Regulated Multicurrency Stablecoins Could Challenge the Dollar’s Crypto Dominance

Dollar Stablecoins Cement Crypto’s US Policy Exposure

Stablecoins initially served as a practical tool for crypto traders by pegging tokens to the US dollar, facilitating 24/7 liquidity in a nascent market. Over time, they have evolved beyond this function to form a foundational onchain financial layer where dollar-pegged coins dictate pricing, collateral standards, and risk tolerance.

This dominance carries risks: without credible, well-regulated alternatives denominated in the euro, yen, or offshore yuan, the US dollar’s supremacy will remain entrenched within crypto’s infrastructure. Consequently, crypto liquidity will closely mirror US interest rates and monetary policy, exacerbating market drawdowns linked to Treasury volatility and transmitting US policy shocks directly into decentralized finance (DeFi) ecosystems.

Europe and Japan Aim to Foster Native Stablecoin Liquidity

Recognizing the strategic vulnerability, European regulators and institutions are actively promoting euro-denominated stablecoins. Projects like EURAU, alongside MiCA-compliant tokens EURC and EURCV, represent initial steps toward establishing euro liquidity pools that can serve as base trading pairs. However, market adoption hinges on proactive liquidity provisioning and market-making efforts rather than mere regulatory frameworks.

Similarly, Japan is advancing its stablecoin ecosystem with initiatives such as Monex’s yen-backed stablecoin and JPYC’s regulatory approval, marking a significant milestone for regulated fiat-backed tokens in Asia. The effectiveness of these tokens will depend on their integration into everyday financial activities like remittances and supplier payments, transparent reserve management, and broad distribution across exchanges and wallets.

Hong Kong Provides a Regulatory Blueprint for Non-USD Stablecoins

Hong Kong’s recently implemented licensing regime is pivotal, offering a supervised pathway for stablecoins backed by non-USD currencies with mandatory reserve transparency, redemption rights, and disclosures. This framework initially targets the Hong Kong dollar but is adaptable to the offshore yuan (CNH), positioning Hong Kong as a critical hub for offshore yuan stablecoin pilots. The success of these initiatives will depend heavily on policy support and market liquidity development, as current CNH pools remain relatively shallow.

Criteria for Shifting Crypto’s Base Currency

For multicurrency stablecoins to disrupt the dollar’s dominance, they must become primary units of price discovery. This requires daily reserve audits meeting or exceeding standards set by established tokens like USDT and USDC, multichain issuance to enable seamless settlement without wrappers, and robust redemption service-level agreements to instill institutional confidence. Exchanges must actively list and incentivize non-USD base pairs, even if initial trading spreads are wider, to cultivate alternative pricing benchmarks.

Europe’s regulatory progress, combined with Hong Kong’s supervisory infrastructure and Japan’s growing stablecoin market, form a triad capable of gradually eroding the dollar’s onchain monopoly without expecting its immediate displacement.

Conclusion: Towards a Resilient, Multicurrency Crypto Ecosystem

Dollar-backed stablecoins will remain integral to crypto markets, but reliance on a single sovereign currency introduces systemic vulnerabilities. Emerging euro, yen, and offshore yuan stablecoins—underpinned by clear regulations and market incentives—offer a path to diversify crypto’s liquidity base. This diversification promises to reduce concentration risk tied to US monetary policy and enhance the robustness of DeFi and onchain finance.

The next phase in stablecoin evolution will reward jurisdictions and issuers that convert regulatory compliance into competitive liquidity provision, while penalizing those that default to reinforcing dollar hegemony by inertia.

Opinion by Jamie Elkaleh, Chief Marketing Officer at Bitget Wallet.