The United States Treasury Secretary has cautioned that China may be positioning itself to challenge American leadership in digital assets, signalling heightened geopolitical competition in emerging financial technologies.

Testifying before the Senate Banking Committee, the Treasury chief said that China’s activities, particularly through Hong Kong’s expansive digital asset “sandbox,” could enable Beijing to cultivate alternative financial instruments or systems that compete with US-based innovations.

While acknowledging that concrete details of specific Chinese projects are not confirmed, the Treasury head noted “rumours” that Chinese authorities might explore digital asset models backed by assets other than the renminbi, such as gold, highlighting Beijing’s potential ambitions in the sector.

He said this should prompt the United States to advance regulatory clarity and legislative action to solidify its own digital asset ecosystem and prevent strategic disadvantages.

The remarks come amid a broader push by the current US administration to make the United States the “crypto capital of the world” by encouraging firms to locate and innovate within domestic markets and by pursuing comprehensive digital asset legislation.

Treasury officials have underscored the importance of fostering a competitive environment for stablecoins, blockchain technology and other digital financial tools, while balancing consumer protection and financial stability considerations.

China’s longstanding ban on cryptocurrency trading on the mainland has contrasted with Hong Kong’s more permissive regulatory approach, which has sought to develop the city as a digital asset hub.

This divergence has fuelled speculation about how different approaches may affect global influence in digital finance.

The Treasury’s warnings reflect not only competition over technological innovation but also concerns that a rival digital ecosystem outside American regulatory influence could shift the dynamics of global capital flows and financial infrastructure.

In response, US policymakers and industry leaders have called for accelerated legislative work to establish clear regulatory frameworks, attract innovation, and reinforce the United States’ position at the forefront of digital financial markets.

Maintaining leadership in digital assets is seen as interlinked with broader goals of sustaining the global role of the US dollar and ensuring that technological advances serve economic growth and national interests.