The Rapid Ascent of Stablecoins and Their Promising Future
On June 25th, Huatai Securities released an in-depth macroeconomic research report highlighting the explosive growth of stablecoins. Since Bitcoin's inception in 2009, cryptocurrencies have evolved rapidly, giving rise to stablecoins that serve as mediators for crypto-asset transactions. Recent legislative advancements in the U.S. (GENIUS Act) and Hong Kong (Stablecoin Ordinance) have brought stablecoin development and regulation into sharp focus.
Key Developments:
- Definition: Stablecoins are cryptocurrencies pegged to specific assets or baskets to maintain value stability.
- Market Growth: From $5 billion in 2020 to $250 billion today, with a CAGR exceeding 100%.
- Transaction Volume: Nearly $37 trillion annually, with USD-backed stablecoins dominating 95% of the market.
- Projections: Conservative estimates suggest a $4 trillion market in 10 years (16x current size), with a 30%+ CAGR.
👉 Why stablecoins are the future of finance
Factors Driving Stablecoin Adoption
- Technological Advancements: Distributed ledger technology and the rise of virtual economies.
- Efficiency: Superior cross-border payment speeds and lower costs compared to traditional systems.
- Accessibility: No bank account required, bypassing SWIFT in underbanked regions.
- Profitability: Issuers earn interest on reserve assets, boosting adoption incentives.
Regulatory clarity is critical to balancing efficiency with security, addressing risks like compliance and redemption transparency.
Stablecoins and Their Impact on Global Monetary Systems
Short-Term Dominance of USD Stablecoins
- First-Mover Advantage: USD-backed stablecoins lead due to existing trust and liquidity.
- Network Effects: Likely to favor major currencies (EUR, JPY, GBP) and potentially RMB long-term.
Credit Expansion Risks
- Shadow Banking Parallels: If reserve assets include bonds, stablecoins could mimic shadow banking, expanding liquidity without central bank oversight.
- U.S. Case Study: GENIUS Act mandates reserves in cash/short-term Treasuries, potentially distorting yield curves and increasing inflationary pressures.
Long-Term Vulnerabilities
- Trigger Events: Rising risk premiums on underlying assets (e.g., U.S. Treasuries) could provoke instability.
Strategies for HKD and RMB Stablecoins to Compete
Hong Kong’s Path Forward:
- Diversify Reserves: Expand high-liquency assets beyond HKD cash, particularly fixed-income products.
- Leverage Offshore RMB: Promote RMB-backed stablecoins amid de-dollarization trends.
Key to Success:
- Expand Use Cases: Support Chinese enterprises in global markets, digital economies, and cross-border ventures.
- Regulatory Synergy: Align policies to foster trust and adoption, revitalizing RMB internationalization.
FAQ Section
Q1: What gives stablecoins their value stability?
A1: They’re pegged to reserves like fiat currencies or bonds, ensuring minimal price volatility.
Q2: How do stablecoins affect traditional banking?
A2: They bypass intermediaries, reducing costs but potentially disrupting deposit systems.
Q3: Can stablecoins replace national currencies?
A3: Not currently—they lack government backing but may complement monetary systems.