The United States' ambition to incorporate "digital currency": Continuing the dominance of the US dollar

The United States is striving to become the global "cryptocurrency capital" through comprehensive regulatory reforms and policy adjustments, a strategy that will profoundly impact the global financial landscape and the dominance of the US dollar.

According to news from the Chasing Wind Trading Desk, HSBC stated in its thematic report in June that for investors, whether digital assets shift from niche innovations to mainstream applications is critically influenced by the clarity of the regulatory environment. Analysts emphasize that although "regulation" may sound dull, establishing a clear and appropriate regulatory environment is crucial for the cryptocurrency industry.

HSBC highlights that stablecoins play a core role in the digital finance sector, and the US dollar's dominant position in the stablecoin market is a key advantage for the United States, while also posing challenges to the monetary sovereignty of other countries' central banks. Cryptocurrencies are at a critical turning point in transitioning from niche innovations to mainstream applications, and the US's proactive push may become the "catalyst" to accelerate this process.

Stablecoins are the Core of Digital Finance

Data statistics show that the current total market value of cryptocurrencies has reached $3.5 trillion, with Bitcoin exchange-traded funds (ETFs) managing over $100 billion in assets, and the number of global cryptocurrency users has reached 659 million.

HSBC states that while Bitcoin and Ethereum dominate most headlines in financial media, stablecoins are actually the dominant force in the digital finance sector: In 2024, the trading volume of stablecoins is expected to approach $28 trillion, and their "boring" low volatility makes them an attractive medium of exchange.

Two stablecoins dominate the market. The stablecoin "Tether" (USDT) accounts for 67% of the stablecoin market value. Another stablecoin called "USD Coin" (USDC) accounts for 26% of the market. Both are pegged to the US dollar at a 1:1 ratio. In fact, the US dollar is the primary pegged currency. Among stablecoins pegged to fiat currencies, the first non-dollar-pegged stablecoin ranks 17th, accounting for only 0.1% of the total market value.

Compared to traditional currencies (the US dollar), stablecoins provide a means for seamless participation in the digital asset space or "on-chain."

They essentially equate to cash for digital assets. They operate around the clock with rapid settlement. They can also generate yields, for example, by being lent out through centralized exchanges or invested in decentralized finance (DeFi) lending protocols. Moreover, not everyone has access to US dollars, and users can transfer stablecoins without intermediaries.

Stablecoins also enable cheaper and faster transactions, with a World Bank report indicating that the average cost of global remittances is 6.65% of the transaction value, while stablecoin transaction fees typically range from 0.5% to 3.0%. Currently, the U.S. Congress is advancing two key pieces of legislation: the Senate's GENIUS Act and the House's STABLE Act, both aimed at creating a regulatory framework for stablecoin payments.

These bills require stablecoin issuers to hold 100% reserve backing, and place regulatory responsibility primarily with banking regulators rather than market regulators. 99% of the stablecoin market value is pegged to the U.S. dollar, and this dominance may further solidify the dollar's status as a reserve currency in the digital finance space, while stimulating the development efforts of central bank digital currencies (CBDCs) in other regions.

Advantages of the U.S. in Building Cryptocurrency Hegemony

HSBC believes that the U.S. has a unique competitive advantage in the race for the title of global cryptocurrency center.

The scale of institutional investors is its greatest advantage, with North America accounting for 22% of global cryptocurrency activity, 70% of which comes from institutional funds. The innovation capability in digital assets is also prominent, as the U.S. has a strong technological infrastructure and talent pool for blockchain technology development. Venture capital support provides ample funding for innovation, with the U.S. accounting for 39% of global venture capital in the cryptocurrency sector in the first quarter of 2025.

The dominance of the U.S. dollar is particularly evident in the stablecoin sector, with 99% of stablecoin market value pegged to the dollar, reinforcing the dollar's status as a reserve currency in digital finance. The U.S. also possesses regulatory influence and reputation, with its regulatory decisions having a profound impact on global digital asset valuations and business models. In cryptocurrency mining, the U.S. accounts for 36% of global Bitcoin mining activity, ranking first in the world.

Regulatory Reform as a Key Breakthrough

HSBC emphasizes that regulatory transparency is key to achieving broader adoption of digital assets. The "Presidential Working Group on Digital Asset Markets," established by the Trump administration, will submit a regulatory reform plan within 180 days (by the end of July).

The core challenge of regulatory reform lies in creating a classification system for digital assets, clarifying who will regulate and the strictness of regulatory requirements.

Traditional financial regulatory frameworks cannot fully apply to digital assets, and regulators need to consider whether to build a regulatory framework suitable for digital assets from scratch. The Securities and Exchange Commission (SEC) cryptocurrency working group will address ten key areas, including the determination of securities status, public offerings, trading platform regulation, custody services, crypto lending, and tokenized securities.

It is noteworthy that the regulatory attitude of the new government has undergone a significant shift. The SEC has withdrawn lawsuits against several well-known cryptocurrency companies like Coinbase and abolished accounting rules requiring financial institutions to record custodial digital assets as liabilities, indicating that the regulatory environment is moving in a more favorable direction.

The FIT 21 Act provides a roadmap for industry regulation, categorizing digital assets into two types: digital commodities based on decentralization and restricted digital assets. This classification will clarify regulatory responsibilities and provide a clearer compliance path for innovators, investors, and exchanges.

Key Timing for Validation of Technology Adoption Theory

According to the theory of innovation diffusion, cryptocurrencies are currently at a critical turning point in transitioning from niche innovation to mainstream application. **The global cryptocurrency penetration rate is approximately 6-7%, primarily in the early adopter stage, while the penetration rate in the U.S. is about 17%, nearing the threshold for mainstream adoption **

The transition from early adopters to early majority is referred to as the "chasm," which requires safety, simplicity, and clear use cases as a bridge. The active push from the United States may become the "tipping point" to accelerate this process by providing regulatory clarity to build this bridge, thereby facilitating broader adoption of digital assets by traditional investors and enterprises.

Challenges and Competition Cannot Be Ignored

Despite the many advantages the United States has, it still faces significant challenges on the road to becoming the global cryptocurrency center. Regulatory complexity is the primary obstacle, as the involvement of multiple regulatory agencies may lead to regulatory turf wars or decision-making deadlocks. Legislative gridlock also poses risks, as Democrats express concerns about potential conflicts of interest for the president in the cryptocurrency space, which may affect bipartisan support for legislative reform.

The tension among traditional financial institutions is another challenge. Even if the regulatory environment improves, financial institutions may still remain cautious about anti-money laundering, crime, and terrorism financing risks. International competition is equally fierce; while the U.S. is preoccupied with regulatory turf wars, other regions of the world are advancing policies favorable to attracting the digital asset industry.

The European Union's Markets in Crypto-Assets (MiCA) regulation has already come into effect, providing a unified regulatory framework for its 27 member states. Regions such as Singapore, the UAE, and Hong Kong are also actively building crypto-friendly regulatory environments, all of which pose competitive pressure on the United States.

HSBC analysis believes that whether the U.S. can achieve its goal of becoming the global cryptocurrency center depends on its ability to successfully deliver a regulatory framework suitable for digital assets, which will serve as a catalyst for institutional clients and enterprises to adopt digital assets and blockchain technology more broadly.