Between Dollar Hegemony and National Power: How China and Europe Choose Different Paths to Secure Their Financial Sovereignty

The debate over private stablecoins has reached a global dimension in recent months. While private companies like Tether are increasingly diverting capital flows from traditional financial systems with their US dollar-pegged tokens, economic blocs are responding with completely divergent strategies. Europe is trying to compete on the same playing field, while China has opened up a radically new path.

The Puzzle of the European Money Circulation

European regulators are confronted with a paradoxical phenomenon: despite massive investments in economic stimulus—ranging from billion-euro subsidies for household appliances to hundreds of billions of euros for electric mobility promotion—the general population does not experience a noticeable increase in prosperity.

The reason does not lie in the economic policy itself but in its redirection. Business leaders and wealthy private individuals who have received these government funds are not converting the money into local consumption but into US dollar stablecoins like USDT (issued by Tether). This capital systematically leaves the European banking system and disappears in the USA—without European authorities having access.

Privately issued stablecoins function as “vouchers” without an international regulatory framework and without reporting obligations. They create an “invisible channel” for asset flight that traditional supervisory mechanisms cannot penetrate. The result: Europe loses purchasing power while the USA freely accumulates assets from around the world.

Two Contrasting Responses to Dollar Dominance

Europe’s Strategy: Competition within the Same System

On September 25, nine major European banks, led by Deutsche Bank, founded a consortium to issue a euro-pegged stablecoin. This is essentially a “counterbalance” approach: the EU responds to private dollar stablecoins with its own euro tokens. The purpose is clear—retain domestic capital and reduce dependence on US instruments. The strategy aims to preserve the monetary autonomy of the euro but operates within the existing US-influenced financial system.

China’s Approach: Building an Independent System

Meanwhile, Shanghai launched an international operations center for the digital yuan on the same day—a fundamental difference from the European response. The digital yuan is not issued by private companies but by the state. It carries legal tender status and government-backed credit, similar to physical currency. All payment transactions run through China’s sovereign system, without US intervention.

For international companies excluded from the dollar system due to US sanctions, the digital yuan offers a secure alternative with state credibility. It enables not only efficient cross-border payments with low fees but also capital flows into US-sanctioned countries—all within a framework of regulatory compliance. This breaks the boundaries of the US-dominated financial system as it currently exists.

The Philosophical Differences

Europe’s defensive strategy remains reactive: it competes on the other’s playing field. China, on the other hand, leaves this playground entirely and creates a new infrastructure. Both approaches address the same issue—the diminishing financial sovereignty—but with different means:

• Europe: Create substitute products of the same kind to slow capital outflows
• China: Build an alternative, decentralized financial system

In the long term, it is not about stablecoins per se but about who shapes the global financial architecture. The era of dollar hegemony without alternatives is coming to an end.