Original Author: Paolo@Victory Securities Partner, Andy@VDX Senior Researcher
Original Source: VWin Ventures
TLDR:
Stablecoins are value mappings of their underlying fiat currencies on the blockchain, serving as a trading medium linking fiat and crypto assets.
The core scenarios for stablecoins are trading and payment, used for permissionless trading and settlement of financial assets and commodity trade on a global flattened blockchain clearing network.
Trading Scenario: Highly concentrated, future incremental growth will come from new financial assets going on-chain, with the competitive landscape gradually shifting from on-chain/exchange trading scenarios to competing for traditional financial transactions on-chain.
Payment Scenario: Payment is currently the largest incremental market for stablecoins, especially cross-border remittances and local acceptance, with real and massive demand. Stablecoins are eroding the core interest chain of traditional clearing systems represented by SWIFT and card organizations. Licensed financial institutions provide compliant and stable trading venues for customers.
Top stablecoin players USDT and USDC initially relied on early channels and traffic binding, with later competition focusing on liquidity and ecosystem networks. Tether expanded naturally through a distributed network of gray markets, while Circle expanded mainstream financial channels through compliant identity.
US dollar stablecoins essentially carry out a "de-geographical" export of the new round of US dollar financial sovereignty, establishing a dollar network that can circulate globally without traditional banks and central banks, promoting free circulation of funds and concentration of assets. The US can remotely control global on-chain dollar flow through regulatory policies and KYC reviews, forming a new digital colonization model.
The Underlying Logic of Stablecoins – Shadow Dollars on a New Global Clearing Network
Stablecoins initially solved the value stability problem in the digital asset world, but essentially, they meet the global demand for "de-banked dollars". These digital dollars can flow freely 24/7, unrestricted by banking and central bank systems, quickly occupying the "gray areas" inaccessible to banks.
The United States extends dollars to areas difficult for traditional regulation to cover by tacitly allowing private institutions to issue stablecoins, forming a decentralized but essentially controllable "digital dollar colonial system".
Stablecoins are a business of converting credit into liquidity. Creating a stablecoin means becoming a private "global central bank" with extremely low deposit costs and marginal expansion costs, controlling two-way exchange fees, fund interest, and multiple hidden profit models. In the entire Crypto industry, stablecoins are like "casino chips" and "mining shovels", serving speculative arbitrage, leveraged trading, and other "gray" demands; stablecoins are one of the few businesses with real long-term value in the Crypto industry.
Core Scenarios of Stablecoins – Permissionless Trading and Settlement of Financial Assets and Commodity Trade
Currently, the total stablecoin issuance exceeds $200 billion, mainly divided into two core scenarios: trading vs payment.
Scenario 1: Trading Market (Stock-dominated, Strong Flywheel Effect)
In trading scenarios, stablecoins serve as hedging assets and trading media, currently trending towards top-heavy concentration, with USDT/USDC having deep moats and obvious network effects:
Stock Market: Currently lacking high-quality assets to further attract liquidity, stablecoin growth in trading scenarios is stagnant and highly competitive;
Incremental Direction: Future growth points are RWA (real-world assets) going on-chain, gradually developing from standard products (like bonds) to non-standard equity assets, forming a new opportunity similar to an "on-chain NASDAQ";
New Player Opportunities: Capturing new assets and scenarios - for example, FDUSD binding with Binance exchange, relying on specific vertical scenarios to build network barriers; or Ethena and Usual developing on-chain fixed-income wealth management products similar to Yu'ebao, seizing scenario-based entry points for user financial needs.
Future development of trading scenarios will gradually shift from pure trading tools to asset financialization and on-chain securitization. Competition between players will focus on resource integration and scenario barrier construction.
Scenario 2: Payment Market (Current Largest Incremental Source for Stablecoins)
Compared to trading scenarios, stablecoins have greater potential in the payment field, stemming from the stock conversion of traditional payment markets:
Cross-border Payment Demand: Especially in developing countries with weak traditional financial systems, stablecoins have obvious cost advantages and massive demand, severely impacting the monopoly of traditional banking systems.
Core Competitive Elements in Payment Scenarios: Credit endorsement and liquidity support are the foundation, with channel network construction being the core competition. Although business models are relatively homogeneous, early blue ocean markets can still seize asset-side or traffic-side dividends by extending upstream and downstream to form bilateral network effects.
Approach Paths:
Top-down: Circle obtains global compliance licenses, promoting traditional financial institutions' acceptance of USDC through official credit and first-mover advantages;
Bottom-up: Represented by USDT, rapidly occupying market share through local non-compliant financial institutions and OTC channels, but with long-term compliance risk hidden dangers.
Compared to stablecoin issuers, circulation merchants (Distributors, such as payment companies, brokers, etc.) can also obtain market expansion and customer acquisition benefits, focusing on downstream channel construction, creating regional distribution networks, capturing incremental market dividends, with high early gross margins but weaker market barriers than issuers' network effects.
Development Path of Top Stablecoins – Rising Through Traffic, Success Depends on Supply Chain
The core competitive elements of stablecoins are: 1. Credit endorsement; 2. Liquidity support; 3. Channel and customer acquisition capabilities. The competitive landscape of top stablecoins has evolved from on-chain/exchange trading scenario comparisons to market and channel competition in non-crypto scenarios such as cross-border payment settlement.
Tether (USDT Issuer, Issuance Exceeding $140 Billion, Market Share Over 60%):
Its development path is remarkably similar to the three stages of US dollar development, expanding naturally through a distributed network of gray markets in conjunction with the censorship-resistant Tron, forming a strong network effect.
Circle (USDC Issuer, Issuance Exceeding $60 Billion, Market Share Over 25%):
Early cold start binding exchanges and public chains (Coinbase & Base, Solana, Binance Launchpool)
Obtaining global compliance licenses to form barriers, waiting for competitors to exit (BUSD sanctioned by the US, MiCA clearing out USDT in Europe), becoming the largest trusted compliant stablecoin in capital markets
Using compliance endorsement to continuously expand compliant financial channels (exchanges, payment companies, banks), capturing global incremental scenarios (payment, RWA, and new asset trading)
Circle will officially submit IPO application documents to the US SEC in April 2025, potentially becoming the first stablecoin stock in the US market; future stablecoin growth scenarios will primarily come from cross-border trade and global cross-border payment on-chain, with the compliant market being a larger incremental source. As a compliant leader, USDC is favored by mainstream US institutions and is poised to capture major market share, with Circle likely to achieve significant fundamental growth in the long term.
Future Challenges
Can Tether be "brought under control" through compliance? To some extent, Tether has helped expand the US dollar and become a top 20 US Treasury investor, while also having deep connections with Lutnick's former asset management company.
With the interest rate reduction cycle beginning, how can issuers enhance diversified profitability as interest income declines?
Under the background of deregulation, as more traditional financial giants (banks, payment companies, etc.) enter the compliant track, how much dividend period remains for Circle's leading compliance position?
Payment Scenarios Become the Main Battlefield for Stablecoin Future Competition, with Huge Growth Potential in Cross-border Payment Chain
In 2024, global stablecoin transaction volume has reached $15.6 trillion, surpassing the scale of traditional payment giants Visa and Mastercard during the same period, becoming one of the world's most important value transfer networks, with conservative estimates suggesting that over half of the volume comes from cross-border payment scenarios.
Traditional payment processes are lengthy and involve multiple intermediary steps, and stablecoins have obvious advantages in cross-border payment links. Stablecoin payments primarily have two core business scenarios:
Scenario One: B2B Business
B2B is more like a web2.5 business, adding a "fiat currency - stablecoin" process in the existing payment chain (which is also the main profit source), achieving cost reduction and efficiency improvement compared to the compliance system, and realizing regulatory arbitrage in regions with exchange difficulties or sanctions, solving real needs.
B2B business has large transaction volumes, stable cash flow, and real business scenarios, including virtual service customers (e.g., voice chat, online gambling) and traditional trade customers:
Virtual service customers mostly have one-way stablecoin off-ramp needs, such as income from Crypto and expenditure (traffic investment, wage payment, etc.) in fiat currency. This scenario is highly homogeneous, gradually saturated, and requires strong operational and sales capabilities.
Traditional trade customers generally involve the entire cross-border payment process: local acquiring - local acceptance - cross-border transfer - foreign exchange - payment, with some including settlement and tax refund needs. Higher gross margins exist in long-tail small countries, competing on stable fund circulation channels, channel network construction, and localized operational capabilities. Compared to traditional payment chains, it offers more chain link optimization and profit enhancement space.
B2B business faces compliance pressure when reaching a certain scale, with licenses like Hong Kong MSO/Singapore MPI becoming necessary compliance costs for scaling up.
Scenario Two: B2C Business
The typical B2C business model is U card issuance, primarily serving underbanked end customers, with currently low overall business gross margins. The business chain is:
C-end customers - Secondary card issuer [accepting third-party settlement] - Primary card issuer (such as commercial banks, payment companies, etc.) - Card organizations (Visa, Mastercard)
Due to high barriers to upstream expansion to primary card issuers, pure crypto cards are a high-risk, low-reward business, but can serve as a customer acquisition method, expanding asset management and other businesses through deposit attraction, and becoming a natural choice for major exchanges' business expansion.
Whether for B-end or C-end users conducting exchange, compliance and security have always been the market's biggest pain points. As the market moves towards institutionalization and mainstreaming, licensed financial institutions have become the most compliant and secure transaction channels, such as Hong Kong compliant exchanges and listed securities firms like Victory Securities, providing customers with safe and reliable transaction options.
(Translation continues in the same manner for the rest of the text)Conclusion: Stablecoins, a Strategic Weapon of the New Era of US Dollar Hegemony and a Historical Opportunity for Reshaping Global Financial Order
The implementation and popularization of stablecoins rely on real transaction demands and clearing efficiency, constructing a structural and sustainable network of capital flows on a global scale.
Currently, stablecoins have become relatively stable in crypto trading scenarios, with leading players monopolizing market share, and incremental growth coming from new financial assets going on-chain. Payment scenarios, especially cross-border payments, are the current main incremental blue ocean and structural breakthrough point.
The on-chain payment and clearing network built around stablecoins is gradually eroding the traditional cross-border payment system dominated by banks and SWIFT, giving birth to a massive payment and exchange market worth trillions of dollars, and providing historical opportunities for global financial institutions, payment companies, and even national financial infrastructures to redefine their roles.
The rise and widespread adoption of stablecoins essentially continues the penetration of US dollar hegemony in the financial system, but upgrades it into a more covert, broader, more strategic, and precisely targeted on-chain version. The competition in the stablecoin era is no longer a game at the financial instrument level, but a strategic contest for global monetary sovereignty and discourse power in the global financial order.
