A 10,000-word analysis of stablecoins: New infrastructure or new risks?

On August 1, 2025, the Stablecoin Ordinance in Hong Kong officially came into effect, establishing a licensing system for legal stablecoin issuers in Hong Kong.

Previously, many well - known domestic enterprises such as JD.com and Ant Group publicly announced their entry into the stablecoin market, chasing the new trend in cross - border payments. Is a stablecoin the "anchor of stability" or the "eye of the storm" in the crypto world? As one month has passed since the implementation of the ordinance and the public's enthusiasm has cooled down, it's time to rationally discuss the relatively new financial concept of "stablecoin" in the public's perception.

Zhu Haikun, an assistant professor of finance who teaches courses on blockchain technology, digital assets, and financial services at the China Europe International Business School, made industry forecasts based on the essence and development history of stablecoins. He also shared professional insights on the opportunities and risks for enterprises to deploy stablecoins.

In recent years, the application and influence of stablecoins have grown exponentially. Statistics show that as of early 2025, the total market value of global circulating stablecoins soared from less than $2 billion in 2019 to over $250 billion, with an average annual compound growth rate of over 100%. The trading volume has also increased significantly. In 2024, the annual global stablecoin trading volume reached the scale of trillions of US dollars. At one point, the on - chain trading volume of stablecoins even exceeded the combined volume of Visa and Mastercard. ①

01 What is a "Stablecoin"?

The concept of a stablecoin, as the name implies, refers to a digital currency with a stable value. Mainstream stablecoins usually maintain a 1:1 fixed exchange ratio with fiat currencies such as the US dollar and the euro. Cryptocurrencies like Bitcoin and Ethereum have large price fluctuations, making them unsuitable as ideal payment and trading media. The emergence of Tether (USDT) in 2014 solved this problem.

The stable value of stablecoins allows cryptocurrency investors to find safe - haven assets during market fluctuations. It also enables smooth transactions between payment parties. Stablecoins also break down the conversion barriers between fiat currencies and cryptocurrencies, facilitating smoother capital flows.

Due to significant differences in the stabilization mechanisms, stablecoins can be divided into four categories: fiat - collateralized, crypto - collateralized, algorithmic, and commodity - collateralized stablecoins. The following table systematically summarizes the mainstream fiat - collateralized and crypto - collateralized stablecoins in the market.

Algorithmic and commodity - collateralized stablecoins have a negligible market share. Algorithmic stablecoins have experienced multiple de - pegging and collapse events in the past few years (such as the TerraUSD incident), severely damaging market confidence. Although commodity - collateralized stablecoins are supported by physical assets like gold, they are limited by reserve management and redemption mechanisms, and their liquidity and popularity are difficult to compare with fiat - pegged stablecoins. The compliance prospects of these two types of stablecoins are unclear, so they will not be elaborated on in this article.

Among these four types of stablecoins, fiat - pegged stablecoins have almost achieved an overwhelming monopoly. According to CoinGecko data, the market value of this type of stablecoin accounts for up to 97.4%, covering almost all market trading and settlement needs. This phenomenon is not surprising. Fiat - pegged stablecoins have become the first choice for users and institutions due to their stable value anchoring, sufficient liquidity, and extensive compliance access channels.

In contrast, crypto - collateralized stablecoins only account for 2.2% and are mainly active in the decentralized finance (DeFi) ecosystem, serving niche areas such as on - chain lending and derivatives trading.

As of August 2025, in terms of issuers, the stablecoin market presents an oligopoly. The largest in market value is USDT, with a market value of over $167 billion, accounting for about 60% of the global stablecoin market value. USDT dominates the market due to its long - accumulated network effects, extensive scenario support, and high liquidity. Its user base values its wide trading access and stable operation record.

The second - ranked is USDC, with a market value of around $67 billion, accounting for about 24%. USDC has won the favor of many institutional and corporate users with its highly compliant and transparent reserve management. For example, its reserves consist of cash and short - term US Treasury bonds and are regularly audited by licensed accounting firms and publicly reported. This transparent and compliant advantage has earned USDC higher trust in traditional financial channels such as banks and payment companies.

In addition, the decentralized stablecoin DAI, PYUSD launched by PayPal, etc., together make up the remaining market share, each exerting influence in specific user groups and application scenarios.

Overall, US - dollar - pegged stablecoins currently account for over 90% of the global stablecoin market. However, stablecoins pegged to other fiat currencies (such as the euro, Hong Kong dollar, and offshore RMB) are also emerging, which helps to reduce the dependence on a single currency and meet local market needs.

Stablecoin Profit Model and Benefit Distribution

In the business logic of stablecoins, taking fiat - pegged stablecoins as an example, the core profit comes from the so - called "reserve spread." When users exchange fiat currencies for stablecoins, the funds are deposited by the issuer in highly liquid and low - risk assets, such as US Treasury bonds, repurchase agreements, and some bank deposits. In the current global high - interest - rate environment, these assets can generate considerable interest returns. However, issuers usually do not distribute this interest to stablecoin holders, so this difference forms the profit.

Taking the world's largest stablecoin, USDT, as an example, as of the end of 2024, Tether held over $100 billion in US Treasury bonds and repurchase agreements, ranking among the largest non - sovereign holders of US Treasury bonds globally, with a monthly interest income of nearly $400 million. In 2024, Tether achieved a net profit of $13 billion, setting a new record for stablecoin issuers. ②

Some studies even point out that Tether's large - scale holdings of US Treasury bonds can affect market interest rates. For every 1% increase in its Treasury bond market share, the yield of one - month US Treasury bonds drops by about 3.8 basis points. When the holding ratio is higher than 0.973%, this effect increases to 6.3 basis points (Ante, Saggu, Fiedler, 2025). In addition to the spread, issuers usually charge a 0.1% - 0.2% handling fee for minting or redemption.

However, the sustainability of this high - profit "easy - money" model highly depends on the external interest - rate environment. If the interest - rate cuts begin, the spread will significantly narrow. At the same time, regulatory requirements for 100% reserves and real - time audits will further increase compliance costs. In the future, to remain competitive, stablecoins need to expand into diversified models such as cross - border settlement, corporate payments, and value - added data services.

The Value of Stablecoins

Stablecoins combine the stability of fiat currencies with the innovative advantages of crypto assets, so they have developed rapidly, which is reflected in the following aspects:

Infrastructure for the Crypto Market: Stablecoins have become the core of on - chain liquidity and are widely used in trading, lending, and derivatives markets. Their stability reduces the liquidation risk in complex financial operations and is called the "digital US dollar."

Cross - Border Payments and Remittances: Stablecoins can complete cross - border transfers at low cost and in real - time, far superior to the SWIFT system, which often charges 7% - 8% in fees. In high - inflation regions such as Latin America and Africa, stablecoin transactions account for over 40%. They are not only a store of value but also promote inclusive finance.

Integration with Mainstream Payments: Visa and Mastercard have piloted using USDC for cross - border settlements. Platforms such as Shopify, Stripe, and PayPal have also integrated stablecoin payments. Thus, stablecoins are moving from the crypto ecosystem to real - world business, becoming a value bridge between Web2 and Web3.

Corporate Treasury and Settlement: Multinational corporations can use stablecoins to transfer funds instantly between global subsidiaries, reducing exchange - rate and settlement costs. In trade finance and RWA tokenization settlements, stablecoins significantly shorten the capital - recovery cycle and improve capital efficiency.

02 Development Trends and Regulation of Stablecoins

Why is the Stablecoin Now Widely Concerned?

Although the concept of stablecoins emerged in 2014, since 2023, it has officially become the focus of the industry and regulators, driven by multiple factors.

First, the gradual clarification of the regulatory environment has injected confidence into the market. Governments and regulatory agencies around the world have shifted their attitudes towards stablecoins from initial ambiguity and caution to facing up to them and formulating rules. In the past one or two years, many major regulatory measures have been implemented, clearing legal obstacles for the development of stablecoins and enhancing public confidence.

The United States passed the Guiding and Establishing National Innovation for United States Stablecoins Act (GENIUS Act, referred to as the "Genius Act"), requiring stablecoin issuers to operate with a license and maintain 100% highly liquid reserves. The European Union's Markets in Crypto - Assets Regulation (MiCA) established classification and reserve standards for stablecoins. Hong Kong also promulgated the Stablecoin Ordinance, taking the lead in implementing a comprehensive licensing system for Hong Kong - dollar - pegged stablecoins. These policies not only reduce compliance uncertainties but also lay the foundation for stablecoins to enter the mainstream financial system.

Second, the in - depth participation of mainstream institutions has given stablecoins broader endorsement. In addition to payment giants such as PayPal and Visa, large asset - management institutions like BlackRock have also started to engage in stablecoin - related businesses, further increasing their credibility and application - scenario diversity. The Bank for International Settlements (BIS) has also published reports discussing the impact of stablecoins on the global payment system, implicitly acknowledging the rationality of their existence to some extent.

In 2023, Coinbase, the largest cryptocurrency exchange in the United States, reached an agreement with the issuer of USDC to prepare for cross - platform payments and settlements at the institutional level, thus becoming an enterprise - level payment infrastructure.

In Hong Kong, with policy support, large Chinese technology companies such as JD.com and Ant Group have announced plans to issue or participate in compliant stablecoin projects in Hong Kong. The entry of these "national - team" and leading companies has added credit endorsement and business networks to stablecoins, helping to dispel public doubts about the credit of stablecoins and expand their application scope.

Third, the uncertainty in the global macro - environment has driven the growth of stablecoin demand. In high - inflation countries such as Turkey and Argentina, residents are flocking to US - dollar - pegged stablecoins to hedge against the risk of local - currency depreciation.

Finally, the profit opportunities brought by rising interest rates have attracted more participants to this field. High interest rates not only enhance the profitability of issuers but also may allow users to share in the benefits, thereby increasing the attractiveness of stablecoins.

Overall, stablecoins have evolved from a safe - haven tool in the crypto market to an important infrastructure for the global digital economy. They have not only promoted the maturity of crypto finance but also brought about structural changes in cross - border payments, commercial settlements, and corporate treasury management. With the implementation of regulations, technological improvements, and the continuous involvement of mainstream institutions, the application boundaries of stablecoins will continue to expand, and they will play a more important role in the future global financial system.

Regulatory Comparison

Policy support and clear regulation are beneficial to the development of stablecoins. From a global perspective, international institutions such as the Financial Stability Board (FSB) have repeatedly called for strengthened regulatory coordination of stablecoins in recent years, proposing high - level principles such as full transparency of reserve assets, cross - border information sharing, clear redemption rights, and implementation of anti - money - laundering/anti - terrorist - financing measures.

These consensus principles set the tone for national regulations, which is to "support innovation while controlling risks." Common requirements include: stablecoin reserves must be highly liquid and safe assets with full provision, issuers need to obtain a license or access qualification, and user real - name authentication (KYC) and a redeemable mechanism should be established. This regulatory framework is gradually taking shape globally, and major economies have issued stablecoin regulatory drafts or guidelines, all focusing on key aspects such as reserve management, issuance qualifications, and information disclosure. The following figure specifically compares the relevant regulations of major economies.

Notably, Hong Kong's Stablecoin Ordinance is regarded as one of the strictest stablecoin regulatory systems globally. All stablecoin users are required to undergo real - name verification, and anonymous wallets are prohibited from connecting to DeFi protocols. This system has actually brought stablecoins into the governance framework of "quasi - sovereign currencies," almost closing the space for decentralized innovation. In the long run, Hong Kong's stablecoin ecosystem may evolve into a "compliance club" dominated by large institutions rather than an open - innovation platform.

Mainland China currently takes a cautious and even restrictive stance towards cryptocurrencies and stablecoins. The focus of mainland regulation is on risk prevention and the protection of the sovereign currency: On the one hand, China is vigorously promoting the research, development, and pilot of the legal digital currency, the digital RMB (e - CNY), keeping the issuance of digital currencies in the hands of the central bank. On the other hand, it is worried that privately issued stablecoins may impact financial security and capital control. Therefore, currently, mainland China has not introduced a positive regulatory framework for stablecoins, and there are almost no legally circulating RMB - pegged stablecoins in the market. However, this conservative attitude does not mean ignoring the trend of stablecoins.

In June 2025, Securities Times published an article stating that China should "actively adapt to the stablecoin wave," calling for the early development of RMB - pegged stablecoins to prevent the dominance of US - dollar - pegged stablecoins. ③ This reflects China's strategic considerations: to prevent the potential strengthening of dollarization by US - dollar - pegged stablecoins while hoping to use stablecoin technology to help the RMB go global. After Hong Kong introduced the Stablecoin Ordinance, mainland regulators have also closely monitored its progress, regarding Hong Kong as