As the RMB breaks 7, why does the US dollar stablecoin USDT experience a deep discount?

Author: ChandlerZ, Foresight News

Original Title: RMB Breaking 7 and USD Stablecoin Discount Simultaneously, What Does It Really Mean?

By the end of 2025, the foreign exchange market is experiencing a quiet yet intense re-pricing of assets.

In late December, the offshore RMB (CNH) against the US dollar briefly broke below the 7.0 level during trading, reaching a high of 6.99, the highest since Q3 2024. Onshore RMB also touched 7.0133.

While the official exchange rate was still battling around the 7.0 mark, the OTC price of USDT had already rarely fallen below 6.90 earlier. As of press time, multiple exchanges showed the OTC USDT price (buy 1) at about 6.83 yuan, which, relative to the current exchange rate of 7.0040, indicates a USDT negative premium of 2.48%.

This inversion was almost unimaginable during the past three years of dollar strength.

The Collapse of the “High Ground” of the US Dollar

The decline of the US dollar in 2025 is the most significant external backdrop for the RMB’s strengthening.

In 2025, the US dollar index plummeted by 9% for the year, marking its worst performance in eight years, logically reflecting a reassessment of global capital’s view on “US exceptionalism.”

First is the pull of valuation reversion. Although the dollar index has rebounded nearly 2% from its September lows, fundamentally, the dollar remains “ridiculously” expensive. According to BIS data, as of October, the dollar’s real broad effective exchange rate (REER) had fallen from a historical high of 115.1 in January to 108.7, but still remains at an absolute high. Corpay, a global corporate payments firm, chief market strategist Karl Schamotta, bluntly states: “From a fundamental perspective, the dollar is still overvalued.”

The line chart shows that, due to years of sustained appreciation, this year’s correction has had little impact on the dollar’s overvaluation.

Secondly, the dovish expectations for the new Federal Reserve. Markets are pricing in a more easing-oriented 2025. With Powell set to leave, and the Trump administration inclined to pursue low-interest policies, including popular successors like White House economic advisor Kevin Hassett and former Fed governor Kevin Warsh, all show clear dovish tendencies.

Reuters pointed out in year-end market reports that the dollar’s decline is driven more by expectations of Fed rate cuts, narrowing interest rate differentials with other economies, and risk premiums associated with US fiscal deficits and political uncertainties.

When the relative returns and safe-haven premiums of dollar assets are re-priced, non-US currencies gain some upward momentum.

Institutional Consensus: Short-term Inertia Upward, Long-term Game Intensifies

Once the psychological 7.0 level is broken, the biggest market question is whether this marks the start of a new long-term RMB appreciation cycle or just a short-term emotional rebound.

Looking ahead to 2026, mainstream institutions are increasingly cautious: short-term inertia points upward, but long-term game intensifies.

Huachuang Securities believes that, on the demand and supply side in the domestic market, the core factor is foreign exchange settlement and sales. Although December’s settlement data has not yet been released, logically, RMB appreciation will influence corporate FX expectations and behavior. Coupled with the seasonal tendency for strong FX settlement at year-end, both factors may jointly drive the second phase of appreciation with a relatively strong domestic demand and supply response. On one hand, the continued RMB appreciation will impact corporate FX decision expectations; on the other hand, net FX settlement at year-end is usually stronger.

However, Guotai Haitong Securities’ macro research team also points out that expectations of RMB appreciation are not unimpeded. Using gold purchasing power parity to gauge domestic expectations, volatility in 2025 has been significant. In April, trade frictions once pushed domestic depreciation expectations above 7.5, while the Fed’s rate cut cycle starting in September brought expectations of RMB appreciation back near 7.0. Essentially, in an environment where the internal economy has yet to show clear elasticity, most investors remain somewhat hesitant about the trend of appreciation.

What Causes the Deep Discount in USDT?

Crypto market data analyst @Phyrex_Ni explains that the deep discount of USDT mainly stems from three reasons:

First: On the macro front, RMB has been strengthening against the dollar, especially since mid-2025. The reasons include the continuation of the Fed’s rate cut cycle, a weakening dollar index, and improving Chinese economic data. Holding USDT is equivalent to indirectly holding dollar assets, which incurs exchange rate losses amid RMB appreciation. In other words, the market expects RMB to continue strengthening, leading to some exchange rate shifts, but this is not the main reason—only a minor secondary factor.

Second: China’s regulatory policies have significantly tightened. In early December 2025, the People’s Bank of China and thirteen other departments jointly issued a document to strengthen crackdowns on virtual currency trading and speculation, explicitly bringing stablecoins (like USDT) under regulatory scope, focusing on illegal cross-border capital flows, money laundering, and underground banking activities involving USDT. This has led many OTC traders and market participants to pause or reduce operations, tightening market liquidity. Some holders worry about account freezes or regulatory risks, rushing to sell USDT for RMB, increasing supply and sharply reducing demand, directly depressing P2P prices. Historically, every regulatory tightening (such as the 2021 ban) has caused USDT OTC negative premiums, and this time’s stronger crackdown amplifies the USDT-RMB exchange rate deviation.

Third: The overall turbulence in the crypto market, combined with regulatory headwinds, has reduced demand for USDT from retail and institutional investors. Some mainland investors, seeking to avoid risks, want to quickly offload their USDT holdings, creating a negative premium cycle similar to China’s current real estate market.

Under the dual pressures of macro cycle shifts and tighter regulatory boundaries, the past three years of a “buy and hold” dollar hedge logic have completely failed.

For all market participants, the key task now is no longer betting whether the next point is 6.8 or 7.0, but to abandon the dependency on a single dollar appreciation path. In the future of increased volatility, returning to a risk-neutral stance is essential.