where Demand Actually Lives

The economist mapped stablecoin adoption in concrete terms. Workers in Turkey, Nigeria, and Argentina use dollar stablecoins to preserve value against depreciating local currencies. Tech firms pay offshore developers through stablecoins to bypass costly banking rails. Merchants trading with sanctioned nations route payments outside the banking system.

This is where the debate transcends China. Every emerging-market regulator faces the same paradox. Dollar stablecoins solve genuine cross-border friction — Gary Liu sized the remittance market at nearly $1 trillion annually — but each adoption cycle reinforces the dollar’s structural edge.

Hong Kong As Testing Ground

Both speakers treated the coming licenses as significant. “Hong Kong’s coming stablecoin licences are a good example of how ‘one country, two systems’ works,” Gary Liu said. Liu Xiaochun framed the city differently — as a pragmatic settlement hub for Chinese companies expanding into countries with volatile currencies and capital controls.

The HKMA reviewed 36 applications under the Stablecoins Ordinance enacted last August. HSBC, a Standard Chartered-led venture, and OSL Group are shortlisted. The regulator’s preference for bank-led issuers signals a bet on institutional credibility over speed. Mainland firms Ant Group and JD.com both withdrew under Beijing’s pressure — a reminder that “one country, two systems” has limits neither panelist dwelt on.

The timing matters. The GENIUS Act is reshaping global stablecoin flows, Russia is exploring its own stablecoin, and the EU is pushing euro alternatives under MiCA.

Hong Kong’s answer — regulated, bank-led, HKD-denominated but ultimately anchored to the dollar through the city’s currency peg — is pragmatic. But it confirms the very dynamic Gary Liu described: the window for building outside the dollar system is closing fast.