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Founder of Coin Community, Vice President of Hong Kong Blockchain Technology Association, OKX Star Community, Ace Node. Bitget 2025 Trading Competition ranked first in Chinese.

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Stablecoins, on the surface, appear to be an innovation in payment tools, but essentially they are private sector reissues of "private money." #纽交所母公司授权OKX推出原油合约 Their advantages are clear: pegged to the US dollar, operating on blockchain, theoretically faster and cheaper than traditional banking systems, especially suitable for cross-border payments. Therefore, the scale of stablecoins has rapidly expanded over the past few years. Currently, the global stablecoin balance is about $300 billion, with Tether around $190 billion and Circle about $76 billion, no longer a niche market. But the problem lies here. Stablecoins want to borrow the credit of the US dollar but do not fully operate within the traditional banking and central bank clearing systems. True currency has a core characteristic: "uniqueness"—1 dollar held by anyone, anywhere, at any time, and in any transaction should equal 1 dollar. Bank deposits, although also a form of money created by private institutions, are backed by central bank clearing, deposit insurance, and a lender of last resort, thus maintaining this uniqueness. Stablecoins are different. They are issued by private institutions, rely on reserve assets to maintain the 1-dollar peg, and operate within a fragmented system composed of different chains, platforms, and issuers. Both Tether and USDC theoretically equal 1 dollar, but historically there have been deviations, though usually minor. The real concern for monetary systems is not small fluctuations during normal times but the collapse of confidence during times of stress. The business model of stablecoin issuers naturally drives them to expand scale, increase returns, and enhance user stickiness. They want more people to use stablecoins, possibly through rewards, cashback, platform incentives, and expanding use cases; they also want reserve assets to generate higher yields. As long as there is profit pressure, there will be the temptation to "reach for yield," meaning investing reserves in assets with slightly higher returns but somewhat lower liquidity or safety. This is the core risk of stablecoins: they look like cash in normal times but can become a tool for bank runs during stress. Once the market doubts a stablecoin can maintain its 1-dollar peg, holders will rush to redeem or sell, forcing issuers to liquidate reserve assets. If the scale is large enough, the risk could spill over from the crypto market to short-term debt, repos, bank deposits, and even broader financial markets. Similar events have happened historically. In 19th-century America, during the free banking era, private banks could issue their own banknotes, resulting in a fragmented system with varying note values, fraud, and frequent bank failures. During the 2008 financial crisis, money market funds "broke the buck" due to holding depreciated assets, triggering wider panic. Stablecoins may seem like new technology, but essentially they represent an old problem: can private credit sustainably serve as public money? Regulation can certainly reduce risks, such as requiring stablecoins to be backed by safe, highly liquid assets, limiting deposit-like interest, and strengthening disclosure and redemption arrangements. But regulation struggles to eliminate their structural contradictions entirely. The more successful stablecoins become, the less they resemble ordinary crypto applications and more like systemic payment infrastructure; once they become infrastructure, they must be regulated under monetary and banking principles, not just technology innovation or crypto asset logic. More realistically, stablecoins are still some distance from a "real economic payment revolution." Most of their use remains concentrated in crypto trading, cross-border circumvention, dollarization demand, and regulatory arbitrage, with a very low proportion used for goods and services payments. Stablecoins tell a story of payment efficiency, but their current main stage is not everyday consumption but the crypto financial system. So my judgment on stablecoins is: they will not disappear, nor are they without value. They indeed represent an important direction in payment technology, especially with real demand in cross-border payments, on-chain settlement, and dollar liquidity access. But they are not the "risk-free digital dollar" many imagine. The essence of stablecoins is private institutions packaging their own credit as dollar credit and improving circulation efficiency through blockchain. The smaller they are, the more their problems resemble internal crypto market risks; the larger they grow, the closer their problems approach monetary and financial risks. The likely ultimate outcome for stablecoins is not wild growth but convergence with the banking system—either becoming strictly regulated payment financial institutions or being partially replaced by tokenized bank deposits. In short, the value of stablecoins lies in efficiency, the risk lies in credit. They can improve payment efficiency but cannot create public monetary credit out of thin air. The more they aim to become mainstream financial infrastructure, the less likely they can remain on the regulatory fringe for long. $BTC $ETH $BSB