Stablecoins: Saving Bad Businesses
The core reason why banks and insurance companies can make money is that they have a source of funds with extremely low cost and low risk. With the support of stablecoins, retail enterprises like Walmart, JD.com, and Amazon, which have large transaction volumes, may also gain this advantage.
A few days ago, Wang Puzhong, the CEO of Meituan's core local business, revealed the profit margin of Meituan's food delivery service: about 4%.
This is exactly the "profit margin" of US dollar stablecoins. The business model of stablecoins is to use the money users pay to buy stablecoins to purchase government bonds and earn profits. Currently, the interest rate of US dollar government bonds is about 4%.
— It may seem like a small amount, but it already exceeds the net profit of many enterprises.
Walmart's net profit margin in fiscal year 2024 was only 2.39%. JD.com's net profit margin in 2024 was 3.6%. The profit margin of Amazon's retail business was about 5%.
These companies are precisely the large companies that are currently actively issuing stablecoins.
If stablecoins can truly become the mainstream payment method within their ecosystems, as the outside world imagines, the interest income alone could reach tens of billions of dollars annually. This is not just a way of financial management; it could become a pillar source of income. The business models of many low - profit businesses will change permanently.
01 The Lower the Profit, the More in Need of Stablecoins
4% is the "natural base" in the world of US dollar stablecoins.
The entire industry's business model revolves around this figure, which is the current interest rate of US dollar government bonds.
Most of the money users pay to buy stablecoins is used by issuers to purchase this risk - free investment product. If an issuer can issue $100 million worth of stablecoins, it can earn an annual revenue of about $4 million. This is the business model of stablecoin manufacturers like Circle and Tether.
On the one hand, 4% is too low.
It's just interest. Of course, a company can optimize its financial structure with interest, but how can it rely solely on bank interest? Moreover, it is volatile. Once the Federal Reserve significantly cuts interest rates, the net profit of all stablecoin manufacturers will plummet. This kind of business has no control over its own profit pricing and is a purely cyclical business.
On the other hand, 4% is high enough, higher than the net profit of many enterprises.
A few days ago, Wang Puzhong, the CEO of Meituan's core local business, admitted that Meituan's food delivery service had a profit margin of about 4% in the past year. Internet giants have invested tens of billions in battles, but in the end, they can only earn the equivalent of the US dollar interest rate. Not all Internet platforms have profit margins as good as Pinduoduo. Didi's profit margin in 2024 was even lower than Meituan's food delivery business, less than 1%.
Traditional retail enterprises are well - known for their low profits. Walmart's net profit margin in 2024 was only 2.3%. Walmart's total profit was only about $15 billion, which is completely unworthy of its long - standing position as the number one company in the Fortune 500.
Online retailers are not much better. JD.com's net profit margin in 2024 was only 3.6%. At Amazon, the annual net profit margin in 2024 was less than 10% — this is the result after being supported by its high - profit cloud service. According to external estimates, its retail business only had a profit margin of about 5%.
Needless to say, in the manufacturing industry, many leading enterprises are in the red. Some enterprises don't even have a 1% profit margin, let alone 4%.
4% interest may be just a bonus for Apple, but for these enterprises, it is a core business that can support their main profits. — It's not without precedent for finance to be the main source of profit. In the first half of 2024, Li Auto suffered an operating loss from selling cars. Out of its net profit of 1.692 billion yuan, 1.439 billion yuan came from investment and financial management income. At its peak, General Electric had low manufacturing profits, but 40% - 50% of its profits came from financial services.
It can be said that the lower the profit margin of an enterprise, the more it needs stablecoins as a financial means to optimize its business model.
Of course, not every enterprise has the ability to issue a large amount of stablecoins. The function of stablecoins is for transactions, and it requires sufficient trading volume to support it. The most suitable enterprises emerge: retailers. They have almost the largest transaction volume in all industries and have a strong ability to issue coins. At the same time, they have low profit margins, so the benefits of entering this field will be more substantial than those of high - profit enterprises.
As a result, retail enterprises have become the most active group in entering the stablecoin field. In June, the media reported that both Walmart and Amazon planned to launch stablecoins. In addition to these two retail giants, the OTA platform Expedia is also gearing up. Across the ocean, Liu Qiangdong personally announced that JD.com hopes to apply for stablecoin licenses in all major currency - issuing countries around the world.
Their ultimate goal is obvious: to issue a large amount of stablecoins and use them for transactions of their own products. It would be best if all transactions within their ecosystems could be carried out using their own stablecoins, just like barbershops use membership cards for payment. Then they can deposit these "pre - charged" fees to earn interest.
02 How Much Can They Earn?
How much income can stablecoins bring?
Take Walmart as an example. Walmart's revenue last year was as high as $680 billion. In addition, Walmart also has some third - party e - commerce business, and its total GMV may exceed $700 billion. If it can issue stablecoins worth one - tenth of its GMV, the market value of its stablecoins may exceed that of Circle. If it can issue stablecoins equivalent to its GMV, Walmart will become a giant in the stablecoin industry.
So, can Walmart issue $700 billion worth of stablecoins?
Of course not. After all, money is fluid. A GMV of $700 billion does not require $700 billion worth of stablecoins. The amount of stablecoins that Walmart and other companies can issue is actually "how much unspent balance can be retained in the market."
There is a reference for this figure: the unspent membership balance at Starbucks. Starbucks' 2024 financial report shows that the amount of stored - value cards on its books reached as high as $1.7 billion. You know, Starbucks' annual net revenue was only $36 billion, and Walmart's revenue is about 20 times that of Starbucks. If Walmart can achieve the same pre - charge ratio as Starbucks with its stablecoins, that is, nearly 5% of its revenue is retained in pre - charged membership cards, there will be nearly $40 billion retained on its books.
Caption: This $1.7 billion is the money that members have recharged but not spent. Starbucks can use it to buy government bonds and earn a profit of about $70 million annually.
In addition, Starbucks has a high - frequency consumption model. Whether it's supermarket shopping at Walmart or online shopping at JD.com and Amazon, the frequency is much lower than "buying a cup of coffee." The lower the shopping frequency, the slower the capital turnover, and the more unspent money there will be on the card — which means more coins can be issued.
The single - purchase amount in the retail industry is also much higher than that at Starbucks. Americans can easily spend hundreds of dollars on a supermarket trip, while a cup of coffee only costs $5. A high consumption amount means a larger balance is needed on the account. Retailers can use offers like "recharge $1000 and get $100" to encourage consumers to recharge more — which also means more coins can be issued.
By nature, Walmart has a stronger ability to retain funds than Starbucks. If the payment ratio of its stablecoins can reach that of Starbucks' membership cards, its coin - issuing volume is likely to exceed $50 billion, and the annual interest income will exceed $2 billion. For Walmart, which has an annual profit of $15 billion, this is definitely not a small amount.
This is not the end. Retailers like Walmart and Amazon also have to pay billions of dollars in transaction fees to card - issuing organizations like VISA, Mastercard, and American Express every year. If the payment system can be largely replaced by stablecoins, this will save a significant amount of profit.
In addition, if all liquidity is retained on their own blockchain, a large number of financial and wealth - management services can be developed.
— A more ambitious idea is that as terminal retailers, Walmart, Amazon, and JD.com can even use stablecoins to pay upstream suppliers and employee bonuses. The potential in this area can be directly measured by the accounts payable of these enterprises. Walmart's accounts payable have always been over $50 billion, and JD.com's accounts payable in its latest financial report reached as high as 176.736 billion yuan. If these accounts are all paid with stablecoins, the issuer can earn interest for a period of time between when the upstream manufacturers receive the stablecoins and when the stablecoins are redeemed.
Caption: As the downstream players in the industrial chain, retailers retain a large amount of upstream funds.
If only part of the above ideas can be realized, for these enterprises with high revenue but low profit margins, the income from stablecoins may even exceed their main business income. The business models of consumer enterprises may also change completely. They can be like Costco: not making money from selling products but just making friends, and then earning profits through stablecoins (membership cards).
03 Everyone Can Be an Insurance Company
Of course, in the financial world, just making a lot of money is not enough; a company also needs to survive in the long run.
In fact, before the emergence of stablecoins, there were quite a few enterprises that wanted to improve their low - profit situation through finance. But most of them ultimately failed.
Take the manufacturing giant General Electric (GE) as an example. Compared with the meager profits in manufacturing, financial services seemed to offer more and easier - to - earn money. This became GE's weapon to "improve its poor business." At its peak, more than half of its profits came from the financial industry.
However, the risks were obvious. Because for most enterprises doing finance, there is actually only one source of funds: borrowing.
For example, GE was one of the most prolific bond - issuing companies in history. By the eve of the financial crisis, the scale of GE's commercial paper had exceeded $100 billion. These short - term borrowings were then lent out by GE to earn the interest rate spread — this was also the business model of many domestic Internet finance companies.
Today, people can easily spot the problem: this is essentially "borrowing to pay off debts" or "robbing Peter to pay Paul." It cannot withstand any fluctuations. As long as there is a little uncertainty in the entire chain, the enterprise may default on its debts. And that's exactly what happened. During the financial crisis, GE crashed, and its stock price evaporated by 80%.
It was the extremely high risk in finance that made GE's approach almost disappear. Today, Internet finance companies like Du Xiaoman mainly play a platform role, and the funds come from banks and other partners. Instead of borrowing money themselves to earn the interest rate spread, because a single fluctuation could break the entire chain.
— But stablecoins don't have this problem.
Compared with traditional finance, the financing model of stablecoins is almost like a "cheat." Enterprises issuing bonds need to pay high interest, and even banks have to pay interest to depositors. But stablecoin issuers don't have to pay any interest. They even charge a certain handling fee when users withdraw money. For example, Circle, the first publicly - traded stablecoin company, raised its redemption fee in October last year, with a maximum of 0.1%. Not only do they not pay interest on financing, but they can also collect money when repaying debts?
Even with the fee, not everyone can redeem stablecoins. For example, Tether stipulates that only certain trusted entities that have passed KYC verification can directly mint or redeem USDT. In short, only large institutions can redeem stablecoins. What's even more overbearing is that Tether also reserves the right not to redeem stablecoins for users, truly living up to the saying "the debtor is the boss."
This greatly reduces the redemption frequency of stablecoins, so stablecoin manufacturers don't need a large amount of reserves to meet liquidity needs.
Due to the extremely low financing cost and regulatory requirements, stablecoin manufacturers don't need to look for high - return but high - risk loans like GE did. They only need to purchase risk - free wealth - management products — government bonds. Currently, the four major US dollar stablecoin issuers hold a total of about $180 billion worth of US government bonds. Of course, stablecoin companies can also invest in other products. For example, Tether, the largest stablecoin issuer, holds some gold and Bitcoin.
If GE, Lehman Brothers, and Goldman Sachs had this financial tool, they would not have collapsed during the 2008 financial crisis. Government bonds are a risk - free investment. During the financial crisis, the price of government bonds did not fall but rose instead. Even if users redeem a large number of stablecoins and sell them, the issuer can still pay off its debts smoothly.
In a word, the financing cost of stablecoins is low, and the risk is also low.
In fact, the core reason why banks and insurance companies can make money is that they have a source of funds with extremely low cost and relatively low risk.
But with the support of stablecoins, enterprises like Walmart, JD.com, and Amazon, which have large transaction volumes, are likely to become the players with the lowest financing costs in the future. They are not insurance companies, but they can enjoy negative - cost leverage like insurance companies.
Of course, enterprises' issuance of stablecoins is still in the exploratory stage. Whether they will issue them on a large scale or only use them