Brothers, today let's talk about issuing stablecoins. Don't think it's something anyone can play with; the costs and nuances behind it can easily scare off newcomers.
1. Want to issue stablecoins? First, see how much it will cost.
Stablecoins are divided into three types: fiat-backed, crypto-backed, and algorithmic. The first two are still viable, but algorithmic? After UST collapsed, it became a joke. We will focus on the first two.
1. Technical development: Initial costs of hundreds of thousands, with no upper limit.
For fiat-backed stablecoins like USDT, you need to develop smart contracts and a coin redemption system. Setting it up on Ethereum costs at least $500,000, and it can go up to $2 million; if you want to operate on faster chains like Solana, you can save 30%, but if you want to run on multiple chains, you'll have to spend tens of thousands more for cross-chain solutions.
Crypto collateral is more troublesome. For example, DAI requires over-collateralization and automatic liquidation mechanisms, which cost over $5 million just for development. Additionally, you have to pay oracles (those providing price data) a 'protection fee' of $200,000 to $500,000 annually.
The most critical aspect is security audits - smart contracts need to be audited for vulnerabilities, with costs ranging from tens of thousands to millions; consensus mechanism audits? Don’t even think about it without a seven-figure budget.
2. Compliance: Whatever the regulators require, you must provide.
Licensing is the first hurdle. Hong Kong has the strictest regulations; to obtain a license, you must have a paid-in capital of HK$25 million and legal fees in the hundreds of thousands, taking 6 months to a year; the U.S. MSB license appears cheap, ranging from a few thousand to $200,000, but the annual maintenance fee is upwards of $500,000.
Anti-money laundering (AML) is even trickier. You need to buy monitoring systems like Chainalysis, with annual fees ranging from $200,000 to $1 million, and you also need to maintain a KYC/AML team whose five members' salaries will total around $1.8 million a year.
Additionally, reserves must be audited monthly by one of the 'Big Four,' costing $100,000 to $300,000 each time. Want to save? The market will directly question whether you are a pump-and-dump scheme, and you won't be able to continue.
3. Reserves: The money isn't yours, it's 'custodial.'
For fiat-backed stablecoins like USDC, over 90% of reserves must be in stable assets like U.S. Treasury bonds, with bank custody fees charged at 0.2% - if you have $1 billion in reserves, the annual custody fee is $2 million.
For crypto-backed assets, you must store the coins in a cold wallet. BitGo's enterprise version costs $50,000 to $200,000 annually, and you must keep 5%-10% in cash to prevent a bank run; otherwise, you'll get liquidated during fluctuations.
Algorithmic? Don't touch it! UST relied on liquidity mining to spend $2 billion to pump its value, and in the end, it still collapsed, with hidden costs that were absurdly high.
4. Marketing operations: If you don't spend money, no one will recognize you.
Listing on a top exchange (like Binance) costs between $500,000 and $2 million just for the listing fee, and you must also give the exchange 20%-30% of the transaction fees.
Want to attract users in the early stages? Organize airdrops and AMA events; if you don’t have $500,000 to $1 million, no one will pay attention. Circle directly spent $1 billion on partners last year to promote USDC.
You also need to maintain a 24-hour customer service team that speaks multiple languages, costing at least $1.8 million a year.
2. Not all materials are ready? Regulators will teach you a lesson in no time.
If you want to do this, you need to prepare materials that are more complete than a bride's dowry; otherwise, a single word from regulators can halt your progress.
1. Compliance documents: You must lay everything bare.
Company qualifications: Business licenses and company articles are basic. You must dig deep into the shareholder structure; the actual controller cannot hide - want to be anonymous? Dream on.
License materials: In Hong Kong, you need to submit HK$25 million for capital verification and reserve fund custody agreements; in the U.S., you need to file documents with FinCEN (Financial Crimes Enforcement Network), and your anti-money laundering plan must be detailed beyond academic standards.
Legal opinion letter: You need to hire a licensed lawyer to write 'this entity is not fraudulent,' clearly stating the token's attributes and user rights; otherwise, it will be considered illegal issuance.
2. Technical documents: If the code isn't good, it's a no-go.
Smart contract code must be open source, and there must be a third-party audit report (for example, CertiK providing an A-level certification); otherwise, who would trust you not to have left a backdoor?
Node deployment plan: How many nodes, where to place them, and what to do in case of a network outage (disaster recovery mechanism) must all be clearly stated - Harmony chain was previously hacked due to a lack of nodes, which serves as a painful lesson.
Emergency Plan: How to pause trading and freeze assets during a crash must be reported to regulators in advance; otherwise, you won't be able to escape during a bank run.
3. Reserve proof: Don't brag, provide evidence.
For fiat-backed stablecoins, you must disclose bank deposit slips and U.S. Treasury bond certificates monthly (Tether now flaunts its holding of $127 billion in U.S. Treasury bonds daily, fearing others won't believe it).
For crypto collateral, real-time collateral ratios (for example, DAI requires ≥130%) and the value of the collateral must have an assessment report.
Algorithmic? You need to write a white paper explaining the mathematical model for supply and demand adjustment, and also provide historical data for backtesting - but no one believes this anymore.
3. Different places have different rules; stepping into pitfalls equals looking for death.
Hong Kong: The first place to clarify stablecoin regulations.
Requires a minimum capital of HK$25 million, with 100% of reserves being cash or U.S. Treasury bonds maturing within three months. You also need to find an independent institution for custody. If you want to operate in Hong Kong, it's best to ally with licensed institutions (like Ant Group), starting with cross-border payments. JD.com plans to use this strategy to reduce 90% of exchange costs.
United States: Using dollar hegemony as leverage.
The newly introduced (GENIUS Act) directly bans yield-bearing stablecoins, reserves can only be cash or U.S. Treasury bonds maturing within 93 days, and the CEO/CFO must be responsible for the authenticity of the data - lying? You could end up in jail. If you want to operate in the U.S., register in a crypto-friendly state like Wyoming to avoid some hassle.
European Union: Implementing tiered regulations, strict on large volumes.
The MiCA Act requires establishing a physical entity in the EU, with daily trading volumes exceeding €200 million, directly regulated by the European Central Bank (EBA). If you want to operate in Europe, first obtain a BaFin license in Germany. The circulation of euro stablecoins (like EURC) has already surpassed €10 billion, which presents an opportunity.
4. Want to save money? These tips can help you spend less.
Technically, don’t mess around: use existing modules, like modifying Uniswap's code, which can save half the cost, but reserve 10%-15% of the budget for fixing bugs. Using Layer 2 (like Arbitrum) can reduce transaction fees from $5 to $0.1, improving user experience.
For compliance, partner with established entities: entering regulatory sandboxes (like Hong Kong's) can significantly reduce the amount of materials you need to submit; collaborating with licensed institutions (like ZhongAn Bank managing reserves) allows you to share anti-money laundering systems, saving 30% on costs.
Risk management: Don't buy only one type of asset for your reserves. Tether currently has 60% in U.S. Treasury bonds, but you can mix in some gold (like PAXG pegged to gold); also, keep 5%-10% in cash for liquidity, as Circle held $6 billion in cash last year to stay calm.
5. Look at how others play.
Tether currently holds $127 billion in U.S. Treasury bonds and made over $13 billion in profit last year. Compliance and reserve management account for a large part of their expenses, and they've secretly invested in Bitcoin mining and AI, turning stablecoins into a 'money printer.'
Hong Kong's Round Coin Technology is currently working on obtaining licenses in collaboration with Fuyuan Quantum and ZhongAn Online to issue the HKDR stablecoin for supply chain finance, using IoT to transmit data in real-time to solve asset transparency issues. This is a clever move.
Summary: If you don't have the strength, don't join in the fun.
Issuing stablecoins is a costly endeavor: fiat-backed starts at $5 million to $20 million, crypto-backed at $8 million to $30 million, and algorithmic is basically dead. Where does the money go? Compliance (20%-35%), technology (30%-50%), reserves (15%-30%).
Materials must be prepared, and regulations must be thoroughly understood. The future is the game of big institutions; small players will either be acquired or eliminated. Want to enter the market? First, weigh your wallet and network; this industry is not for everyone.