China's first offshore renminbi stablecoin debuts, challenging the digital dominance of the US dollar.

With the intensifying competition of global stablecoins, the first regulated stablecoin linked to the international version of the Renminbi (CNH) and aimed at the forex market debuted this week in Hong Kong, marking a significant strategic layout for China in the digital currency domain. At the same time, the Korean Won (KRW) stablecoin has also been announced, further escalating the competitive landscape of Asia in the global digital currency arena.

Renminbi stablecoin AxCNH debuts at the "Belt and Road" Summit

According to Reuters report, financial technology company AnchorX launched its AxCNH stablecoin pegged to the Renminbi at the Belt and Road Summit held in Hong Kong, after Chinese regulatory authorities had introduced stablecoins to the international market.

The stablecoin aims to facilitate cross-border transactions with countries related to the "Belt and Road" initiative. The "Belt and Road" is an infrastructure project aimed at building physical roads connecting China with the Middle East and Europe, as well as establishing maritime trade routes with other regions.

This initiative is seen as an important step for China to expand the international influence of the Renminbi, especially in the digital economy and cross-border payment sectors.

KRW stablecoin launches simultaneously, intensifying competition in Asian digital currencies

(Source: BDACS)

The digital asset infrastructure company BDACS also announced the launch of a KRW1 stablecoin pegged to the Korean won.

KRW1 and AxCHN are both over-collateralized stablecoins, which means they are fully backed by deposits of fiat currency or government debt instruments held by custodians at a 1:1 ratio, ensuring their value stability and market trust.

Stablecoin: An Emerging Geostrategic Competitive Field

Stablecoins have now become a field of strategic geopolitical importance, as sovereign governments rush to place their fiat currencies on digital tracks to increase international demand for their currencies, hoping to offset the inflationary effects brought by currency printing.

The traditional financial system operates slowly and requires robust infrastructure that may not be available in developing regions, and certain jurisdictions impose currency controls, thereby suppressing the demand for fiat currency.

Placing fiat currency on a blockchain track that operates around the clock and has near-instant cross-border settlement capabilities can increase international demand by making it easier for ordinary people to access fiat currency, thereby offsetting price increases caused by currency inflation.

The Complex Relationship Between Stablecoins, Fiat Currencies, and Government Debt

Currency inflation leads to rising prices, as the demand for money is disproportionate to the additional supply created through printing. At a time when global government debt has reached an all-time high, U.S. government debt has surpassed the $37 trillion mark, and countries are looking for innovative ways to manage their debt burdens.

Issuers of over-collateralized stablecoins, such as Tether and Circle, support their digital fiat tokens by purchasing government debt instruments and cash assets, allowing anyone with a mobile phone and crypto wallet to use these tokens, thereby helping to address this issue.

Essentially, these companies provide a pathway for the majority of individuals globally to become indirect bond buyers, thereby facilitating the market for these assets, lowering the debt yields of national issuances, and alleviating the government's debt repayment burden.

Tether is currently one of the largest holders of U.S. Treasury bonds in the world, surpassing developed countries such as Canada, Norway, and Germany, demonstrating the growing influence of stablecoin issuers in the global financial system.

Future Outlook of Global Stablecoin Competition

With the launch of stablecoins in China and South Korea, the competitive landscape of the global stablecoin market is changing. These emerging regional stablecoins may challenge the dominance of the US dollar stablecoin and create new international use cases for their respective fiat currencies.

For investors and market participants, this development trend provides new opportunities for diversified portfolios and reduced currency risk, while also reflecting that the global financial system is evolving towards a more digitized and decentralized direction.