In the past, stablecoins were used to bypass regulation; now stablecoins are used for excessive money supply, through a digital bubble, printing money, then the bubble bursts, and the currency is destroyed. Ultimately, the government solves the debt issue, big players profit, and most retail investors have a dreamlike experience, perfect.

Why I'm not optimistic about Hong Kong stablecoins

The origin of stablecoins: Initially, in the web3 field, everyone used BTC and ETH for pricing, but these things fluctuate in price, and the unit prices are too high, so a payment might be 0.0001B or 0.01E.

At this point, there was a smart idea from the people at Tether company, thinking can I map something with a stable price to Web3.

The most typical stable-priced asset is USD, the famous US dollar.

However, the US dollar is fiat currency, which doesn't connect with blockchain; they are not part of the same system and do not communicate with each other.

What to do? How to make people recognize that something on the blockchain can be linked to the US dollar?

A simple method is the so-called 1:1 exchange.

In simple terms, I deposit 1 dollar in the bank, then issue 1 virtual web3 dollar.

At this point, this virtual dollar has value and can be used as 1 dollar at any time.

We name this something on the blockchain, called USD Tether, abbreviated as USDT.

This is currently the common transactional equivalent in the web3 industry.

Because its price is stable, it is called a stablecoin pegged to the US dollar at a 1:1 ratio.

1. Because virtual currencies are not so easily circulated and are inconveniently connected to fiat currency, having stablecoins as a medium of exchange, or a measure of value, greatly promotes the market for virtual currencies in the web3 field.

2. It forms a payment system that is detached from the regulation of any specific country or region globally, allowing purchases to be made directly with USDT. Although one could previously pay directly with BTC or ETH, the prices were still unstable, making it impossible to form a perfect payment system.

However, if everyone does this, it will lead to many cross-border capital flows not being controlled by the current financial regulatory system. Therefore, there has always been the belief that incorporating stablecoins into regulation is a big issue.

In simple terms, if we can bypass a certain level of regulatory systems (whether fiat, forex, or international settlement), allowing capital to flow freely, then there will be sufficient application scenarios.

From this perspective, the HK and US stablecoin legislation, which requires regulation, eliminates part of the functionality.

However, the USD's capacity for cross-border global payments still exists. But personally, I am not optimistic about stablecoins pegged to HKD, as they do not possess the attributes of a global currency.