Author: Wang Yang, renowned mathematics professor, Vice President of Hong Kong University of Science and Technology (2020-2025), Chief Scientific Advisor of the Hong Kong Web3 Association
The hegemony of the US dollar has not been defeated, but rather circumvented. It has not been replaced by another hegemony, but has undergone de-hegemonization. It has not collapsed in a dramatic moment, but has quietly disintegrated in millions of P2P transactions.
Last time we discussed how stablecoins can be a double-edged sword for the hegemony of the US dollar. Today, let’s delve into the core channel of the operational mechanism of US dollar hegemony, CHIPS, and why stablecoins can bypass this channel, weakening the dollar's dominance.
01 The Channel of Dollar Hegemony
Let’s start with a simple example. Suppose a Thai company wants to pay an Argentine company 1 billion Argentine pesos (about over 800,000 USD) for goods. Theoretically, this transaction has nothing to do with the United States—where do Thailand, Argentina, and their currencies fit in?
But the reality is harsh.
First, there’s the exchange rate trap. The direct exchange rate market for Thai baht to Argentine pesos is almost non-existent. Even if it exists, the buy-sell spread can be as high as 15%. Thus, the Thai company is forced to choose the "cheaper" path: first converting baht to dollars, then dollars to pesos. To save money and for convenience, it enters the "path" of SWIFT and CHIPS.
SWIFT is a global interbank financial communication network that provides secure, standardized information transmission services for cross-border payments. It identifies financial institutions through exclusive codes, ensuring accurate routing of cross-border remittances, letters of credit, and other transactions; covering over 200 countries/regions and connecting more than 11,000 financial institutions.
But SWIFT is merely a communication system—"the WhatsApp of banks." The Thai bank sends a SWIFT message to the Argentine bank: "Please pay 1 billion pesos to a certain account." But the message is not money. Where is the actual flow of funds?
This leads us to another core pillar of dollar hegemony: CHIPS (Clearing House Interbank Payments System). CHIPS handles over 95% of global interbank dollar payment clearing and foreign exchange transaction settlement. Almost all international dollar transactions—whether from Thailand to Argentina or Germany to Japan—must ultimately be cleared through CHIPS.
Why? Here we need to understand a key concept: the so-called "offshore dollars" are merely IOUs. A dollar account at a German bank is actually an account at a CHIPS member bank in New York. When a German company transfers dollars to a Japanese company, the actual clearing must take place in New York.
It’s like a global casino: banks around the world issue and trade dollar chips, but these chips must ultimately return to New York, the only redemption window, to be cashed out. No matter where you win chips—Las Vegas, Monaco, or Macau—you must go to the same cashier. And CHIPS is the only cashier in this global dollar casino.
02 CHIPS: The Silent Assassin
If SWIFT is the mouthpiece of dollar hegemony, then CHIPS is its heart. But strangely, almost no one talks about CHIPS.
Why is CHIPS more lethal than SWIFT? A SWIFT ban means "you cannot use our communication network," but you can still use the phone, email, or other banks. A CHIPS ban means "your dollars are frozen," with no recourse. This is the difference between cutting the phone line and freezing a bank account.
The efficiency of CHIPS is astonishing, processing $1.8 trillion in transactions daily. Through sophisticated multilateral netting, CHIPS achieves an average liquidity efficiency of 25:1, meaning every $1 of funds can support $25 of settlement payment value (according to CHIPS official data). 41 direct CHIPS members control 95% of international dollar flows. With a single command from the US Treasury, any entity can be excluded.
Even more frightening is the silent weaponization of CHIPS. In 2018, executives of Turkey's state-owned bank Halkbank were arrested in the US. CHIPS did not formally sanction the bank, but its dollar payments began to "experience technical difficulties." Clearing times extended from 1 day to 2-3 weeks, forcing many Turkish companies to abandon dollar transactions. No headlines, no formal statements, just a slow financial suffocation.
"Kicking our financial institutions (like Bank of China) out of CHIPS is equivalent to releasing a 'financial nuclear bomb' against China, which could cause significant systemic financial risks to us while the US itself suffers relatively little loss. This operation is simple and flexible for the US, making it a preferred policy tool during intensified conflicts." (Huang Qifan, "Strategy and Path")
03 Stablecoins: The Open Path Around Hegemony
Within the traditional currency system, although everyone has seen through the US game, very few can challenge it. China is striving to bypass dollar hegemony by launching CIPS—a three-in-one alternative to SWIFT, CHIPS, and Fedwire. CIPS integrates communication, clearing, and settlement functions, operates 23 hours a day, natively supports cross-currency transactions, and reserves interfaces for the digital yuan, making it technically advanced.
However, CIPS still struggles to solve two major dilemmas:
First is the liquidity dilemma: the daily trading volume of the dollar/euro market is $6 trillion, with a spread of 0.01%; while the daily trading volume of the yuan/euro market is less than $50 billion, with a spread of 0.5%; as for the yuan/ruble market, the spread can exceed 1% or even 2%. Without market depth, there is no efficiency, and without efficiency, there is no attractiveness.
Second is the exchange rate pricing dilemma: some exchange rate pricing behind certain transactions has strong administrative power, deviating from market exchange rates, and a mature exchange rate pricing mechanism has not yet formed.
However, while China and the US are vying for control over financial channels, the crypto world is building spacecraft outside traditional paths.
Stablecoins completely bypass CHIPS. Traditional paths require multiple intermediaries, while stablecoins only need wallet-to-wallet transactions. Transactions cannot be monitored through CHIPS, funds cannot be frozen, and sanctions cannot be enforced. This pillar of dollar hegemony has no support in the stablecoin system.
Stablecoins achieve true 7*24 clearing, while CHIPS only operates 18.5 hours on business days. More importantly, stablecoins create decentralized liquidity. In Lagos, you may not find a market for naira/baht, but you can find a P2P market for USDT/naira. Market depth is no longer created by central banks but formed spontaneously by demand.
Yet critics always point out the key bottleneck of stablecoins: you ultimately still need to convert back to fiat currency. No matter how freely USDT circulates on-chain, in the real world, you still have to go through the banking system to buy bread. However, this situation is about to change dramatically.
04 In the Name of Fiat, Farewell to Fiat
The US itself may pull the trigger that ends dollar hegemony.
The US GENIUS Act and related legislation are paving the way for the mainstreaming of stablecoins. Once regulations are clarified, American corporate giants are already gearing up: Amazon is preparing to launch Amazon USD, Walmart plans to issue Walmart Dollar, and Apple may roll out iUSD. This is not a small-scale experiment but a tsunami that is about to change the rules of the game.
Imagine a day in 2027: in the morning, buying Starbucks with iUSD, shopping with Amazon USD at noon, receiving corporate stablecoin wages in the afternoon, and paying for subscriptions with stablecoins in the evening, all without touching traditional banks. This is no longer a "last mile" issue, but the entire journey can be completed without fiat currency.
When Walmart accepts stablecoin payments and offers discounts, competitors will be forced to follow suit. Mexican workers can receive Walmart Dollar wages and instantly send them to their families, who can directly consume or exchange for pesos. The entire process involves no banks and no CHIPS clearing.
Even more disruptive is inter-company payments. When Tesla can pay suppliers with stablecoins, and suppliers can purchase raw materials with stablecoins, an entire supply chain can operate on stablecoins, giving birth to a financial universe parallel to the traditional banking system.
This is not science fiction. In today’s Argentina, many freelancers are already living entirely in a stablecoin economy. Banks seem to belong to another world.
05 The Paradox of Dollar Hegemony
The US now faces an unsolvable dilemma. If it stifles stablecoins, innovation will flow out, and other countries or even decentralized stablecoins will take advantage of the situation. If it embraces stablecoins, CHIPS will gradually become marginalized, financial monitoring capabilities will decline, and the weapon of sanctions will become ineffective. If it tries to control stablecoins, decentralized projects will go underground, and other countries will launch competing products, accelerating de-dollarization.
This is akin to the dilemma faced by the British Empire at the end of the 19th century: the choice of openness brought prosperity to London but also sowed the seeds for the end of pound hegemony.
The next five years will be a watershed in financial history. If the daily trading volume of stablecoins exceeds a trillion dollars, if the Fortune 500 companies widely accept stablecoin payments, and if multiple countries incorporate stablecoins into their reserves, then the traditional financial system will face an irreversible decline.
Financial networks have strong path dependence. Once the stablecoin ecosystem reaches a critical scale, the more people use it, the better the liquidity, the better the liquidity, the lower the costs, the lower the costs, the greater the attractiveness, and the greater the attractiveness, the more people will use it. This is a positive feedback loop, while CHIPS will fall into the opposite death spiral.
06 The Emergence of a De-hegemonized System
What we are witnessing is not just a change in payment methods, but a fundamental restructuring of the financial power structure. From geographical space to cyberspace, from permissioned to permissionless, from opaque to transparent, from unipolar hegemony to decentralized networks.
The CHIPS building still stands in New York, processing trillions of dollars daily. But in corners around the globe, a parallel financial universe is rapidly expanding.
The irony of history is that the moment of greatest strength for dollar hegemony may also be its most vulnerable moment. When all transactions must pass through your node, the motivation to bypass that node becomes universal. When financial weaponization reaches its peak, the technology for de-weaponization will emerge.
The Bretton Woods system took 27 years from establishment to collapse. How long can the dollar hegemony system based on CHIPS last?
Future financial history textbooks may record: the dollar hegemony was not defeated, but circumvented. It was not replaced by another hegemony, but underwent de-hegemonization. It did not collapse in a dramatic moment, but quietly disintegrated in millions of P2P transactions.
Of course, the US has not given up on equipping stablecoins with hegemonic weapons. The US stablecoin GENIUS Act requires stablecoin issuers to establish policies and procedures to prevent, freeze, and reject illegal transactions, and to develop effective customer identification programs, including identifying and verifying account holders, high-value transactions, and appropriate enhanced due diligence. Recently, Tether, under pressure, froze Tether stablecoins worth a total of $900 million in wallets linked to Iran, signaling the US's intention to weaponize dollar stablecoins.
However, stablecoins are gradually rising globally, and the issuers of stablecoins will become increasingly diverse, while decentralized stablecoin issuance platforms are also growing. The US's control over stablecoins will be far less than its control over the traditional currency system through SWIFT and CHIPS.
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