Commentary by Jamie Elkaleh, Chief Marketing Officer, Bitget Wallet
Originally, stablecoins provided a solution for cryptocurrency traders. By linking these digital assets to the U.S. dollar, they ensured available funds in a market functioning around the clock. Swiftly, their function broadened significantly, leading to a financial ecosystem built on blockchain where dollar-pegged assets dictate pricing, collateral standards, and risk tolerance.
The core risk is this: A future dominated by the U.S. dollar in crypto is likely unless dependable, regulated alternatives in euros, yen, and offshore yuan emerge and thrive.
This situation could make liquidity closely tied to U.S. interest rates and monetary policy, intensifying market dips during Treasury market instability and directly transmitting Washington’s policy shocks into decentralized finance (DeFi).
The effect of traditional finance is already seen in the crypto world, driven by dollar-based tokens. Although specific figures shift quarterly, the underlying structure remains constant: reserves are kept in U.S. government money markets, linking crypto liquidity to U.S. rates.
While effective and transparent, this setup concentrates significant macro risk through a single nation’s financial markets. Treating this single point of failure as neutral is a deliberate choice that the crypto sector needs to rectify as it builds its future infrastructure.
Europe and Japan: Converting Policy into Market Liquidity
Europe isn’t just talking about the issue anymore. To challenge dollar stablecoins as the rule-setters of on-chain finance, the euro needs significant market presence, not just conceptual frameworks. EURAU represents the initial test: can euro liquidity reach depth and become a fundamental trading pair? The existence of EURC and EURCV, both compliant with MiCA regulation, provides the framework, but active market making is essential to stimulate euro-based trading activity.
Regulatory agencies need to proactively back specific initiatives and ensure sufficient liquidity, rather than simply providing guidelines. Otherwise, “strategic autonomy” risks becoming an empty promise.
The European Central Bank has frankly acknowledged the issue: dependence on dollar stablecoins undermines euro autonomy, highlighting the urgent need for euro-based infrastructure.
Related: ECB president advocates addressing risks from stablecoins not based in the EU
Japan is following a similar approach. Monex, a fintech group, is planning the introduction of a yen-backed stablecoin, and JPYC recently secured approval, becoming one of the first regulated fiat-backed tokens in Asia. However, for this initiative to truly be impactful, the JPY token must facilitate remittances, supplier payments, and become a key base pair on major exchanges. It needs to show strict reserve transparency and wide distribution via exchanges, PSPs, and wallets to become more than just a compliant pilot.
Hong Kong: A Testing Ground for Alternatives to USD
Hong Kong’s new licensing framework is significant as it establishes a regulated path for non-USD tokens featuring verifiable reserves, redemption mechanisms, and transparency requirements—the very characteristics Europe and Japan need to function during Asian trading hours.
While initially focusing on the Hong Kong dollar, the framework could accommodate the offshore yuan (CNH), making Hong Kong the logical testing location for an offshore-yuan trial that can be observed and expanded. Success will depend more on policy than on code. Since CNH pools lack sufficient depth, a licensed CNH token will offer a useful bridge until improved liquidity and more cost-effective hedging solutions are established.
What is Needed to Alter Base Pair Dynamics?
Non-USD tokens will only matter if they become primary pricing benchmarks. This requires daily reserve disclosures and independent audits surpassing the standards of USDT/USDC. Native multichain issuance, ensuring settlement without wrappers, coupled with firm redemption SLAs, enabling institutions to readily fund in euros or yen overnight, is crucial. Exchanges should encourage non-USD base pairs with direct incentives, even during periods of broader spreads, to promote price discovery that is detached from the U.S. dollar.
Europe possesses the initial two essential components: a regulatory-approved pipeline of issuers and a central bank openly advocating for euro-based infrastructure. Hong Kong adds the third critical piece: a jurisdiction capable of licensing and regulating issuers catering to Asian trading hours, with clear mandates regarding reserves and operational conduct. Together, these elements can erode the dollar’s dominance within the blockchain ecosystem without entirely displacing it.
The Broader Perspective: Multicurrency Infrastructure
Dollar stablecoins will persist, and they should. However, relying on a single currency for the base layer would weaken crypto’s resilience instead of increasing its openness. The approval of Europe’s EURAU demonstrates how policy can generate liquidity. Japan’s licensing trend expands regional reach, and Hong Kong’s regulatory framework creates the necessary testing environment to ascertain if non-USD infrastructures can handle significant transaction volumes.
If euro and yen liquidity strengthen on exchanges—with transparent and licensed CNH tokens joining them—pricing, collateral management, and funding on-chain will extend beyond the influence of a single nation’s monetary policies. This reduces concentration risk without compromising speed or composability. The forthcoming market cycle will reward issuers and regions that turn regulatory compliance into competitive FX liquidity while penalizing those that inadvertently re-establish dollar dominance.
Commentary by Jamie Elkaleh, Chief Marketing Officer, Bitget Wallet.
This article is provided for informational purposes only and should not be regarded as, or relied upon as, legal or investment guidance. The viewpoints, ideas, and opinions articulated herein belong solely to the author and do not necessarily reflect the positions or opinions of Cointelegraph.
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