By June 2025, the global scale of 'stablecoins' will exceed 250 billion.
As early as the end of 2024, when its scale was still at 200 billion, it had already set a record of 15.6 trillion in annual trading volume—this figure surprisingly exceeds the combined total of VISA and Mastercard, which is truly astonishing.
'Stablecoin' is complex when made complicated and simple when made simple:
Every time the issuer receives 1 dollar from the user, they will generate 1 stablecoin on the blockchain and transfer it to the user's account, while using that 1 dollar to buy highly liquid assets like short-term government bonds, always ready for user redemption, thus stabilizing the currency's value.
For users, this operation is almost no different from depositing money into a bank card.
But stablecoins are, after all, a type of cryptocurrency that runs on blockchain. This makes them much more powerful than traditional banking systems: cross-border transfer speeds are compressed from days to seconds, and transaction fees are slashed from the 'money-grabbing' dollar level to the cent level, or even lower.
Leveraging this inherent advantage, stablecoins have managed to carve out a crack in the high walls of traditional finance, becoming the 'cross-border remittance tool' in the eyes of ordinary users. This year, it has been packaged by the knowledgeable ones as the 'genius tool for defending dollar hegemony,' secretly igniting a 'digital colonial war.'
To understand stablecoins, it's not just about grasping a new tool, but also seeing through a financial shadow war that is rewriting the flow of global wealth.
This article will first briefly discuss the origin of stablecoins, and then dissect several of the most contentious points currently being argued.
1. Are stablecoins considered a disguised form of currency issuance?
2. Is the knowledgeable ones' vigorous push for stablecoins an attempt to absorb US Treasury bonds?
3. Can stablecoins serve as a reservoir against dollar inflation?
4. Is Hong Kong's promotion of stablecoins an attempt to seize the throne of international currency on-chain?
How did stablecoins come about?
The stablecoin that has suddenly gained popularity this year is actually over ten years old.
In 2014, Tether launched the first generation of stablecoin USDT, with a very practical initial intention: Bitcoin's price volatility was too wild, and bank transfers were as slow as a snail, making cryptocurrency trading hard to enjoy.
Users first exchange dollars 1:1 for USDT, then use USDT to quickly buy Bitcoin, thus avoiding the pitfall of the price having already changed drastically by the time the bank processes the transaction.
In 2019, the banking system finally could not tolerate the lack of regulation and risk exposure of cryptocurrencies, and globally, no services were provided to cryptocurrency exchanges, forcing cryptocurrency trading to shift to over-the-counter.
But this turned out to be a godsend for stablecoins—the pain points of over-the-counter trading were magnified a hundredfold, making stablecoins the only efficient settlement tool, leading to their first explosion: in the subsequent five years, the scale surged from 20 billion in 2020 to 200 billion by the end of 2024, a tenfold increase.
At this point, stablecoins are essentially still just a technical tool. Until this year, the knowledgeable ones had a sudden insight, discovering that it hides the perfect gene of 'financial nuclear weapons.'
By 2025, even if the knowledgeable ones have already become 'trinitarian,' they will still be unable to sleep due to the pile of issues such as obstacles to currency expansion, obstacles to fiscal expansion, and unsold US Treasury bonds.
They have tried global tax sticks, attempted to coerce and entice Powell to lower interest rates, and engaged in geopolitical maneuvers, yet found no breakthrough. Suddenly one day, they figured it out:
The mechanism of stablecoins is inherently suitable for solving the sluggish sales of US Treasury bonds; it just lacks official endorsement and regulatory norms. Filling this gap can break the original balance of risk and efficiency, not only alleviating the predicament of US Treasury bonds but also helping to overcome the obstacles to fiscal and monetary expansion.
What’s even more remarkable is that this way, stablecoins can also be crafted into the 'financial nuclear weapon' of the new era, allowing dollar hegemony to shine again.
Immediately following, the 'Mar-a-Lago Agreement' evolved into the 'Pennsylvania Plan.'
In June, the Senate quickly passed the (GENIUS Act), paving the way for the standardized development and federal regulation of stablecoins.
From then on, stablecoins donned the halo of 'on-chain fiat currency' and officially launched their second leap—industry estimates conservatively suggest that their scale could multiply by more than ten times in the next five years, potentially reaching 3.7 trillion by 2030.
After the rise of stablecoins, there has been a surge of popular science in the domestic market. However, it is inherently more complex than traditional financial tools, naturally giving rise to numerous controversies.
For example, does generating one stablecoin on-chain count as currency issuance? From one perspective, 1 dollar off-chain has been exchanged for US Treasury bonds, but on-chain there is now one stablecoin that can buy 1 dollar worth of goods, which seems like an issuance; but from another perspective, the on-chain stablecoin can serve as collateral, while the off-chain US Treasury bonds as reserve assets cannot be collateralized, which seems like there is no issuance...
The four controversial points listed earlier have both sides citing a bunch of 'profound' financial theories, sounding quite sophisticated, but neither side can convince the other.
The blind spot of the controversy: Are stablecoins considered currency?
This deadlock often arises because an important premise has been overlooked.
In the controversy over stablecoins, the blind spot is: Are stablecoins considered currency?
If the second leap of stablecoins is merely a flash in the pan and cannot achieve global popularity, then users will eventually redeem dollars, and the corresponding stablecoins will be canceled, and the reserves of US Treasury bonds will be sold again. In such a case, stablecoins cannot be considered currency, at best they are a form of advanced gaming currency.
The side of the controversy has implicitly accepted this assumption, never considering that stablecoins could achieve global popularity, thus logically arriving at the conclusion:
1. Stablecoins are not a disguised form of currency issuance.
2. Discussing absorbing US Treasury bonds is even more far-fetched.
3. The issuance of stablecoins does not affect real-world inflation.
But what if the second leap of stablecoins can successfully achieve global popularity?
International students use stablecoins to remit money to overseas schools, tourists in Thailand swipe stablecoins to buy mango sticky rice, factories in Argentina pay workers with stablecoins...
Just like the dollar 20 years ago, countries not only do not exchange dollars for gold or oil, but instead desperately increase their dollar reserves.
In a scenario with globally popular stablecoins, users would not bother redeeming dollars; stablecoins would never need to be canceled, and reserves of US Treasury bonds would only accumulate more, while reserve assets would no longer be required to be 100% frozen; the ratio would decline repeatedly like the bank reserve requirement ratio.
By that time, stablecoins will fully possess the five major functions of currency—they will be genuine currency.
Even if stablecoins are still some distance from global popularity, under the full push of the knowledgeable ones, relying on the dollar's status as a world currency and the high growth and demand momentum of stablecoins, global popularity is likely to be a matter of three to five years ahead.
Given such strong potential, when considering related issues, stablecoins should be regarded as the currency of the future.
The other side of the controversy has drawn completely different conclusions based on this point:
1. Stablecoins are essentially currency issued out of thin air. This may not be obvious now, but once global popularity is achieved, it will soon be exposed.
The Federal Reserve is now afraid to print money (QE) casually; the fear of dollar depreciation is secondary; the main concern is that more and more countries are no longer using the dollar, which is what they are most anxious about.
Before the year 2000, the dollar's share in global foreign exchange was as high as 71%.
However, in the past ten years, this ratio has dropped from 66% to 57.4%, with no rebound during that period, and it has been dropping even faster in recent years. If this continues, it may fall below 55% within two years, putting dollar hegemony at risk.
On the other hand, the dollar accounts for nearly 100% of stablecoins. When we usually say 'stablecoin,' we actually refer to 'dollar stablecoin,' without the need to specify the full name.
It's no wonder they are eager to 'make dollar hegemony great again'; it's not surprising that the (GENIUS Act) could be passed quickly.
Once stablecoins achieve global popularity, they will become a new type of foreign exchange reserve that no country can easily discard. By then, the Federal Reserve can print money (QE) to buy its own stablecoins, and countries can only watch their wealth being siphoned away.
Don't think this is impossible—20 years ago, when the Federal Reserve printed money to buy its own Treasury bonds, it was also considered unbelievable and a breach of limits, but now it has long since become commonplace.
2. The knowledgeable ones' push for stablecoins is partly motivated by the need to solve the issue of unsold US Treasury bonds.
Some say that the scale of 250 billion in stablecoins is just a drop in the bucket compared to 360 trillion in US Treasury bonds, so it’s impossible for the knowledgeable ones to be buying up US Treasury bonds.
Those who can say such things are basically financial novices.
At least 20 years ago, when the Federal Reserve Chairman was Greenspan, they understood the game of US Treasury bonds—relying on dollar hegemony, US Treasury bonds could always 'borrow new to pay old,' and the principal never needs to be repaid.
The expansion of US Treasury bonds over the past 20 years is the best proof. As long as new debt can be sold, it doesn't matter how many trillions are due.
We see in the news that the US Congress fights over the debt ceiling every year, and it takes a long time to finally break through, occasionally leading to a temporary government shutdown. But fundamentally, this feels more like a show for the world, demonstrating that the US is a 'credit giant' and that US Treasury bonds are not issued arbitrarily; in reality, this is a benefit for the opposition party, providing one or two opportunities each year to blackmail the ruling party.
According to statistics, since 1960, the US debt ceiling has been raised on average every eight months, and it has been raised 103 times so far.
It is often said that the pressure of US debt is great, 'just the interest paid each year exceeds 1 trillion.' Little do they know that their 'debt pressure' is actually only the interest.
360 trillion in US Treasury bonds, simply calculated at 4.2%, yields just over 15 trillion in interest per year.
250 billion is indeed insignificant in the face of 360 trillion, but in the context of 15 trillion in interest, it could be crucial.
Their current problem is the sluggish sales of US Treasury bonds, not that they can't sell even one dollar. To solve 'sluggish sales,' there's no need to take over the whole situation; just filling the demand gap, or even just raising demand expectations, can solve the problem.
Moreover, stablecoins are conservatively estimated to multiply by more than ten times in the next five years; calculating it based on 250 billion is too simplistic.
3. While stablecoin issuance currently does not affect real-world inflation, what is meant to come will eventually arrive.
Moreover, with global popularity, the parts that should have inflated but haven't will gradually 'inflate.' However, this 'inflation' may not necessarily occur in the US; where stablecoins are spent, inflation may occur.
In simple terms, it’s still the old trick—making the world pay for American inflation.
Most stablecoin issuers are private enterprises, making this move very clever. It can cleverly shift 'balance sheet expansion' from the Federal Reserve to private enterprises, catching those economists who stick to outdated Western economic doctrines off guard. After all, they still cling to economic axioms from one or two hundred years ago, only recognizing the so-called iron rule of 'Federal Reserve balance sheet expansion - dollar depreciation - inflation.'
A carefully designed 'currency transformation story'
In fact, stepping out of the financial realm and looking at the knowledgeable ones' motivations, these controversies may be much simpler.
Promoting stablecoins has risen to the level of modifying the 'Mar-a-Lago Agreement' and is a core strategy. If the goal were merely short-term to absorb US Treasury bonds, mitigate sluggish sales pressure, or find a temporary pool to buffer short-term inflation, would it really warrant such a huge mobilization?
Conversely, aiming for global popularity can not only solve the sluggish sales of US Treasury bonds but also 'make dollar hegemony great again,' making the world pay for American inflation, thereby breaking the fiscal and monetary expansion dilemma—this is the accounting that a businessman would calculate.
In simple terms, the 'Pennsylvania Plan' is a carefully designed 'currency transformation story.'
The mission of Hong Kong's stablecoin
Domestic mobile payment is unique in the world; 'dollar stablecoins' trying to penetrate the Chinese market through transaction convenience have basically no chance.
However, for most developing countries, 'dollar stablecoins' come with an advanced mobile payment system, making it convenient for imports, exports, and travel, while internally combating inflation, making them sufficiently attractive.
Even many developed countries find it hard to resist this temptation.
This would allow the dollar to don the cloak of stablecoins and regain its penetration rate in global foreign exchange reserves.
Moreover, blockchain can bypass the banking system, and stablecoins can easily penetrate some countries with capital controls, reaching places where dollars previously couldn't reach—this is 'making the dollar hegemony great again.'
This is both a carefully designed 'currency transformation story' and a covert 'digital colonial war.'
Defeating magic with magic usually only exists in stories. When the opponent is too strong, the best choice might be to 'counter magic with magic.'
The European Union has rushed to legislate, restricting the circulation of 'dollar stablecoins' while intensifying the research and development of 'euro stablecoins'; Japan is also relaxing regulations while exploring 'yen stablecoins.' They would rather build their own small ponds than jump into the ocean of dollars and become 'colonies of digital dollars.'
But magic may not necessarily counter magic; sometimes learning someone else's magic makes it easier to become their nourishment.
For example, South Korea is in a dilemma regarding the 'Korean won stablecoin': on one hand, they want to use it to combat the on-chain expansion of 'dollar stablecoins'; on the other hand, South Korea has some capital controls, and the 'Korean won stablecoin' would facilitate the exchange for 'dollar stablecoins,' accelerating capital outflow.
For us, 'offshore RMB stablecoins' are a feasible path. Conservatively speaking, it is a form of defense; optimistically speaking, it may be the key to countering the global financial colonization of 'dollar stablecoins.' It can bypass the dollar's SWIFT system while attracting countries along the 'Belt and Road' to use 'offshore RMB stablecoins' for payment, aiding in the internationalization of the RMB.
The Hong Kong dollar, based on the free flow of capital, is a good 'testing ground' for promoting the 'Hong Kong dollar stablecoin.'
Thus, the mission of Hong Kong's stablecoin is primarily defensive and balancing, rather than actively competing for on-chain international currency status.
If they wanted to actively compete, they wouldn't wait for the US (GENIUS Act) to complete its process in the Senate before issuing the first virtual asset trading license with a state-owned background. It’s worth noting that Hong Kong (stablecoin regulations) was formally passed in May, which is much faster than the US.
If they wanted to actively compete, they would not have chosen Guotai Junan International, with a state-owned background, to take the lead after extensive selection. This indicates that China’s push for stablecoins is not a 'balance sheet transfer' trick like the US.
Speaking of licenses, let me briefly clarify a few points:
1. Recently, the skyrocketing stock price of Guotai Junan International obtained a virtual asset trading license, but not a formal stablecoin issuance license. This is Hong Kong's 11th virtual asset trading license, and the first ten were all foreign or Hong Kong-funded. The formal stablecoin issuance licenses will only be issued after the implementation of the (stablecoin regulations) on August 1, with only 3-5 in the first batch, which is much scarcer than virtual asset trading licenses.
2. The stock price of Guotai Junan International surged, primarily due to valuation logic: including its future value as a massive traffic gateway, higher trading fee profits, and the value of scarce licenses (with state-owned background, it's highly likely to obtain a formal stablecoin issuance license). The emotional aspect is secondary.
3. For mainland cross-border e-commerce giants, obtaining a stablecoin license means a significant opportunity to expand into overseas markets. That's why JD's JD-HKD Hong Kong dollar stablecoin squeezed into the slots of five institutions to enter the Monetary Authority's stablecoin sandbox test. However, entering the sandbox does not guarantee obtaining a license.
An experiment under the guise of 'efficient payment' is quietly rewriting the rules of currency warfare.
