The global digital currency landscape is undergoing new shifts, with regulatory frameworks, financial attributes, and patterns of competition all experiencing significant change. Image generated by AI

At present, the rapid development of digital technologies is driving the evolution of money from physical currency to digital currency. The global digital currency landscape is undergoing new shifts, with regulatory frameworks, financial attributes, and patterns of competition all experiencing significant change. Looking ahead, the ability to anticipate the trajectory of digital currency development and seize strategic initiative will be critical to safeguarding China’s monetary sovereignty in the digital economy era, and thus warrants close attention.

Global regulation moving toward legitimacy and compliance

Digital currency encompasses cryptocurrencies represented by Bitcoin, stablecoins pegged to real assets, and central bank digital currencies (CBDCs) backed by sovereign credit. With the European Union’s regulation on markets in crypto-assets (MiCA) officially entering into force, the US announcing the creation of a strategic Bitcoin reserve and digital asset reserve, and the International Monetary Fund including cryptocurrencies and other digital assets in its balance of payments for the first time, global regulatory attitudes toward digital currencies are shifting dramatically, moving beyond strict risk control toward standardized and guided oversight across three main dimensions.

First, regulation is moving from ambiguity to classification. Major economies have moved away from the early stage of vague supervision and have begun to establish targeted regulatory frameworks based on the classification of digital currencies. In the EU, the MiCA regulation classifies crypto-assets into electronic money tokens pegged to a single fiat currency, asset-referenced tokens backed by baskets of assets, and utility tokens designed for specific services. Fully decentralized assets, non-fungible tokens (NFTs), CBDCs, and security tokens fall outside MiCA’s scope. In the US, the creation of strategic Bitcoin and digital asset reserves has been accompanied by the GENIUS Act, which brings stablecoins under federal supervision while prohibiting CBDCs altogether. Going forward, digital currency regulation will be marked by the coexistence of regional frameworks, posing challenges in terms of cross-border and intra-regional classification standards, regulatory intensity, and allocation of responsibilities.

Second, regulators are balancing legal red lines with market access thresholds. In terms of legal red lines, anti-money laundering and counter-terrorist financing have become mandatory components of global regulatory frameworks. Economies practicing classification-based regulation all require crypto-asset service providers to conduct client due diligence and file suspicious transaction reports. On market access, most economies have adopted licensing systems to strengthen entry supervision. In the EU, MiCA sets entry standards for different crypto-assets based on registration location, outstanding obligations, and disclosure requirements. In the US, firms dealing in cryptocurrencies or stablecoins must obtain state-level money transmitter licenses or specific permits, while exchanges offering crypto-derivatives must secure derivatives clearing and designated contract market licenses. The Hong Kong Special Administrative Region (SAR), Singapore, and Canada have also established similar licensing regimes. While legal red lines for regulating digital currencies are likely to converge globally, entry thresholds will steer markets toward standardized operations.

Third, stablecoins have become a regulatory priority. The use of stablecoins for cross-border payments and decentralized finance has risen rapidly, attracting global regulatory attention. In the EU, MiCA requires issuers to maintain 100% asset reserves, limits everyday payment use to euro-denominated stablecoins, and bans algorithmic stablecoins. In the US, the GENIUS Act mandates a 1:1 reserve backing, allocates supervisory responsibilities between federal and state authorities, and establishes a unified legal framework for stablecoins. In the Hong Kong SAR, the Stablecoins Bill explicitly classifies stablecoins as products, distinct from cryptocurrencies like Bitcoin, with regulation focused on issuers’ solvency and transparency. Globally, the regulatory emphasis for stablecoins lies in setting entry thresholds, ensuring transparency and risk segregation of reserves, and addressing regulatory fragmentation.

Integration of the virtual and the real reshaping traditional finance

The penetration of digital currency into the traditional financial system is becoming increasingly evident, driving disruptive transformations.

First, traditional financial institutions are actively expanding into the digital currency space. They are increasingly engaging in cryptocurrency investment, stablecoin issuance, and CBDC development. In the crypto market, traditional institutions are increasing Bitcoin exposure through exchange-traded funds, trusts, and other compliant channels. In stablecoins, Société Générale, PayPal, BlackRock, and VanEck have already issued stablecoin products, while Fidelity and J. P. Morgan have launched stablecoin pilot tests. In CBDCs, the Bank of Korea has begun wholesale payment trials, the European Central Bank’s digital euro is scheduled for review in October 2025, and the Central Bank of the UAE plans to launch a retail CBDC in Q4 2025. Through these activities, traditional financial institutions are leveraging digital currency to enter the virtual economy, while also digitally transforming their existing business models.

Second, tokenization of real-world assets (RWA) is enhancing liquidity in traditional finance. RWA tokenization not only lowers barriers to investment but also dramatically increases capital turnover, becoming a key tool for supplementing liquidity in traditional finance. In China, the energy sector—such as photovoltaic plants and charging stations—has become the main arena for tokenization, owing to its large asset base, mature IoT infrastructure, and verifiable data. Abroad, USD stablecoins already serve as liquidity substitutes for the dollar in decentralized finance and in countries lacking full monetary sovereignty. RWA tokenization is reshaping traditional financial paradigms, and RWA-backed digital currencies are further bridging the gap between the virtual and real economies.

Third, digital currencies are accelerating the restructuring of international financial infrastructure. Stablecoins enable multi-tier service providers to process payments around the clock, at low cost and with transparency. Their fiat convertibility supports peer-to-peer cross-border transactions, addressing the traditional system’s issues of high fees, long settlement time, and complex intermediation. Some stablecoin issuers also distribute interest or yields from reserve assets to holders, drawing idle funds away from legacy systems. CBDCs, meanwhile, are building new payment networks on distributed ledger technology, enhanced by interoperability standards across different CBDCs. This improves cross-border transaction efficiency, reduces settlement costs, strengthens traceability, and bolsters regulatory oversight. The broader implications of digital currency for international finance can be summarized as technological innovation and institutional restructuring. Blockchain technology is poised to be deeply embedded in the new international financial infrastructure, leading to a significant improvement in payment and settlement efficiency, while increasingly relying on diversified currency baskets.

Intensifying competition for monetary sovereignty

Digital currencies are evolving along three distinct paths: the CBDC-led trajectory represented by China, the cryptocurrency–stablecoin path represented by the US, and the diversified model pursued by the EU. As these approaches diverge, competition for global monetary sovereignty is entering a critical phase, with three features standing out.

First, the digital renminbi leads global CBDC development and enjoys a clear first-mover advantage. Domestically, e-CNY covers a wide range of applications, including payments, taxation, and utilities. Internationally, it is expanding cross-border settlement through the mBridge project and the Cross-border Interbank Payment System, promoting a new multilateral order in international payments. With the US withdrawing from CBDC competition, China faces a crucial window to internationalize the e-CNY. Leveraging its technological strengths, depth of application, and growing international reach, the e-CNY could become a powerful tool in challenging dollar hegemony. Looking ahead, it is poised to play a greater role in cross-border settlements, reserve allocation, and trade cooperation, thereby accelerating the multipolarization of the international monetary system.

Second, the “cryptocurrency + stablecoin” model is nurturing a new form of dollar hegemony. The US seeks to construct a crypto-dollar regime anchored in strategic Bitcoin reserves and circulating through dollar-denominated stablecoins, while shaping global crypto-asset standards to reinforce the dollar’s dominance in the digital economy era. Going forward, dollar-backed stablecoins will directly compete with CBDCs such as the e-CNY, with the two models contesting in technological innovation, market application, and regulatory compliance.

Third, the EU is constructing its defense of monetary sovereignty through a diversified path. Europe has long been constrained in payments by US-led financial and technology firms, and the rise of dollar stablecoins has heightened its concerns regarding autonomy and financial security. At the same time, the advancement of the digital renminbi has intensified Europe’s sense of monetary competition. In response, the EU has adopted a multipronged digital currency strategy. Through MiCA, it regulates and guides the development of cryptocurrencies and stablecoins, while supporting euro-denominated stablecoins. Meanwhile, the digital euro project aims to strengthen payment integration within the eurozone and reinforce the euro’s sovereign role. From a long-term perspective, although comprehensive and targeted, the EU’s digital currency policies are less competitive than those of China or the US in specific domains, leaving it in a defensive posture of preserving monetary sovereignty. In the future, multiple types of digital currencies may circulate within Europe, giving it a certain degree of competitiveness in the global ecosystem, while also positioning it as a potential partner courted by both China and the US. Ultimately, however, the EU’s influence in the digital currency domain will depend not only on external competition but also on the stability of cooperation within the eurozone itself.

Tian Kan is director of the Credit Research Center at the National Academy of Economic Strategy under the Chinese Academy of Social Sciences.