When Will Stablecoins Truly Become "Stable"?

·

Stablecoins have recently become a focal point in capital markets. Not long ago, Circle, often referred to as the first major stablecoin stock, went public and was highly sought after by investors. As the issuer of USDC, the second-largest stablecoin by market capitalization, Circle saw its stock price surge dramatically on its first trading day, rising 168% above its $31 offering price. The stock continued to perform strongly in the following days.

In Asian markets, Guotai Junan International, which obtained a cryptocurrency trading license in Hong Kong on June 25, also closed up 198.4% that day. These scenarios clearly demonstrate the热度 (heat) that stablecoin-related concepts are generating in capital markets.

With the United States, Hong Kong, and other regions passing legislation related to stablecoins, major internet companies like JD.com and Ant International are also preparing to issue stablecoins in Hong Kong.

In fact, it's not just big tech companies that are eager to participate. Various investors are also filled with anticipation for the financial prospects of this new type of "currency," often stating that if they missed out on Bitcoin, they cannot afford to miss stablecoins.

Is Stablecoin a Once-in-a-Lifetime Opportunity for Investors?

The recent market炒作热度 (hype) around stablecoin-related concepts primarily stems from a lack of understanding and excessive expectations among general investors.

As an emerging phenomenon, stablecoins are easily mistaken for virtual currencies similar to Bitcoin, which can be profited from through price speculation. In reality, stablecoins are not assets for investment or speculation but are payment tools. They have no appreciation potential, and their current application scenarios are relatively fixed. Therefore, retail investors should not treat them as assets for speculation.

However, in an era where cryptocurrency and blockchain technology are profoundly transforming the financial industry, stablecoins have become an unavoidable important topic in the digital economy. They are not only a "stable anchor" addressing the high volatility of crypto assets but also a core driver for the rapid growth of the Web3 ecosystem and decentralized finance (DeFi).

So, when will stablecoins truly achieve "stability"? What is their essence, what risks do they face, and how do they influence and shape the Web3 world? Let's delve deeper into these questions.

What Kind of Asset Are Stablecoins?

Stablecoins are a type of cryptocurrency pegged to a relatively stable external asset, typically a fiat currency like the US dollar or euro, or a basket of assets. Their design goal is to provide a "value anchor" in the highly volatile cryptocurrency market environment, enabling users to enjoy the transparency, decentralization, and efficiency advantages of blockchain while avoiding the inconveniences caused by drastic price fluctuations.

Their basic attributes include:

Stablecoins can be broadly categorized into four main types based on their stabilization mechanisms and collateral support methods:

1. Fiat-Collateralized Stablecoins

These are backed by equivalent fiat currency or highly liquid assets held as reserves by the issuer. For example, issuing 1 USDT requires 1 US dollar or an equivalent asset to be held in a bank custody account. They require regular third-party audits, but transparency depends on the centralized operator.

2. Crypto-Collateralized Stablecoins

These involve locking excess crypto assets (like Bitcoin) on-chain as collateral, managed automatically by smart contracts. If the collateral value drops, the system automatically auctions the collateral to maintain solvency. The collateral ratio is often greater than 100%.

3. Algorithmic Stablecoins

These use algorithms and smart contracts to adjust the supply of stablecoins, not relying or partially relying on collateral. Common systems include "dual-token systems," where a volatile coin (e.g., LUNA) and a stablecoin (e.g., UST) coexist, balancing prices through arbitrage mechanisms.

4. Commodity-Collateralized Stablecoins

These are pegged to physical commodities like gold or silver, with each stablecoin representing ownership of a certain amount of the physical asset. They require highly credible custody and audit mechanisms.

What Is the Fundamental Value of Stablecoins?

Mainstream virtual cryptocurrencies, such as the famous Bitcoin and Ethereum, are highly volatile, making them unsuitable as everyday units of account, payment, or value storage. For instance, using Bitcoin to buy a cup of coffee is impractical due to its high value (over $100,000 per Bitcoin). Moreover, between ordering and receiving the coffee, Bitcoin's price could easily fluctuate by 10% or more, making payments and receipts extremely inconvenient. Thus, stablecoins serve as an intermediary for transaction settlement.

Additionally, investors seeking to "避险" (hedge) during market uncertainty want to move funds from volatile assets to a stable one without leaving the blockchain ecosystem. DeFi applications also require a stable unit of value as a foundation for lending, derivative trading, and more.

Therefore, the core function of stablecoins is to connect virtual currencies with real-world daily commercial and financial交易场景 (transaction scenarios). Other use cases include:

Stablecoins also have significant potential in cross-border payments. For example, during a recent trip to Africa, often seen as the "next land of opportunity," I noticed that Chinese goods are regarded as high-quality and cost-effective. Many domestic traders want to sell goods to Africa, but African countries' financial systems are generally 20 years behind. Local importers often lack hard currencies like US dollars or euros for settlement, and Chinese sellers are reluctant to accept local currencies. Here, stablecoins can play a huge role due to their blockchain特性 (characteristics), greatly improving the efficiency of international remittances and reducing costs.

Will Stablecoins Replace Traditional Central Bank-Issued Currencies?

Given the above advantages in various use cases, could stablecoins quickly replace fiat currencies or digital currencies issued by central banks and enter ordinary people's wallets? Absolutely not, because stablecoins are not issued by central banks of various countries and regions, lack sovereign credit backing, and do not have the tax base behind sovereignty to support them.

Instead, stablecoin holders must face a series of "instabilities," including:

Regulators can take several actions, such as requiring reserve compliance, formulating and coordinating international regulations, guiding innovation, and accelerating central bank digital currency (CBDC) processes. Currently, stablecoin regulation is a focus for global financial and regulatory departments. How will further regulatory work evolve? We can wait and see.

Regardless, as the current Web3 digital economy becomes a trend in digital economic development, stablecoins have a positive role and room for growth.

The core of the Web3 ecosystem is decentralized applications (DApps) and decentralized finance (DeFi), and stablecoins are the stable anchor and settlement unit ensuring their operation. Without stablecoins, DeFi lending, DEX liquidity, on-chain derivatives, etc., would struggle to scale due to price volatility.

As a type of "digital currency (e.g., digital dollar)," stablecoins significantly enhance the practical implementation of Web3 payments, cross-border transfers, corporate treasury management, etc., enabling on-chain economies to link with real-world assets and promoting the development of new formats like asset tokenization, the creator economy, and GameFi.

In summary, stablecoins are a core bridge connecting the traditional financial world with the Web3 digital economy. By providing price stability, they address the core pain points caused by high volatility in the blockchain world, becoming fundamental elements for new financial applications like DeFi, on-chain payments, and asset tokenization. At the same time, stablecoins themselves face multiple challenges related to trust, transparency, regulation, and technology. In the future, with the improvement of regulatory frameworks, technological advancements, and the continuous expansion of real-world application scenarios, stablecoins are expected to truly become "stable," playing a more critical, standardized, and innovative role in the global digital economy.

👉 Explore advanced strategies for stablecoin integration

Frequently Asked Questions

What is the primary purpose of stablecoins?
Stablecoins are designed to provide price stability in the volatile cryptocurrency market. They serve as a reliable medium of exchange, unit of account, and store of value within blockchain ecosystems, enabling practical use cases like payments, remittances, and DeFi transactions.

How do algorithmic stablecoins maintain their peg?
Algorithmic stablecoins use smart contracts and algorithms to automatically adjust the supply of the stablecoin based on market demand. For example, if the price falls below the peg, the system may burn tokens or incentivize arbitrage to reduce supply and raise the price.

Are stablecoins regulated by governments?
Regulation varies by jurisdiction. Some countries, like the US and Hong Kong, are developing specific frameworks for stablecoins, focusing on reserve transparency, consumer protection, and financial stability. However, global regulatory standards are still evolving.

What are the risks of holding stablecoins?
Key risks include depegging from the underlying asset, issuer insolvency, regulatory crackdowns, smart contract vulnerabilities, and loss of trust due to inadequate transparency or audits.

Can stablecoins be used for everyday purchases?
Yes, stablecoins are increasingly accepted for everyday transactions, especially in regions with high cryptocurrency adoption. Their low volatility makes them suitable for buying goods and services, though widespread retail acceptance is still growing.

How do stablecoins impact traditional banking?
Stablecoins offer faster, cheaper cross-border payments and financial services, potentially challenging traditional banks. However, they also collaborate with banks for custody and reserves, and central banks are exploring CBDCs to complement or compete with them.