When China declared all crypto-related transactions illegal in 2021, it wasn’t merely a regulatory move—it was a statement about control. The rise of stablecoins, especially those pegged to the US dollar, represents not just a technical challenge but a geopolitical dilemma. In Beijing’s eyes, a freely circulating dollar-backed token threatens to quietly erode the state’s tight grip on its capital borders.
In the years since that sweeping crackdown, China’s policy has only hardened. Although individuals are still allowed to hold cryptocurrencies as virtual property, using them for payments, trading, or fundraising is forbidden. It’s not the technology per se that unnerves Chinese regulators—it’s the autonomy it offers.
| Issue | Countries Banning Stablecoins | Countries Embracing Stablecoins |
|---|---|---|
| Monetary Sovereignty | China, Algeria | USA, Japan, EU |
| Financial Stability Concerns | Nigeria, Turkey | UK, Singapore |
| Regulatory Framework | Total or partial bans | GENIUS Act (USA), MiCA (EU) |
| Capital Controls | Used to prevent capital flight | Stablecoins used to promote inclusion |
| Use in Illicit Activity | Justification for restriction | Regulated platforms required to comply with AML/KYC |
Stablecoins, by design, are a paradox. They promise stability while riding on decentralized rails. In countries where economic volatility is routine, that promise feels particularly alluring. In Argentina and Venezuela, for example, USDT—the Tether stablecoin—is often used informally as a hedge against inflation. It’s not legally sanctioned, but it’s undeniably useful.
This is where the divide begins. Nations that already struggle to maintain trust in their currency often face a stark choice: block stablecoins outright or cautiously integrate them. Nigeria’s central bank tried to clamp down in 2021, banning banks from facilitating crypto transactions. Yet by 2023, the tone had softened. Peer-to-peer platforms kept growing, and young Nigerians found ways around the restrictions.
By contrast, the European Union opted for structure over prohibition. The MiCA framework, which came into full effect in 2025, forces stablecoin issuers to meet strict reserve and licensing rules. This isn’t about surrendering sovereignty—it’s about preserving it through regulation.
That’s an argument increasingly echoed in Washington. The U.S. GENIUS Act—signed into law in July 2025—requires stablecoin issuers to hold sufficient reserves and comply with anti-money laundering laws. It doesn’t ban the technology. It harnesses it.
I remember reading the language of the act and thinking—not without surprise—that it was both rigorous and unusually bipartisan. That rarely happens in American financial legislation.
Stablecoins now serve as a kind of test case for how governments balance openness with oversight. Singapore, for instance, has become a regional hub by implementing rules that allow stablecoin innovation while safeguarding consumers. It’s a calculated openness, shaped by prudence.
Japan took a different but equally intentional path. Only banks and trust companies are permitted to issue stablecoins, and they must be fully backed by yen. That level of specificity reflects how seriously the country takes monetary integrity. There’s no room for algorithmic guessing games here.
The caution is not without justification. When TerraUSD collapsed in 2022, wiping billions from the crypto market, it was a wake-up call. The so-called “algorithmic” stablecoin wasn’t backed by real assets, and when confidence cracked, the fall was brutal. For regulators, it reinforced a long-standing fear: when a digital currency pretends to be stable but isn’t, the fallout is swift and messy.
But banning stablecoins entirely isn’t a one-size-fits-all solution. In parts of Sub-Saharan Africa, where traditional banking services are scarce, stablecoins are increasingly seen as a bridge—not a threat. They enable cross-border payments, remittances, and even basic savings. Governments there walk a delicate line, wary of destabilization but mindful of opportunity.
Meanwhile, countries like China are doubling down on their own alternatives. The digital yuan, rolled out through state-backed pilots, gives Beijing a digital currency without ceding control. It’s programmable, traceable, and firmly within the state’s grasp. But it’s also, by design, the antithesis of stablecoins like USDC.
There’s a broader ideological divide at play. Stablecoins question who gets to define money in the digital era. If a private company can issue a dollar-backed token, is it competing with the Federal Reserve? Or is it simply providing a tool the Fed hasn’t offered yet?
U.S. policymakers are split. Some argue that dollar stablecoins actually strengthen the dollar’s dominance globally. Others fear they weaken the Fed’s ability to set interest rates and control the money supply. Both sides may be right.
The stakes aren’t just economic. They’re geopolitical. As more countries explore Central Bank Digital Currencies (CBDCs), stablecoins have become a kind of proxy battleground. Supporters say they’re remarkably effective for remittances and trade. Critics warn they’re alarmingly unregulated.
What’s becoming clear is that no nation wants to be caught flat-footed. Whether through bans, frameworks, or alternatives, governments are acting decisively. Stablecoins have forced their hands.
For now, the global map remains uneven. Some countries are building regulatory sandboxes. Others are erecting walls. And in between, the stablecoin market keeps growing—quietly reshaping how people, especially in vulnerable economies, think about money.
The next chapter may not be decided by central banks alone. It might be written by the engineers who build the rails, the consumers who trust them, and the regulators who choose, with varying degrees of urgency, to respond.
