[Column] The Dollar Goes Blockchain, the Yuan Turns to Gold... The Currency Hegemony War Has Changed

China is creating an "exit to gold" for the yuan.

The Shanghai Gold Exchange (SGE) opened its first physical gold delivery vault outside mainland China in Hong Kong last year. It also introduced contracts that allow trading in yuan and receiving physical gold. There are analyses suggesting that China is considering expanding this vault network to Singapore, Kuala Lumpur, Dubai, Riyadh, and Moscow.

Interpreting this as a move for China to return to the gold standard is excessive.

The Chinese government is not fixing the value of the yuan to gold or promising to exchange all yuan at a certain ratio for gold.

The more significant change lies elsewhere.

China is broadening the pathways for those who receive yuan to transfer their assets into gold if needed.

The oldest weakness of yuan internationalization is not the size of the Chinese economy, but capital controls.

When receiving dollars, one can buy U.S. Treasury bonds, stocks, and operate freely in global financial markets. The yuan does not have that flexibility. Even when trading with China and receiving yuan, there has always been the question of where to store that money and what to invest it in.

Gold can complement this weakness.

Gold is an asset that does not require trust in China's credit or the U.S. credit. It can be traded in any major financial hub in the world.

China is not trying to guarantee the yuan with gold; rather, it is adding options for moving from yuan to gold.

From a monetary strategy perspective, this is a fascinating change.

The U.S. has taken a completely different path.

Instead of bringing in gold, it is putting the dollar on the blockchain.

The GENIUS Act enacted by the U.S. last year has formally incorporated dollar stablecoins into the U.S. financial order. It stipulates that stablecoins for payment must be backed by highly liquid assets such as cash and short-term U.S. Treasury bonds, and it has established a framework for issuance and supervision.

Importantly, the U.S. government does not view this merely as a cryptocurrency regulation.

As dollar stablecoins are used more globally, the demand for dollars increases, as does the demand for U.S. Treasury bonds used as reserve assets.

In the past, banks were responsible for transporting dollars around the world.

The New York financial market, U.S. Treasury bonds, the international banking network, and SWIFT created dollar hegemony.

Now, a new layer is being added on top of that.

It is blockchain.

Individuals in Africa, companies in South America, and AI agents in Asia can hold and trade dollar-denominated stablecoins as long as they are connected to the internet.

Having a bank account is not even necessary.

The U.S. has chosen a method where private companies spread dollars on the blockchain rather than the government directly distributing digital dollars through Central Bank Digital Currency (CBDC).

In other words, it is a private outsourcing of dollar hegemony.

The U.S. government does not issue it.

Instead, fintech companies, exchanges, and blockchain firms around the world spread the dollar.

And behind that, U.S. Treasury bonds are placed again.

China does not have an open capital market like the U.S.

It also lacks an overwhelming safe asset market that central banks and institutional investors can freely buy and sell, like U.S. Treasury bonds.

Even though China has risen to be one of the world's largest trading nations, the international status of the yuan falls far short of the dollar.

Rather than directly addressing this issue, China is creating a detour.

That detour is gold.

China is one of the world's largest gold producers and consumers, and it has a massive physical gold market centered around the Shanghai Gold Exchange.

The central bank is also steadily buying gold. The People's Bank of China has officially purchased gold for 21 consecutive months as of July this year.

In the gold industry policy announced last year, the Chinese government designated gold as a "strategic mineral resource," emphasizing its importance in terms of resource, industry, and financial security.

This trend is attached to an overseas vault network.

If a company trading with China receives yuan, buys gold with that yuan, and can receive physical gold in Hong Kong or other future international financial hubs, the burden of holding yuan for a long time is reduced.

This is a much more realistic strategy than China telling the world to "trust the yuan."

It allows transactions to occur even without fully trusting the yuan.

This could be particularly significant for countries looking to expand energy and raw material trade with China while reducing dependence on the dollar.

China is not trying to topple the dollar immediately.

Rather, it is gradually creating a second path that allows transactions to be completed without the dollar.

Japan cannot move like the U.S., which has the world's reserve currency, nor is it in a position to adopt a strategy linking gold and trade like China.

Instead, Japan is choosing the method it does best.

It is institutionalization.

Starting in 2023, Japan has established a legal basis for regulated entities such as banks, money transfer businesses, and trust companies to issue stablecoins linked to legal tender.

Last year, Japan's first yen-denominated stablecoin was actually issued.

This year, it has taken a step further.

The Japanese Diet passed amendments to the Financial Instruments and Exchange Act and the Payment Services Act in July, legalizing the direction of bringing cryptocurrencies into the existing financial product regulatory framework.

However, full implementation is not yet complete.

But the direction is clear.

It aims to incorporate cryptocurrencies into the regulated financial system, where investor protection, disclosure, and trading regulations operate, rather than keeping them as a separate "coin market" existing outside the traditional finance.

Taxation is also moving in the same direction.

Currently, a plan is being pursued to convert the comprehensive taxation of cryptocurrency income, which can reach up to 55%, into a separate taxation system similar to stocks under certain conditions, and regulatory adjustments for cryptocurrency ETFs are also underway.

What is more interesting is that this is not the end.

The Financial Services Agency of Japan is supporting demonstrations of transferring rights to existing financial products such as government bonds, corporate bonds, funds, and stocks on the blockchain and settling transaction amounts with stablecoins.

The Bank of Japan is also reviewing the possibility of tokenizing central bank reserves in an internal sandbox.

It is still in the experimental stage.

However, the picture Japan is drawing can be read.

It is not just about bringing coins into the regulatory framework but also about connecting the existing financial market to digital rails.

The paths chosen by the three countries are all different.

The U.S. has chosen dollar stablecoins.

It is expanding the dollar and U.S. Treasury bonds onto the blockchain.

China is creating an exit to gold.

It is trying to partially complement the weakness of the yuan's capital controls with gold, the world's oldest neutral asset.

Japan has chosen institutionalization.

It aims to connect cryptocurrencies, stablecoins, tokenized securities, and existing financial institutions within a single regulatory framework.

The means may differ, but the goal is the same.

To ensure that their currency and financial markets do not get pushed to the periphery in the next financial order.

The meaning of currency hegemony is changing.

In the past, we looked at what percentage of dollars were held in central bank foreign exchange reserves and what percentage of yuan was used in international trade settlements.

In the future, that will not be enough.

What currency is the world's stablecoins issued in?

In what currency are tokenized stocks and bonds traded?

What money do AI agents use for payments?

Which network settles cross-border transactions?

What is the most held currency in the digital wallets of people around the world?

And how easily can they exit when they want to convert that money into other assets?

These will become new indicators of currency competition.

The strength of the dollar is not only because the U.S. government is strong.

It is because the world is connected around the dollar.

Oil is bought in dollars, and raw materials are traded in dollars. Companies borrow in dollars, and central banks accumulate dollars as reserve assets. The New York financial market is a refuge for global capital.

Currency is ultimately a network.

The more users there are, the stronger it becomes, and the stronger it is, the more users it attracts.

Blockchain can further enhance this network effect.

There are no borders, and there are no banking hours.

Money and assets move 24 hours a day.

Then, the most important question in the future may not be "who issues the best currency."

It may be "who builds the broadest financial network."

That competition has already begun.

This is why the U.S. sees stablecoins as a matter of dollar hegemony.

This is also why China views vaults not merely as storage facilities for precious metals but as infrastructure for yuan internationalization.

The same goes for Japan, which does not stop at merely fixing one cryptocurrency regulation but aims to connect stablecoins, securities, bank deposits, and central bank currencies.

The question now is about Korea.

Discussions on won stablecoins and the institutionalization of digital assets are also underway in Korea.

However, much of the debate still revolves around "who will issue it," "how much should banks participate," and "which institution will supervise it."

These are certainly important issues.

We cannot take currency stability and financial stability lightly.

But if we only debate those, we may miss the bigger questions.

How will we use the won on the next financial rails?

When foreigners buy Korean Treasury bonds on the blockchain, what money will they use for payment?

When Korean companies sell services abroad and receive small payments of $10 or $100, what payment network will they use?

When Korea's games, content, and AI services are sold to users worldwide, will they only use dollar stablecoins as the payment method?

When the era of AI agents trading with each other opens, what currency will Korea's agents use?

If Korea's real estate, bonds, content revenue rights, and intellectual property rights are tokenized, what will be the benchmark currency in that market?

If we cannot answer these questions, Korea can participate in the digitization of finance.

However, the won may disappear from that digital finance.

We cannot rule out the possibility that dollar stablecoins will become the default payment method even within services created by Koreans.

That is the frightening aspect of currency hegemony.

It is not that an occupying force comes in.

The moment people choose more convenient money, they quietly transition.

The global currency order will not change overnight.

The financial market and military-economic foundation of the dollar remain overwhelming.

The yuan has structural limitations due to capital controls.

Japan's various experiments will also need time to settle into the actual financial market.

However, new orders always start with infrastructure.

Cities emerged after railroads were laid, and platform companies appeared after internet networks were established.

Money is no different.

New financial railroads are being laid around the world right now.

The U.S. is placing dollar stablecoins on top of that.

China is creating an exit to gold where it can get off that railroad.

Japan has begun to connect the existing financial market to that railroad.

The 21st-century currency hegemony will not be determined solely by how many dollars and gold are piled up in central bank vaults.

What matters more is on which rails the world's money and assets move.

The U.S. has moved.

China is also moving.

Japan has opened the door to institutional finance.

The questions Korea must ask must now change as well.

It is not about whether to allow coins.

Where will the won be on the path of money in the next era?

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