On July 3, the School of Economics at Fudan University held the third session of the Nantou International Financial Policy Roundtable, which is also the second discussion in the series on stablecoins, with the theme "Stablecoin Issues from an Interdisciplinary Perspective."
At the roundtable, Professor Zhu Jiejin from the Department of International Politics at the School of International Relations and Public Affairs at Fudan University analyzed the deep connection between the development of stablecoins and the U.S. dollar hegemony, pointing out that the rise of stablecoins in cross-border payments may have a structural impact on the international monetary system, and to some extent, could weaken the U.S. dollar's hegemonic position.
Zhu Jiejin believes that the establishment of U.S. dollar hegemony began with the Bretton Woods system, where the "power" and "virtual power" of the United States supported the U.S.-led international monetary order. However, after the "Nixon Shock" in 1971, although the dollar was no longer tied to gold, it continued its hegemony through the network effects of the SWIFT system and the authorization of the international governance system, i.e., "virtual power." Currently, the U.S. promotes the development of stablecoins, and while the U.S. government claims it aims to consolidate the dollar's hegemonic position, this move may actually weaken the SWIFT system and the traditional advantages of the entire U.S. dollar hegemony, posing a risk of "self-destruction."
The following is the full text of Zhu Jiejin's speech:
After receiving Professor Yang's invitation, I found during my preparation that although I had not previously focused specifically on stablecoins, some of my research was related to this field. It mainly involves stablecoins and cross-border payment issues. In addition, the U.S. dollar hegemony is also an important issue in international politics.
The U.S. dollar is a key element for the U.S. to exercise hegemony. The establishment of U.S. dollar hegemony can be traced back to when it became an international reserve currency. At the Bretton Woods Conference after World War II, the U.S. became the supporter due to its strength at that time. Since gold was no longer suitable as a currency anchor, and the U.S. contribution to the anti-fascist alliance and security made it widely recognized, the U.S. dollar became the international reserve currency. As the "leader," the U.S. needed to bear the responsibility of "dual linkage," which is essentially a commitment by the U.S. to the international community, providing corresponding public goods. According to the concept of "power" and "virtual power" proposed by Bai Gang, the U.S. power and virtual power were matched at that time, and the U.S. played a relatively good role as a leader in the international community.
However, as the U.S. economic power declined in the world economy, the internal difficulties of the U.S. dollar hegemony gradually emerged. In the "Nixon Shock" of 1971, the U.S. stated that it would no longer bear the responsibility of "dual linkage," but at that time, the role of "virtual power" became prominent — the U.S. dollar was still regarded as an international reserve currency.
On June 17, 2025, after the U.S. Senate passed a bill related to stablecoins, there were many criticisms within the U.S., claiming that the bill would harm the U.S. dollar hegemony. However, U.S. Treasury Secretary Bernanke believed that stablecoins would enhance the U.S. dollar's hegemony. In fact, during the process of issuing stablecoins, the domestic political considerations of the U.S. clearly take precedence over international politics, focusing mainly on domestic debt issues and promoting the private sector to purchase more digital assets.
From this perspective, what impact will the U.S. launching stablecoins have on its dollar hegemony? In the traditional currency stage, the U.S. dollar and the SWIFT system's hegemonic advantages are very obvious. However, in the stablecoin stage, the hegemonic advantages of the U.S. are difficult to continue, as the cross-border payment systems built using blockchain technology and digital currencies make it hard to maintain the U.S. hegemony.
In the traditional currency stage, SWIFT and CIPS are important cross-border payment systems (CIPS involves U.S. dollar settlements), and the SWIFT message system has significant network effects. More than 11,000 financial institutions globally are connected to this system, and the number of users constitutes core value, making it extremely difficult to replace the SWIFT system.
Russia and Iran are typical examples of attempts to replace the SWIFT system. Since 2005, the U.S. has used SWIFT for sanctions, targeting countries such as North Korea and Iran. During the Crimea incident in 2014, Obama planned to sanction Russia via SWIFT, but this was blocked by European countries. After the outbreak of the Ukraine-Russia war in 2022, the U.S. and Europe reached an agreement to impose SWIFT sanctions on Russia, making it an important "financial nuclear weapon."
During last year's Kazan Summit of the BRICS countries, Russia proposed the initiative to build a BRICS cross-border payment system to reduce the U.S. dollar's hegemony in cross-border payments. However, there are two different paths for the BRICS cross-border payment system: one is the security path. This path focuses on strengthening financial security, preventing and responding to the "weaponization" of cross-border payment systems, and enhancing cross-border payment cooperation from the perspective of countering financial sanctions. The other is the development path. This path focuses on providing stable and reliable financial infrastructure for cross-border payments, reducing the cost and improving the efficiency of cross-border payments, thereby enhancing cross-border trade and investment cooperation among countries from the perspective of promoting economic development.
Countries advocating the security path are represented by Russia and Iran. Both Russia and Iran have been subjected to financial sanctions by Western countries, and they created their own cross-border payment systems as important measures to maintain financial security after being threatened. For Russia, after the outbreak of the Crimea crisis in 2014, the U.S. and Europe repeatedly threatened to cut off Russia's connection with the SWIFT system, causing significant fluctuations in Russia's macroeconomic situation. In this context, in 2014, Russia drafted a bill to develop a cross-border payment system called the System for Transfer of Financial Messages (SPFS). In December 2017, the SPFS system completed its first transaction. As of January 2024, the SPFS system had more than 550 financial institutions from 20 countries joining it. For Iran, in March 2012, the U.S. intensified its financial sanctions against Iran, and SWIFT cut ties with more than 30 important Iranian financial institutions under U.S. pressure. In 2018, the Trump administration unilaterally withdrew from the comprehensive agreement on the Iranian nuclear issue, and SWIFT again removed Iranian financial institutions from the system. In 2019, the Iranian Central Bank officially launched the Iranian Financial Messages Exchange System (SEPAM) for cross-border payments.
Functionally, both the SPFS system developed by Russia and the SEPAM system developed by Iran are designed as alternatives to SWIFT, with the core goal of preventing financial sanctions and maintaining financial security. After the official operation of the SPFS system, Russia took "carrot and stick" measures to attract domestic financial institutions to join. At the same time, Russia actively lobbied foreign financial institutions to establish connections with the SPFS system. In 2023, the central banks of Russia and Iran signed an agreement to connect the SPFS system with the SEPAM system, establishing a link between Iran's domestic banking network and Russian and foreign banks in the SPFS system. The deputy governor of the Iranian Central Bank responsible for international affairs stated that this measure would create conditions for traders and banks in Iran and Russia to conduct transactions without being restricted by sanctions, enhancing cooperation and transactions between the two countries.
Different from the security path, China's Cross-Border Interbank Payment System (CIPS) embodies the development path. CIPS is mainly to follow the pace of the internationalization of the RMB, providing a complete infrastructure for cross-border RMB payments and settlements, thus further promoting cross-border trade and investment between China and other countries. Looking at the construction timeline, before the establishment of the CIPS system, the People's Bank of China had already developed the China Modernized Payment System (CNAPS). However, this system did not use the internationally common message format, and foreign financial institutions could not directly become members, making it difficult to meet the rapidly growing demand for cross-border payments and settlements under the context of RMB internationalization. To meet the needs of the RMB's cross-border use, further integrate existing channels and resources for cross-border RMB payments and settlements, and improve the efficiency of cross-border RMB payments and settlements, in early 2012, the People's Bank of China decided to build the RMB cross-border payment system. On October 8, 2015, the CIPS system (Phase I) was successfully launched. In March 2016, CIPS signed a cooperation memorandum with SWIFT, cooperating in message conversion, enabling foreign broker institutions to handle RMB settlement business through SWIFT. Currently, in terms of functional division, the CIPS system and the SWIFT system are more complementary and developing in parallel, and there is no clear substitutability between them.
In the stablecoin stage, since digital currencies are currently in a state of diversified development and flourishing, the U.S. does not hold a core position, and the SWIFT system is not the only system, lacking network effects, which may pose a certain challenge to its hegemonic position. In May 2019, the Hong Kong Monetary Authority and the Bank of Thailand signed a Memorandum of Understanding, officially launching the multi-CBDC Bridge (mBridge) project. The project aims to establish a high-efficiency, low-cost, highly scalable, and regulatory-compliant cross-border payment system platform centered around central bank digital currencies. In February 2021, the Research Institute of Digital Currency of the People's Bank of China and the Central Bank of the UAE joined the project, with the Research Institute of Digital Currency of the People's Bank of China serving as the chair of the technical committee of the mBridge project and building a test platform for the money bridge. The central banks of the Philippines, Indonesia, Malaysia, and South Korea also participated as observers. In September 2021, 22 financial institutions and organizations from mainland China, Hong Kong, Thailand, and the UAE participated in test transactions covering 11 industry scenarios, with a total amount exceeding 2 billion RMB. In October 2022, 20 commercial banks completed the first real transaction pilot, completing 164 transactions within six weeks, with a total amount exceeding 150 million RMB. In addition to the mBridge project promoted by China, the Ubin project by the Singapore Monetary Authority, the Jasper project by the Bank of Canada, the Stella project by the European Central Bank and the Bank of Japan, and the Dunbar project initiated by the central banks of Australia, Malaysia, Singapore, and South Africa have all started, and have developed rapidly in a short period of time.
In summary, in the traditional currency stage, due to the existence of network effects, the hegemony of the U.S. dollar and SWIFT cross-border payments remains relatively solid; however, in the stablecoin stage, due to the weakening of network effects, the U.S. digital currency hegemony may be weakened.
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