The digital currency quietly taking over the global financial system

This article appeared in the Australian Financial Review on June 16 2025.

The global financial system is undergoing its most profound transformation since the advent of electronic banking, with digital currencies rapidly rewriting the rules of international trade and payments.

At the heart of this shift are stablecoins – digital tokens pegged to traditional currencies – that have quietly grown into a US$250 billion market.

These blockchain-based instruments facilitate instant, round-the-clock payments and settlement – without relying on traditional banking networks such as SWIFT. In 2024 alone, stablecoins processed nearly US$28 trillion in transactions, surpassing Visa and Mastercard combined.

Strong financial background

Two distinct models have emerged globally. The US has embraced a market-led approach. Private-sector innovations such as Circle’s USDC and Tether’s USDT have become the de facto standard, creating what some analysts call a ‘digital dollarisation’ of finance. Legislation is now progressing to bring them under formal regulation, including reserve requirements and Treasury backing, cementing their role in the financial system. Policymakers see them as a way to extend US dollar dominance in the digital age.

China, by contrast, has banned privately issued crypto tokens and is promoting the e-CNY – its central bank digital currency (CBDC) – as a state-controlled alternative. Through pilot programs and cross-border trials, it is developing a digital yuan ecosystem that could offer an alternative to the dollar in Belt and Road trade corridors.

Hong Kong has emerged as Beijing’s testing ground for stablecoin innovation. On May 30, it enacted the world’s first bespoke stablecoin law. The Stablecoin Ordinance, which takes effect in August, creates a regulated framework for licensed issuers with strict requirements, including 100 per cent reserves and third-party custody. Early movers include JD Chain Technology, a subsidiary of Chinese tech giant JD.com, which is piloting Hong Kong dollar- and US dollar-pegged stablecoins, with plans for an offshore yuan version pending Beijing’s approval.

This two-tiered approach reflects China’s careful strategy: using Hong Kong as a bridge – fostering innovation in blockchain-based finance while promoting the internationalisation of the renminbi.

This quiet competition is more than technical. It signals a geopolitical scramble over who will control the infrastructure of money in global trade, increasingly conducted through programmable currencies. And it raises urgent questions for a trade-dependent economy like Australia.

Australia’s measured middle path

The Reserve Bank of Australia has taken a characteristically prudent approach to CBDCs, ruling out a retail eAUD for now while exploring wholesale applications through initiatives such as Project Acacia. This project examines how tokenised bank deposits could improve efficiency in wholesale financial markets.

The private sector has taken the lead in stablecoin development. In early 2023, NAB launched AUDN, a fully backed Australian dollar stablecoin. It was used in carbon credit trading and cross-border foreign exchange but was quietly shelved in 2024 due to limited uptake and internal risk concerns.

Former NAB executives have since launched Ubiquity, a fintech focused on stablecoin innovation outside the traditional banking sector. ANZ’s A$DC stablecoin has also been trialled for real-time superannuation compliance, aiming to speed up payments and improve transparency.

These examples show promise, but the lack of co-ordination risks fragmentation. Treasury is developing a regulatory framework for stablecoins and crypto exchanges under a new ‘stored-value facility’ regime, with draft legislation expected before year-end. Without clear regulatory signals and public-private alignment, digital money may either stall or shift offshore.

Why it matters

In an era where economic statecraft increasingly involves payment systems and financial sanctions, control over monetary infrastructure carries geopolitical weight.

Yet the window for Australia to act is narrowing. As global standards coalesce and network effects take hold, Australia risks being left with limited influence over systems that will nonetheless affect its prosperity.

This is not just about competition for innovative blockchain solutions. It’s about control over the monetary rails that underpin international commerce. In the near future, iron ore exports to China could be settled in e-CNY or via stablecoin networks, bypassing traditional banks and SWIFT.

If Australia’s systems aren’t compatible, exporters could face higher costs, slower settlement, or exclusion from preferred trade. There’s also a sovereignty risk: if stablecoin infrastructure in Australia becomes dominated by foreign-issued tokens operating on foreign-controlled digital rails, the Reserve Bank’s ability to manage liquidity and maintain financial stability could be compromised.

What Australia should do

For Australia to maintain its position as a regional financial leader, several steps are critical:

• Finalise the stablecoin regulatory framework. This will provide certainty for investors while mitigating risks. The proposed ‘stored-value facility’ regime overseen by APRA strikes a reasonable balance, but delays could stifle innovation.
• Accelerate wholesale CBDC development for applications in cross-border transactions. This could position Australian banks to participate in next-generation global financial infrastructure.
• Engage regionally. Deeper co-ordination through forums like ASEAN and RCEP can help shape emerging standards for digital finance, ensuring they reflect Australian interests and values.
• Support public-private pilots. Trials in programmable money for trade finance, energy markets, and tokenised assets will build institutional capability and inform policy.

As global trade moves onto digital rails powered by stablecoins and CBDCs, Australia must step up its infrastructure and regulation – or risk losing its edge.