Core Views
In a recent livestream, TRON founder Sun Yuchen addressed the question of 'how to ensure the security of stablecoin reserves' with two disruptive suggestions:
1️⃣ 'Avoid Hong Kong trust institutions and prioritize listed financial institutions': He pointed out that some licensed trust companies in Hong Kong have regulatory loopholes and ethical risks, and should choose listed financial institutions with higher transparency and multiple regulatory oversight as custodians.
2️⃣ 'Complete on-chain information of bank reserves': He urged Hong Kong banks to upload reserve fund flow data to the blockchain in real-time, using technology to achieve **'transparent traceability + immediate warning'**, fundamentally preventing misuse and misappropriation.
Why abandon Hong Kong trust institutions? - Insights from the TUSD fraud case on industry crises.
Sun Yuchen's recent suggestions directly point to the TUSD $456 million reserve fund misappropriation case he exposed (involving organizations including the Hong Kong licensed trust FDT). He emphasized:
Insufficient Regulatory Penetration: The Hong Kong trust industry has lax scrutiny on 'beneficial owners', making it easy for transnational criminal networks to exploit.
Advantages of Listed Institutions: Listed financial companies must regularly disclose financial statements and are subject to scrutiny by global regulatory bodies such as the SEC, making fund movements easier to track.
Case Evidence: In 2024, the SEC sued TrueCoin over TUSD fraud, exposing how unlisted institutions can easily hide violations.
Reserve Funds on Chain: How Technology Can Solve the Trust Dilemma?
Sun Yuchen further proposed a specific path for 'bank reserves on-chain':
Real-time Transparency: Record reserve fund balances and flows in real-time on public chains (such as TRON or Ethereum) through smart contracts, verifiable by anyone.
Risk Warning: If there are abnormal changes in reserves (such as exceeding withdrawal limits in a single day), an automatic alert will trigger on-chain, freezing suspicious transactions.
Precedent Cases:USDC: Publishes monthly reserve audit reports and collaborates with Chainlink to develop a 'Reserve Proof' protocol.
DBS Bank Singapore: Pilots putting trade finance data on-chain to enhance transparency and audit efficiency.
Industry Feedback: Feasibility and challenges coexist.
1️⃣ Support Voices
Compliance technology company Chainalysis:
'On-chain reserve verification is an inevitable direction for stablecoin compliance and can significantly reduce the space for institutional misconduct.'Advisor to Hong Kong Cyberport:
'If the Monetary Authority promotes banks to pilot reserve funds on-chain, it will consolidate Hong Kong's position as a Web3 hub.'
2️⃣ Questions and Resistance
Privacy Conflicts: Banks worry that business secrets (such as large customer transactions) could be exposed by being on-chain.
Technical Costs: Small and medium-sized banks lack blockchain deployment capabilities and need third-party service providers to intervene.
Sun Yuchen's Deep Demand: Rebuilding Industry Trust
This proposal is not only a technical solution, but also an advocacy for **'Decentralized Regulation'**:
Breaking the Black Box: Forcing institutions to 'prove their innocence' through on-chain data, rather than relying on delayed manual audits.
Global Collaboration: Cross-border fraud cases require countries to share on-chain evidence to improve judicial recovery efficiency.
Sun Yuchen calls for:
'If Hong Kong can take the lead in promoting bank reserves on-chain, it will become a beacon of global financial innovation. This is not a multiple-choice question, but a matter of survival.'
#StableCoinSafety #OnChainRegulation #FinTech
Action Guide: Investors must verify whether the reserves of stablecoins have **'On-chain Real-time Proof'** (such as USDC, USDT) to avoid projects with opaque audits.
