Circle's surge is because stablecoins have the functions of a) exchanging currency for chips; b) lending for banks; c) bypassing SWIFT transfers, etc. There is a lot of room for imagination. Retail investors can make money by buying related stocks, and bigwigs can make money by building platforms. However, stablecoins cannot replace the US dollar because they lack the endorsement of the real industry. The following is a detailed text:
1) [Definition of stablecoin: equivalent to "small Hong Kong dollar"]
Whether it is the International Monetary Fund (IMF), or the U.S. Securities and Exchange Commission (SEC) and the Office of the Comptroller of the Currency (OCC), all define stablecoins as digital value units that aim to maintain stable value by anchoring external assets (such as fiat currencies or commodities) or controlling their supply through algorithms, and are usually pegged to the U.S. dollar at a 1:1 ratio.
Stablecoins can be divided into the following categories:
[Fiat-backed stablecoins]: Such as Tether (USDT) and USD Coin (USDC), which hold US dollar reserves at a 1:1 ratio and are deposited in banks or regulated custodians - this is actually similar to the Hong Kong dollar being pegged to the US dollar. We can almost say that stablecoins are almost equivalent to "small Hong Kong dollars".
Commodity-backed stablecoins: such as Pax Gold (PAXG), which is pegged to gold, with each unit representing a certain weight of physical gold.
[Crypto-backed stablecoins]: Such as DAI, which is over-collateralized by crypto assets on Ethereum and its value is maintained through smart contracts.
[Algorithmic Stablecoins]: Such as Ampleforth (AMPL), which adjust supply through algorithms to stabilize purchasing power without direct asset support (high risk, example: TerraUSD collapse).
This article mainly discusses [stablecoins backed by fiat currency], because this "small Hong Kong dollar" is the mainstream asset of stablecoins.
2) [Opportunities to make money: Cricle listing and the passage of stablecoin bills in the United States and Hong Kong]
The biggest opportunity to make money in stablecoins recently is the surge in the stablecoin platform Circle (US stock code: CRCL) after its listing, causing many big names in the cryptocurrency circle to sigh and regret that they missed the opportunity. See Figure 1 for details:
The main reason behind the surge in CRCL is the support of news: the United States and Hong Kong passed the stablecoin bill.
On May 19, 2025, the U.S. Senate passed the procedural vote of the Guiding and Establishing National Innovation for U.S. Stablecoins Act (hereinafter referred to as the "GENIUS Act") with 66 votes in favor and 32 votes against. On June 17, the U.S. Senate passed the GENIUS Act with 68 votes in favor and 30 votes against.
[According to the (GENIUS Act), stablecoins must be fully backed by U.S. dollars or similar liquid assets]. For issuers with a market value of more than $50 billion, the Act requires annual audits. At the same time, the Act establishes special compliance rules for foreign entities such as Tether. It is worth noting that [the Act prohibits non-financial public companies such as Meta and Amazon from issuing stablecoins unless they meet specific risk and privacy standards]. The Act specifically establishes a "super priority" for stablecoin holders. In the event of the issuer's bankruptcy, stablecoin holders will be paid before other creditors-in short, the Act aims to establish a comprehensive regulatory framework for the issuance of stablecoins.
The above is simply:
a) By paying homage to the US government and obtaining a license, you can issue stablecoins.
b) It must be backed by highly liquid assets, which can be US dollars or short-term US Treasury bonds.
c) must be regulated and audited by the U.S. government.
On May 21, 2025, two days after the procedural vote in the United States (GENIUS Act), the Hong Kong Legislative Council passed the (Stablecoin Bill), which officially became law on May 30. [Hong Kong became the world's first jurisdiction to establish a comprehensive regulatory framework for fiat stablecoins], as shown in Figure 2:
Moreover, the fishing village has also started a pilot program for the Hong Kong dollar stablecoin:
a) Standard Chartered Bank: Established a joint venture with Ansai Group and Hong Kong Telecom, focusing on cross-border trade settlement in the Greater Bay Area, with the goal of reducing corporate foreign exchange costs by 3%-5%.
b) JD Technology: Launched the "JD-HKD" stablecoin, integrated into the e-commerce payment system, which users can use directly for shopping and supports cross-border B2B supply chain financing
3) [Imagination space for stablecoins: "world currency" that bypasses the SWIFT system]
However, the news alone cannot fully explain why CRCL has soared. In the eyes of Caimi, the first stablecoin stock Circle has soared because stablecoins have the following imagination space:
[First, stablecoins provide a "chip exchange counter" for cryptocurrency players]
[Stablecoins provide a counter for exchanging chips, allowing altcoins/air coins/meme coins to be linked to sovereign credit currencies]-----Coin circle players use sovereign credit currencies to exchange for stablecoins, and then use stablecoins to buy and sell various altcoins/air coins. This is similar to the casinos in Macau that allow everyone to exchange sovereign credit currencies for chips, and then players use the chips to play slot machines or baccarat.
But it should be noted that stablecoins can also be used as units to measure the value of altcoins/air coins/meme coins. If air coins such as luna appear, the exchange value of stablecoins will depreciate significantly.
[Second, replace banks in absorbing deposits/lending]
Before this, deposit collection and lending were the privileges of banks. Stablecoins opened the way and used dollar tokens to circumvent the legal supervision that companies cannot issue dollars and cannot collect deposits. As long as the company gets enough legal currency, it can exchange it for stablecoins, and the stablecoins can be used to trade in the U.S. bond market to make money. Moreover, companies can also use these stablecoins as anchors to issue their own altcoins - the potential impact of this is also very cool and awesome.
Moreover, as of now, this matter is actually prohibited in the United States, but it seems that there is a loophole in the fishing village - after all, JD.com can issue currency in the fishing village.
【Third, stablecoins can bypass banks and the SWIFT system for cross-border transfers】
Stablecoins can be used for cross-border payments - both parties open a stablecoin account, the money arrives in seconds, and then the recipient exchanges the stablecoin for the local currency in their own country/region. This will of course be very fast, and it is equivalent to bypassing the banking system and SWIFT system - the players in the industry should all know how explosive this may cause.
Why is the United States willing to make this offer?
The financial fan's understanding is: first, the United States has a small government and has always been very tolerant of new things; second, the credit of the US dollar is backed by technology and US debt that has not defaulted for hundreds of years, and stablecoins are difficult to replace; third, the largest stablecoin exchanges Circle and Tether are both in the United States. Once they become bigger, the US government will be able to completely control the circulation of global stablecoins - you know, the Swift system is in Europe, the United States has the dominant position, but it is difficult to completely control the Swift system.
【Fourth, stablecoins may become potential local currencies of third world countries】
Third world countries with unstable local currencies can use stablecoins to replace local currencies for payment. The premise is that computers and mobile phones are popular in the country. Only in this way can payment systems similar to Yu'ebao and WeChat Pay be rolled out - however, these poor countries will not do this unless they have no choice, because this is equivalent to handing over the right to mint coins to others.
[Fifth, stablecoins have the potential to become "digital world currency"]
Based on its four major functions as a) a counter for exchanging chips in the cryptocurrency circle; b) a substitute for banks in absorbing deposits/lending; c) a cross-border transfer system that bypasses SWIFT; and d) a potential local currency for third world countries, stablecoins have the potential to become the currency of the digital world - after all, stablecoins can also be exchanged for US dollars or other sovereign credit currencies.
More importantly, [the various regimes that issue sovereign credit currencies will also welcome this, because stablecoins expand the use scenarios and demand for sovereign credit currencies] - in the past, sovereign credit currencies were mainly circulated domestically, and major global currencies such as the US dollar could also be used for international settlements. Now, [sovereign currencies can also be exchanged for various digital cottage currencies, which can increase the market demand for sovereign credit currencies, thereby increasing the value of sovereign credit currencies].
Another benefit of this is that all sovereign credit currencies can enter the new digital currency market to exchange for stablecoins - this is equivalent to giving all sovereign credit currencies a new opportunity to "grab land" and engage in currency colonization.
However, the governments of most countries in the world did not quickly recognize this opportunity and try to grab market share. Only the US government and the fishing village government reacted the fastest and quickly passed laws to link the US dollar/Hong Kong dollar with stablecoins. This may lead to the US dollar and Hong Kong dollar occupying the top shares in the future stablecoin market, and further lead to an increase in the demand and value of the US dollar and Hong Kong dollar.
4) [The fishing village is rapidly promoting stablecoins because the mainland giants want to cash out their crypto assets]
Why is the fishing village promoting stablecoins so quickly? I think it is because, as mentioned above, [the fishing village's stablecoin can help the mainland giants find ways to cash out their cryptocurrency assets], see Figure 3 for details:
According to media reports: In 2017, the Beijing Municipal Public Security Bureau and the Beijing Municipal Finance Bureau took the lead in establishing a "green channel" for physical transfer to the state treasury, allowing the public security organs to transfer the property involved in the case that needs to be turned over to the state treasury in kind to the Beijing Stock Exchange designated by the financial department for disposal. In this innovation of the overseas disposal model, the specific operation is that the public security organs entrust the Beijing Stock Exchange to dispose of the physical virtual currency involved in the case. After accepting the entrustment, the Beijing Stock Exchange selects a professional service agency to detect, receive, and transfer the virtual currency involved in the case, and sell it publicly through a compliant licensed exchange in Hong Kong, China. After completing the national foreign exchange management approval procedures, the settlement is transferred to the special account of the public security organs involved in the case and turned it over to the state treasury. [The key channel for this model to form a "closed loop" is to sell it publicly through a compliant licensed exchange in Hong Kong, China]. With the collaborative operation of multiple institutions, the detection and transfer of virtual currency, inquiry transactions, and settlement of foreign exchange can be compressed to 24 hours.
Since 2021, mainland China has completely banned virtual currency transactions and mining, and the mechanism for converting seized virtual currencies into traditional currencies is relatively lacking. Taking the recently publicized Plus Token pyramid scheme case as an example, the relevant ruling shows that law enforcement agencies have seized more than 194,000 Bitcoins, 830,000 Ethereums, 1.4 million Litecoins, etc. The seized virtual currencies will be handled in accordance with the law, and the proceeds will be confiscated and turned over to the state treasury. However, the specific disposal of the relevant virtual currencies has not been made public.
5) [Stablecoins have great potential, but they will face great challenges in the future]
Stablecoins also face the following challenges:
First, it is almost wishful thinking for stablecoins to replace the US dollar and become the main currency in global circulation.
The main reason why currencies such as the US dollar/pound sterling/euro have become the world's major trading currencies is that these currencies have withstood the test of hundreds of years of credit records - the US Treasury bonds have never defaulted since the founding of the country, and the UK Treasury bonds have never defaulted since the Glorious Revolution.
The US dollar and the British pound are backed by the real economy of the United Kingdom and the United States. If countries around the world want to buy American Nvidia chips, F35 fighters, Apple phones, Tesla cars, and Hollywood blockbusters, they must pay in US dollars. This ensures that stablecoins are difficult to replace the US dollar. Because people can only exchange stablecoins for a bunch of altcoins/air coins/meme coins. Even if a third world poor country adopts a stablecoin as legal tender, people can only buy products and services from the third world poor country, and cannot buy Nvidia chips, F35 fighters, and Hollywood blockbusters.
Second, [although stablecoins are fast to trade and remit, they are not safe]
I have explained many times why I never invest in cryptocurrencies, but instead invest in cryptocurrency platforms such as Coinbase and Robinhood. This is because small retail investors like me are not afraid of altcoins/air coins/meme coins themselves, but of black platforms. As long as the platform cheats, it doesn't matter even if small retail investors like me buy Bitcoin or Ethereum.
In addition, even if the platform itself does not cheat, if it encounters a powerful hacker, the security of the platform cannot be guaranteed - and security is the foundation of finance, as shown in Figure 4:
If the above two major problems are not solved, the pricing of stablecoins will not go up.
At this point, we can make a summary:
First of all, [stablecoins are small Hong Kong dollars. Retail investors like us can make a fortune by buying stablecoin concept stocks (such as Circle), and bigwigs can make a fortune by establishing stablecoin trading platforms. ]
Secondly, [stablecoins have great potential because they have four functions: a) a counter for exchanging chips in the currency circle; b) replacing banks to absorb deposits/lend; c) bypassing SWIFT's cross-border transfer system; d) potential local currency of third world countries. At the same time, they have the potential to become the currency of the digital world. 】
However, [since stablecoins do not have hundreds of years of credit and real economy to back them up, it is almost wishful thinking to replace the main currencies in global circulation. At the same time, although stablecoins are fast in transactions and remittances, they are not safe. These two issues will affect the pricing of stablecoin concept stocks. ]
[Investment strategies that money fans may adopt]: Retail investors like me can hold stablecoin concept stocks such as Circle in small batches for a long time. In addition, we can use some money to invest in stablecoin concept stocks.
Band. Make a little money through long-term + medium-term holding methods - at least, the money lovers themselves will do this.【Note】: Caimi is only explaining and analyzing its own investment strategy. The above information is just Caimi’s personal opinion and does not constitute investment advice. Caimi is not responsible for the investment consequences. The market is risky and investment should be cautious.