Three 'Misunderstandings' about Stablecoins.
1. The essence of stablecoins: 'Yu'ebao' on the blockchain.
Currently, 99% of stablecoins are pegged to the U.S. dollar, essentially functioning as U.S. dollar money market funds, but with a few differences: first, stablecoins do not pay interest, so the issuers profit greatly; second, the shares of stablecoins as money market funds can be stored and circulated in a decentralized manner. Stablecoins can be understood as 'fiat currency' in the blockchain world, capable of purchasing other blockchain assets and facilitating convenient cross-border payment settlements.
2. Misunderstanding One: Stablecoins weaken the U.S. dollar.
In fact, quite the opposite is true; stablecoins expand the functions and usage scope of the U.S. dollar, actually enhancing the U.S. dollar's status globally. Other non-U.S. currencies may experience certain shocks, especially small economies with unstable currency values.
3. Misunderstanding Two: Any fiat currency can be used to issue stablecoins in large quantities.
In fact, the credit of stablecoins is built on the foundation of fiat currencies. If the recognition of fiat currencies is not high, the acceptance of stablecoins based on that foundation may also not be high. Just like an asset that is of poor quality, would anyone buy an ABS based on that asset? Obviously not. Otherwise, we wouldn’t see that 99% of stablecoins are pegged to the U.S. dollar.
4. Misunderstanding Three: Stablecoins can solve the U.S. debt issue.
In fact, it can be said that it does not help at all in solving the U.S. debt issue. Stablecoins are money market funds that primarily purchase short-term bonds, and the biggest influencer in the short-term bond market is the Federal Reserve. If the policy interest rate remains unchanged, the short-term bond interest rates will also remain unchanged. Moreover, some stablecoins simply replace demand deposits in U.S. dollars. Long-term U.S. debt is even less affected because stablecoins do not include long-term bonds; thus, stablecoins do not provide any benefits to U.S. debt.
5. It is necessary to pay attention to the medium- to long-term opportunities of stablecoins.
The emergence of stablecoins is a product of the global monetary changes, characterized by excessive issuance of global currencies, changes in monetary relationships, and an increasingly obvious trend towards decentralization. Stablecoins will play an increasingly important role in purchasing blockchain assets, cross-border payment settlements, and substituting fiat currencies in countries with high exchange rate volatility. Regarding opportunities, attention can be focused on issuing companies, exchanges, cross-border payment settlement intermediaries, etc.
