Core Insights - The dominance of USD-linked stablecoins like USDT and USDC, which account for over 99% of the $300 billion market, indicates a potential shift in global liquidity dynamics if a yuan-backed stablecoin captures a significant market share [1][6][7] - The dollar's share of global FX reserves is currently at 56.32%, and a decline below 55% by 2027 could signal a major shift in reserve structures and diversification of state money [2][3][6] - The rise of AI in financial infrastructure is accelerating changes in liquidity and settlement, with the Bank for International Settlements warning of increased systemic risks [5][24] Stablecoins and Global Liquidity - Stablecoins are becoming informal policy instruments in high-inflation economies, providing a digital hedge against currency collapse [9][10][8] - In Argentina, stablecoins account for over 60% of crypto transactions, and their destabilizing effects may arise if they exceed 20-25% of retail payments [10][11] - The annual on-chain settlement now exceeds $35 trillion, indicating a robust demand for USD beyond traditional banking systems [7][8] Central Bank Digital Currencies (CBDCs) - 94% of central banks are currently piloting CBDCs, reflecting a trend towards diversification and digitalization of state money [6][3] - A significant shift in reserve structures is anticipated if CBDC flows exceed $1 billion annually, marking a transition from theoretical diversification to practical policy [2][3] - China's e-CNY has processed 7 trillion yuan in transactions by mid-2025, showcasing the potential for state-led digital currencies to reshape financial systems [16][18] Tokenization and Sovereign Debt - Tokenization is gaining traction, with projections suggesting that 5% of new sovereign issuance could be tokenized by 2028, primarily in Asia and Europe [14][15] - The market for tokenized treasuries has already surpassed $5.5 billion, indicating a shift from pilot projects to practical applications [13][14] - The convergence of public and private efforts in tokenization suggests a gradual reform of traditional financial systems [15] Geopolitical Implications - The emergence of a "state-led Web3 bloc" between Russia and China could redefine global trade dynamics, especially if 50% of their trade shifts to digital assets [19][20] - The EU's ban on a ruble-backed stablecoin highlights the increasing use of digital assets as tools in financial conflicts [21] - The potential for blockchain technology to enhance transparency in government procurement systems could provide democracies with a governance advantage [26] Conclusion - The analysis suggests that the evolution of monetary power is shifting towards a more data-driven and shared system, rather than a complete disruption of the existing dollar-dominated framework [27][28]