Introduction
At the 2025 China Digital Economy Development and Governance Academic Annual Conference held at Nankai University, Dr. Zhang Ming, Deputy Director of the Chinese Academy of Social Sciences' Finance Institute, delivered a pivotal keynote address. His presentation "The Impact of Digital Currencies on the International Monetary System" explored critical developments reshaping global finance through three primary digital currency types: cryptocurrencies, stablecoins, and central bank digital currencies (CBDCs).
Three Representative Digital Currencies: Characteristics and Prospects
1. Bitcoin (Cryptocurrency Archetype)
- Key Features: Decentralized, finite supply (21 million cap)
Limitations:
- Extreme price volatility (unsuitable as value standard)
- No economic adjustment capability
- Future Role: Primarily as speculative asset rather than functional currency
- Blockchain Potential: Underlying technology holds broader application value
2. Libra/Diem (Stablecoin Pioneer)
- Historical Context: Facebook's abandoned project created lasting ripple effects
- Market Impact: Catalyzed global stablecoin development despite termination
Current Stablecoin Categories:
- Fiat-collateralized (e.g., USDT, USDC)
- Commodity-pegged (e.g., gold-backed)
- Hybrid crypto-fiat models
👉 Why stablecoins are outpacing traditional CBDCs in adoption
3. Digital Yuan (CBDC Case Study)
- Current Design: M0 replacement only (cash equivalent)
Usage Constraints:
- Limited to retail transactions
- Minimal cross-border functionality
Evolution Requirements:
- M1 expansion (enterprise payments)
- M2 integration (financial market transactions)
- mBridge Potential: Emerging CBDC-based alternative to SWIFT
The Rising Dominance of Stablecoins
Market Growth
- 2024 Valuation: $170B (vs. $20B in 2017)
- Dollar Dominance: 80-90% USD-pegged stablecoins
Primary Functions:
- Cryptocurrency trading pairs
- DeFi liquidity provision
- Emerging market reserve assets
Systemic Implications
- Dollar Reinforcement: Virtual economy dollarization
- Payment Innovation: Blockchain-based settlement efficiencies
- Monetary Sovereignty Challenges: Developing nation currency substitution
Four Disruptions to the International Monetary System
Cross-Border Payment Revolution
- SWIFT bypass via blockchain validation
- Near-instant settlement vs. multi-day traditional transfers
Non-USD Currency Vulnerabilities
- "Stablecoin premium" phenomenon
- Novel dollarization pathways in high-inflation economies
CBDC Competition
- Nigeria's eNaira failure case study
- Political divergence in US digital currency approaches
Regulatory Complexities
- Mixer-enabled money laundering
- Issuer misconduct risks
China's Strategic Responses
Policy Recommendations
Digital Yuan Enhancement
- Expand to M1/M2 functionality
- Accelerate mBridge participation
Homegrown Stablecoin Development
- Leverage Tencent/Alibaba/TikTok global platforms
- Counter USD stablecoin dominance
Controlled Cryptocurrency Experiments
- Hong Kong crypto-asset pilots
- Potential Bitcoin reserve strategies
Multilateral Coordination
- Promote IMF e-SDR initiatives
- Advocate for monetary system diversification
FAQ Section
Q: Why can't Bitcoin function as real currency?
A: Its extreme volatility prevents reliable price measurement, while fixed supply eliminates monetary policy flexibility.
Q: How do stablecoins strengthen the US dollar?
A: By creating dollar-equivalent instruments in virtual economies, they extend USD's reach beyond traditional financial systems.
Q: What limits digital yuan's international use?
A: Its current M0 design restricts applications to small cash-like transactions rather than wholesale financial flows.
Q: Are stablecoins regulated like banks?
A: Most operate in regulatory gray areas, with varying reserve transparency and oversight standards globally.
👉 The future of digital currency regulation in 2025
Q: Can CBDCs replace stablecoins?
A: Not inherently - success depends on functionality design and adoption incentives beyond government mandates.
Q: How might digital currencies reduce remittance costs?
A: Blockchain-based transfers can eliminate correspondent banking layers, potentially cutting fees by 50-80%.
Conclusion
As digital currencies evolve from speculative assets to systemic components, their interaction with traditional monetary systems will define the next decade of global finance. China's strategic choices—from digital yuan enhancements to controlled crypto experimentation—will significantly influence whether the future monetary order remains dollar-centric or achieves genuine multipolarity.