Stablecoin: The Value Anchor of the Encryption World

In the field of cryptocurrency, stablecoins have become an indispensable key element. Their unique value is not only reflected in their role as a medium for trading crypto assets but also showcases revolutionary potential in traditional financial scenarios such as cross-border payment settlements. The latest data shows that as of April 9, 2025, the global circulating market value of stablecoins has reached 236.7 billion USD. Large asset management institutions, as well as economies such as the EU and Singapore, are accelerating their layout in the stablecoin sector. A certain stablecoin issuer has recently officially submitted a prospectus to the US SEC, expecting to go public with a valuation of 5-7 billion USD, becoming a microcosm of industry development.

1. Definition and Application of Stablecoins

A stablecoin is a type of cryptocurrency that theoretically can maintain a specific price over the long term, with its core feature being the maintenance of a relative stability in coin value through specific mechanisms. It should be clarified that central bank digital currencies do not fall under the category of stablecoins.

The emergence of stablecoins has solved the value storage problem in the cryptocurrency world. Investors can purchase the cryptocurrency they wish to invest in using stablecoins, and then, after the investment gains or loses, exchange the corresponding cryptocurrency back to stablecoins, thereby locking in investment gains or losses.

In addition to the cryptocurrency market, stablecoins are also widely used in areas such as DeFi and cross-border payment settlements. In cross-border payments, stablecoins demonstrate significant efficiency and cost advantages. A cross-border transfer using stablecoins can typically be completed within 2 minutes, achieving T+0 instantaneous settlement, with transaction costs far lower than those of traditional banking systems.

In the DeFi field, stablecoins have become the cornerstone asset for the operation of the ecosystem. Stablecoins provide stable and sufficient liquidity support for various decentralized platforms, optimizing the economic models of trading and lending on DeFi platforms through their low volatility characteristics.

2. Classification and Comparison of Mainstream Stablecoins

The mainstream stablecoins in the market can be divided into: fiat collateral, cryptocurrency collateral, physical asset collateral, and algorithm-based stablecoins.

1. Fiat-backed stablecoin

USDC

• Issuer: Some Company
• Circulating Market Cap: Approximately 60 billion USD
• Stablecoin value stabilization mechanism: supported by excessive reserves of cash in USD and short-term U.S. Treasury securities.
• Compliance Framework: Licensed remittance institutions regulated by U.S. state laws, have obtained issuance permits under the EU MiCA legislation.

USDT

• Issuer: Some Company
• Circulating Market Cap: Approximately 60 billion USD
• Stablecoin mechanism: Maintained through 1:1 reserve of cash and non-cash assets such as US Treasury bonds and commercial papers.
• Compliance Framework: There are disputes regarding compliance, and fines were imposed due to the lack of transparency in reserves. Currently, it has not obtained the EU MiCA issuance license.

Despite the shortcomings of USDT in compliance and transparency, the network effects it has built within the encryption ecosystem allow it to maintain a high market value. The extensive use of USDT in legitimate transactions and some gray areas has given it a unique market position.

2. Encryption asset collateral stablecoin

DAI

• Issuer: MakerDAO
• Circulating Market Cap: Approximately $3.1 billion
• Stablecoin value stabilization mechanism: achieved through the over-collateralization of encryption assets.
• Compliance Framework: As a decentralized autonomous organization, there is a lack of clear legal entity, and regulatory assessment poses challenges.

3. Physical Asset-Backed Stablecoin

PAXG

• Issuer: a certain company
• Market Cap: Approximately $1.87 billion
• Stablecoin value stabilization mechanism: supported by physical gold reserves, 1 PAXG = 1 troy ounce of standard gold bar
• Compliance Framework: Approved and regulated by the New York State Department of Financial Services

4. Algorithm stablecoin

Algorithmic stablecoins maintain coin value stability through smart contract algorithms, without relying on physical reserves. Due to an excessive reliance on algorithmic design, they can easily lose stability under extreme market conditions. The collapse of a certain algorithmic stablecoin in 2022 exposed the potential risks of such stablecoins, leading to a collapse of market trust in them.

3. The Value Foundation and Risks of Stablecoins

The value of stablecoins is built on the dual support of anchored assets and market consensus. However, the "stability" attribute of stablecoins is not absolute. When there are cracks in market consensus or when reserve assets encounter systemic risks, stablecoins may face the risk of price fluctuations or even de-pegging. To protect the rights and interests of holders, relevant regulatory frameworks and technical assurance mechanisms still need further improvement.