Core Focus: The concept of “cryptomercantilism” as a US strategy to extend dollar dominance through stablecoins, the geo-economic competition between the US and China over digital currency infrastructure, and the implications for other jurisdictions.

In-Depth Notes:
The transatlantic divergence in digital currency policy must be understood in the context of broader geo-economic competition. The US strategy of promoting private stablecoins has been described as “cryptomercantilism”—a deliberate US strategy of promoting US dollar-pegged stablecoins to extend dollar dominance into the digital realm . This strategy has implications not only for Europe but for the entire international monetary system.

The Concept of Cryptomercantilism:
A European Parliament study dubs the US strategy of promoting stablecoins as “cryptomercantilism” . The rationale is clear: US dollar-pegged stablecoins extend the reach of the dollar into digital payments at a scale and speed no CBDC could replicate . The GENIUS Act’s reserve requirement creates a structural link between stablecoin market growth and demand for US sovereign debt, with US Treasury Secretary Scott Bessent explicit about the appeal: a thriving stablecoin ecosystem would drive private-sector demand for the very assets used to back those stablecoins .

The Potential for Fiscal Currency:
More fundamentally, the promotion of stablecoins could facilitate the emergence of a “fiscal currency”—government-issued debt instruments that function as a means of payment . The idea is that stablecoins backed by US Treasury bills create a form of interest-free government debt that circulates as money, with gross income for issuers equal to the interest on the cover pool . This could create a powerful incentive for the US government to promote stablecoins as a source of captive demand for short-term US debt .

The US-China Digital Currency Competition:
The United States and China are waging a digital currency competition. China is building a parallel financial system where Chinese fintechs are allowed to issue stablecoins from Hong Kong . The US has chosen to promote private dollar stablecoins, while China is developing its digital yuan and permitting stablecoins in Hong Kong. Smaller economies may face the risk of CBDCs from larger countries crowding out national digital money, leading to “digital dollarisation” or “yuanisation” .

Implications for Other Jurisdictions:
Countries outside the US and EU face a strategic choice: adopt a public CBDC, rely on private stablecoins, or develop alternative public-private models. The transatlantic divergence creates a fragmented regulatory landscape, with the US promoting private stablecoins, the EU promoting a public digital euro while restricting private euro stablecoins, and China developing its digital yuan while permitting stablecoins from Hong Kong. This fragmentation means that businesses operating globally may need to navigate multiple regulatory regimes and different digital payment infrastructures.