Xiao Feng’s latest speech: Stablecoins are a new stage in currency evolution

On June 15, the China Wealth Management 50 Forum (CWM50) held a special seminar on "Fast Coin Development: Potential and Challenge" , and Xiao Feng, Vice Chairman of Wanxiang Holdings, attended and gave a special speech.

Xiao Feng said that stablecoins have become a new stage in currency evolution and can be called "tokenized currency". It is based on distributed ledger technology, enabling peer-to-peer transactions without the need for intermediate institutions to align information. Since the emergence of distributed ledger technology, financial market infrastructure has changed significantly. The emergence of stablecoins also marks the emergence of a digital twin trend, which is to introduce real assets into blockchain for tokenization. Asset tokenization has the significance of improving global liquidity of assets, bringing new clearing and settlement models, programmability, and facing the future AGI era.

From the perspective of currency functions, stablecoins have functions such as payment and settlement, and are high-circuit currency across time and space. They solve the "last mile" problem of inclusive finance and play an important role in facilitation of cross-border payments.

The goal of the US dollar stablecoin is to maintain the global mainstream currency of the US dollar. Its impact on China is multidimensional and is already in a stage where it must be actively responded. China may consider using Hong Kong as a test field to carry out an offshore RMB stablecoin pilot program and explore its synergy mechanism with the central bank's digital currency.

*This article only represents the author's personal views and does not represent the position of the forum.

From a practical perspective, stablecoins are actually not just a payment tool, but a new stage in the evolution of currency, which can be called " tokenized currency " .

1. The significance of stablecoins

(I ) Technical value as a distributed ledger

To truly understand stablecoins, we need to first sort out their development background. Stablecoins are based on distributed ledger technology . Distributed ledger technology is the third iteration of human computing methods in thousands of years. The first time is the single- type accounting method. Judging from the clay tablet books in the Sumer region that have been discovered, the single- type accounting method is adopted , which only records income and expenditures.

By around 1300 AD , a double bookkeeping method appeared in Italy, which not only recorded income and expenditures, but also assets and liabilities. In the past 700 years, the calculation method was only optimized, and no new iterative versions appeared.

It was not until the emergence of Bitcoin blockchain in 2009 that a new calculation method, namely the distributed accounting method, appeared for the first time. The biggest difference between the distributed accounting method and the previous accounting method is that the previous accounting methods were all recording their own accounts and belonging to private account books. For example, a remittance from Beijing to New York involves the participation of multiple institutions, which requires alignment of all the information on the private ledgers of these institutions, which takes some time and cost. However, a distributed ledger is a public ledger. Whether it is a global organization or an individual, it keeps accounts on the same ledger. Therefore, no need for many institutions to align information, the two parties to the transaction can directly complete payments through a point-to-point method. This is the biggest difference between the two calculation methods.

After the emergence of the Bitcoin blockchain, stablecoins began to appear in 2014. In the process of continuous engineering experiments, continuous maturity and continuous optimization of distributed ledger technology, two trends have emerged: on the one hand, since 2009, people have created Bitcoin, Ether, etc. on blockchain, which are called "digital native". On the other hand, since 2014, the emergence of stablecoins represented by USDT marks the emergence of another trend, namely "digital twin". The so-called digital twin refers to the existence of some kind of asset, such as the US dollar, in the real world, introduced into the blockchain and tokenized, that is, mapping existing assets to the chain through digitalization.

At the same time, with the United States and Hong Kong approving the launch of Bitcoin ETFs last year, a new phenomenon has emerged: digitally native assets are transferred from on-chain to off-chain (On-Chain). Bitcoin ETFs are listed on the New York Stock Exchange (New York Stock Exchange) and the Hong Kong Stock Exchange (HKEX), and investors can invest and buy and sell them according to the mechanism of stock trading. Bitcoin itself exists on the chain, while Bitcoin ETF exists off the chain. Therefore, in this process, the conversion between On-Chain and Off-Chain is involved, as well as the interaction between digital twins and digital natives.

In the practice of distributed ledger technology over the past decade, if it is regarded as a social engineering experiment, the changes can be seen and the value of these technologies is gradually proved.

(II ) As a new financial market infrastructure

Based on distributed ledger technology, financial market infrastructure has also undergone significant changes since 2009, resulting from changes in distributed ledger methods. Financial market infrastructure mainly includes a series of mechanisms such as payment, transaction, clearing and settlement. So where is the new mechanism compared to the old one? What are the characteristics of the old and new mechanisms?

The financial infrastructure assets we rely on currently adopt central registration, central custody , central counterparty transactions and central settlement models. At least three institutions are required to cooperate to complete the clearing and settlement of a transaction. However, in the distributed ledger, since all participants are keeping accounts on the same ledger, the transaction model has changed to point-to-point transactions, and any two people can complete the transaction directly, and there is no need for intermediate links.

The settlement model of the existing financial market infrastructure is net settlement, while the settlement model on the distributed ledger is transaction-by-transaction. In other words, once the transaction is confirmed, the settlement is completed and the goods are both settled. From the stock market, the New York Stock Exchange will launch a 5×23-hour trading model at the end of this year, and reserve one hour for clearing after the end of the trading time; while Nasdaq will launch a 5×24-hour trading model in the future. However, Nasdaq will not achieve this goal this year because under the old financial infrastructure, the transaction process must be suspended for a period of time for clearing. In contrast, Hong Kong's virtual currency exchanges have achieved 7×24-hour holiday-free trading, which is precisely because of the different types of ledgers, which leads to different financial market infrastructure. This is also one of the backgrounds of stablecoins, that is, they are built on new financial market infrastructure.

2. Asset Tokenization (RWA)

(I ) What is asset tokenization

In my opinion, asset tokenization actually originated from USDT, which refers to the fact that real-world assets are on-chain and tokenized through blockchain technology. Its development history has gone through three stages:

The first stage is the emergence of USDT, with its time node in 2015. Practice and social experiments from 2015 to the present ten years have shown that the tokenization of fiat currency has great value, not only in the field of payment and clearing, but also in other aspects, which will be elaborated in detail later. Against this backdrop, countries have begun legislation aimed at regulating and further promoting it under the licensing and regulatory framework. According to statistics from different calibers in 2024, the minimum transaction volume of US dollar stablecoins is US$16 trillion, while the higher statistics are US$28 trillion. Whether it is $16 trillion or $28 trillion, this shows that stablecoin applications based on distributed ledgers and blockchain have become a "killer application" and are widely used. Its largest user group is those in Africa who do not have bank accounts, using USDT and USDC to complete cross-border payments.

The second stage began last year. With BlackRock, Fidelity and others launching tokenization of fund products in the United States, such as US Treasury Funds, US dollar monetary asset funds, etc., these funds were tokenized and put on the chain, starting the process of tokenization of financial assets.

The third stage is tokenization of physical assets, that is, tokenization of physical assets such as real estate and hotel assets. This stage is still in the exploration stage and may be gradually promoted from this year. There are currently billions of dollars in physical assets tokenization practices.

These three stages are arranged in an order from easy to difficult. Tokenization of fiat currencies is relatively easy because it does not require other means of credit endorsement. The legal currency such as the US dollar and RMB is endorsed by the state's laws, so the market has a high level of trust in it and the tokenization process is relatively simple. Tokenization of financial assets is relatively more complex, but it is still easy to tokenization of physical assets because its issuers and custodians are usually regulated licensed financial institutions and are custodially in banks. People trust these licensed financial institutions that are strictly regulated and therefore are more likely to accept their tokenization.

The biggest difference before and after tokenization is that once the assets are minted into tokens on the chain, they leave the banking system, leaving both the bank account system and the SWIFT system, and become a decentralized form. Therefore, whether the token exists on the chain and exists permanently needs to be guaranteed by strictly regulated financial institutions (custody banks). Tokens are generated based on instructions issued by the custodian bank. For example, after the custodian bank confirms that it receives $100,000 from the client, it mints $100,000 (such as a US dollar stablecoin). This kind of instruction only recognizes the issuance of the hosted bank, so this process is relatively simple.

However, there are currently no mature solutions to tokenization of physical assets. The main problem is how to put information on the chain and confirm rights, and how to ensure strong binding between on-chain information and physical assets off-chain, because the two are easily decoupled. For example, for real estate, real estate information needs to be put on the chain, which requires cooperation from multiple parties, such as the Housing Administration Bureau and other relevant departments, but this problem has not been well solved.

In the blockchain industry, although there is a potential solution, it is currently immature. It is called DePin (Decentralized Physical Network). In theory, each block can collect data on the chain, ensuring that the assets are real and validated through on-chain. For example, a charging pile can be equipped with a blockchain communication module, through which data such as the usage time, charging amount, and revenue of the charging pile can be directly uploaded to the chain. However, this path is currently inadequate in technological maturity and has high costs, so physical assets are relatively less tokenized. It is expected to develop from 2025.

(II ) The significance of asset tokenization

Some people point out that why tokenization is necessary and what is special about traditional currencies such as the RMB or the US dollar? The necessity of tokenization is:

1. Improve asset liquidity worldwide

When an asset is minted as tokens on the public chain, investors around the world can easily obtain it, giving the asset a global liquidity. This is equivalent to integrating it into the global liquidity pool. For example, buying stocks on the Hong Kong Exchange is a complicated process for Brazilian investors, requiring opening an account in Hong Kong, converting the currency into Hong Kong dollars before trading can be carried out. However, on the blockchain, these tedious procedures are omitted because they remove traditional mechanisms such as central registration and central custody, and enable point-to-point transactions. Investors can independently find information and decide whether to buy it. This greatly improves the accessibility of assets and transaction convenience.

2. New clearing and settlement mode

Tokenization brings a peer-to-peer clearing and settlement model, with fewer links, higher efficiency and lower costs. According to preliminary statistics, the number of capital turnovers of traditional banks is about 7 to 8 times a year, while mortgage loans based on decentralized finance (DeFi) can reach 67 times a year, which is almost 10 times that of traditional banks. The fastest case of completing a loan on the blockchain is 10 seconds, including lending, recycling and interest settlement. This model is called "Flash Loan". "Flash Loan" is achieved through excessive asset mortgage rather than leveraged lending, with the interest on USDT borrowing on chain of 8%. This high interest comes from a significant increase in the frequency of capital turnover, rather than amplifying returns through leverage. Therefore, tokenization not only improves capital turnover efficiency, but also eliminates the need to use leverage, reducing risks.

3. Programmability

Traditional currencies (such as RMB and US dollar) are not programmable, while tokenized currencies can be programmed through smart contracts. This feature has been widely used in clearing settlement and default handling in smart contracts, greatly improving efficiency. For example, in on-chain lending, once a default condition is triggered, the smart contract will automatically perform liquidation without the intervention of an accountant, bank or court. This process takes only a few seconds, and handling defaults in traditional financial markets requires a large number of intermediaries and a long time.

4. The AGI era for the future

With the advent of the era of general intelligence ( AGI), machines will create economic value independently of humans, and payments and clearings are also required between machines. In this case, transactions between machines cannot rely on traditional payment methods, but require payment, clearing and settlement through smart contracts and programmable currencies. If fiat currencies want to maintain their importance and value in the AGI era, they must be programmable. Therefore, tokenization is not only a need for current financial innovation, but also an inevitable choice for future technological development.

3. The currency attributes of stablecoins

The attributes of currency have undergone three iterations: First, early currencies have natural attributes, whether they are shells, gold, silver or copper, all originate from nature, and people give them monetary attributes. Second, with the emergence of sovereign states, such as the birth of legal currencies such as the RMB, the US dollar, and the British pound, currencies have legal attributes at this stage. Third, digital currencies such as Bitcoin are generated. They are based on digital technologies such as cryptography, distributed ledgers, digital wallets and smart contracts, and constitute the technical attributes of the currency, making it gain global consensus. Based on this consensus, the total market value of Bitcoin has reached more than 2 trillion US dollars.

Stable coins have dual attributes: on the one hand, legal currency is a currency that is forced to give value to people by law. On the other hand, when legal currency is converted into a stablecoin, it has technical attributes, which runs on a distributed ledger and is based on cryptography, distributed ledger, digital wallet or smart contract technologies during issuance, minting and operation. From this perspective, stablecoins can be regarded as the tokenization of legal currency and are the preferred currency currently created by mankind.

From the perspective of currency attributes, stable coins have functions such as payment and settlement. In addition, stablecoins not only have technical attributes such as programmability, but also currency across time and space. Once the currency is converted into a stablecoin and runs on the chain, it transcends spatial restrictions and judicial regional restrictions. For example, in Africa, since more than 60% of the population does not have a bank account, it is impossible to obtain currencies such as US dollars through banks, but with the help of a mobile wallet, US dollar stablecoins can be easily purchased on-chain. Third, it is a high-circuit currency, which is bound to flow through smart contracts on the chain, and is more efficient than the actual currency flow. Fourth, it is democratized currency. Specifically:

(I ) Discussing stablecoins from the perspective of reserve assets

Stable coins are the same as money funds in asset reserve management. The stablecoin issuer collects the customer's USD and deposits it into the custodian bank. The custodian issues instructions to the issuer, such as receiving $100,000 for someone, and the issuer then mints $100,000 for him on the chain. The underlying assets of the stablecoin are fiat currency, but fiat currency is not circulated directly, but circulated through tokens, and its management method is consistent with that of money funds. Some people are worried about whether this involves currency creation, but there is actually no currency creation. Because fiat currency is only deposited in its original place, the issued currency does not have leverage and has no currency storage, it has relatively little disturbance to financial stability. Stablecoins are only circulated at high speed across time and space through tokens, replacing leverage. The reason why there is no currency storage is because it improves the efficiency of capital turnover. For example, "Flash Loan" can be borrowed and recovered within 10 seconds.

From the perspective of reserve assets, stablecoins actually solve the "last mile" problem of inclusive finance. Inclusive finance requires that access to financial services be convenient. If there is no financial account, inclusive finance will be impossible. Stablecoins are widely adopted in Africa, although the amount is not high. Take Kenya as an example. 60% of its people do not have a bank account, so they developed payment methods based on mobile phone numbers, becoming a classic case of inclusive finance. Now Kenyans can not only send text messages to telecom operators to complete payment, collection or payment through their mobile wallets, but also more conveniently obtain US dollar stablecoins on the chain through digital wallets, which is more convenient than the bank account system.

(II ) Analysis of stablecoin from the perspective of cross-border payment facilitation

After obtaining the US dollar stablecoin, holders have the ability to pay cross-border, which is a great progress for inclusive finance and greatly increases the access to financial services. The result is that those without bank accounts in Africa have obtained the possibility of global payment through mobile wallets, and China's cross-border e-commerce has become the biggest beneficiary. In Yiwu, local exporters have begun to charge US dollar stablecoins. Merchants who do international trade in China's cross-border e-commerce need to return to foreign exchange settlement after receiving the US dollar stablecoin paid by the customer, but cannot directly use the US dollar stablecoin to settle the exchange. They can only exchange it for US dollars on the Hong Kong Exchange and return it to the bank account and then settle the exchange. From the perspective of actual business, the problem of "last mile" in inclusive finance has been solved.

At present, China's cross-border trade and international trade have emerged . That is, global C-end users directly place orders and shop on the Chinese Internet e-commerce platform. Chinese merchants no longer transport goods through containers, but instead use packages. After the C-end users place an order, the merchant will make the purchased goods such as shoes, clothing, etc. into packages and send them to the user's residence directly through logistics. Compared with the traditional B To B To C container trade, C To B parcel trade urgently needs faster payment methods. If the payment takes 7 days to arrive, the merchant must wait for the payment to be collected before delivery. If traditional payment methods are used, the parcel trade cycle will be extended to two or even three weeks. If a US dollar stablecoin is used, the C-end customer will receive the payment quickly and the cost is extremely low when paying to the Chinese Internet platform. Against this background, cross-border e-commerce has become the biggest beneficiary of stablecoins, and China's cross-border e-commerce has benefited a lot. Although China does not currently recognize such payment methods, Chinese people actually benefit greatly from it, which provides a strong boost to the facilitation of cross-border trade.

4. US dollar stablecoin

Further focusing on the stablecoins of the US dollar is not to help US Treasury bond sales and increase US Treasury bond buyers, but to maintain the dominant position of the US dollar as the global mainstream currency, which can be regarded as the inheritance and development of from gold dollar, oil dollar to token dollar or digital dollar. It is observed that the transaction volume and payment amount of about ten to two trillion US dollars last year have left the banking system. Once the stablecoins are minted, they have nothing to do with the bank. After the customer holds the stablecoins, they no longer rely on the bank account system, nor do they need to rely on SWIFT. At present, nearly 20 trillion US dollars of transaction volume have been reached. From the perspective of payment alone, although it is less than 100 billion US dollars, the combination of transactions and payments is about 20 trillion US dollars.

Given that the dollar stablecoin bypasses SWIFT, this has a major impact on U.S. financial power, however, this trend is driven by technology and unstoppable. The United States may eventually accept compromise, that is, allowing bypassing SWIFT, but strive to maintain its status as the US dollar. In this case, 99.99% of the USD 20 trillion stablecoin transactions last year were traded in US dollars, just because other countries did not issue their own stablecoins, the market was occupied by the United States.

Currently, the U.S. government expects to pass a stablecoin bill before Congress adjourns in August. At this stage, there are two types of US dollar stablecoins, which are divided into onshore and offshore. As of May 2025, the total amount of casting reached US$250 billion. One is USDC, issued by US fintech company Circle and the mainstream cryptocurrency exchange Coinbase. It is an onshore dollar stablecoin and is favored by US users. The second is USDT, which is issued by Tether, a company registered in El Salvador, and has no branches in the United States. However, as a US dollar stablecoin, its reserve asset management is the same as a monetary asset fund, and requires the purchase of a large amount of US short-term Treasury bonds, US dollar deposits and cash. The relevant operations are completed through US institutions, so they can be regarded as an offshore US dollar stablecoin.

The Hong Kong Stablecoin Ordinance also divides Hong Kong dollar stablecoins into onshore and offshore categories. Hong Kong dollar stablecoins approved by the Hong Kong Monetary Authority can be used locally in Hong Kong for individual retail investors. However, if Hong Kong dollar stablecoins issued outside Hong Kong are recognized to a certain extent by Hong Kong regulators, they can be used in Hong Kong, but only qualified investors are allowed, and retail investors will not be able to use them. The same is true for relevant US regulations. As for why USDT chose El Salvador as its registered place, the reason is that the legal currency of El Salvador is originally the US dollar, and the country does not have its own legal currency. The US dollar was designated as the legal currency when legislation was made, so there are no legal obstacles to conducting US dollar stablecoin-related business in El Salvador.

5. The significance of stablecoins to China

(I ) Impact and response

The impact of stablecoins on China is multi-dimensional at the monetary level. On the one hand, the currency pattern continues to evolve over time. When technical attributes and legal attributes are integrated to empower currency, the competitiveness of currency will be significantly improved. In the pattern of currency competition among countries, better currencies will inevitably have a strong competitive advantage over other currencies with slightly less competitive strength.

On the other hand, the process of monetary globalization is accelerating. In 2024, the global stablecoin transaction volume will reach US$20 trillion, and most of the transactions will be denominated in US dollars. This currency circulation model based on public ledgers provides a more efficient and cheaper way to internationalize currency.

In addition, the global monetary pattern is gradually developing towards multipolarization. In this process, countries need to actively think about how to improve the competitiveness of their own currencies and explore the possibility of creating better currencies through technological empowerment and other means.

Monetary facilitation is also an important aspect that cannot be ignored. The key to the widespread use of stablecoins in Africa is its convenience in acquisition and payment. It does not require the bank account opening conditions. It can achieve peer-to-peer payments worldwide with just a mobile wallet, greatly improving the accessibility and efficiency of payments.

Given the many impacts of stablecoins, China is already in a stage where it must actively respond. Related work can be promoted from stages and levels. First, we can consider using Hong Kong as the "test field" to carry out related pilot projects for offshore RMB stablecoins. For example, support Hong Kong and mainland free trade zones, such as Hainan Free Trade Zone, Guangdong-Hong Kong-Macao Greater Bay Area, Shanghai Free Trade Zone and other places. In particular, the FTN account of the Shanghai Free Trade Zone has unique advantages, and its financial policies are relatively more convenient and perfect. These policies can be combined with the stablecoin pilot and explored from the offshore RMB stablecoin. Accumulate experience through pilot projects and lay the foundation for subsequent promotion on a larger scale in the country.

(II ) Coordination mechanism with central bank digital currency (CBDC)

If the RMB stablecoin is officially launched in the future, we need to think about its coordination mechanism with the central bank's CBDC. One possible solution is to build a two-tier architecture, that is, the central bank directly opens an account for the stablecoin issuer. The stablecoin issuer deposits the account after receiving the fiat currency of the customer, and the central bank issues CBDC to it accordingly. The issuer then uses the CBDC to mint stablecoins on the blockchain for customers to use on a global scale. Of course, this idea still needs further discussion and improvement, but its core lies in exploring the organic combination path between the central bank's CBDC research results and the stablecoin architecture.

The central bank's CBDC and the commercial institutions' stablecoins have their own emphasis, and the two complement each other. The central bank's CBDC focuses more on centralized issuance to ensure monetary sovereignty and financial stability; while the stablecoins of commercial institutions rely on blockchain technology to achieve decentralized circulation after leaving the banking system, break through national borders and judicial regional restrictions, and achieve free circulation. Under this model, the first half issuance is led by the central bank, and the second half is commercial institutions to promote market circulation, give full play to their respective advantages, and jointly promote the innovative development of the monetary system.

(III ) Understanding of "decentralization"

The concept of decentralization can be understood from multiple perspectives: First, from the economic perspective, decentralization is actually a trade-off between fairness and efficiency. If we focus on fairness, we need to decentralize to avoid excessive concentration of power on a single subject. On the contrary, if you pursue efficiency, you tend to make centralized decisions. Therefore, the degree of decentralization is closely related to the focus of fairness and efficiency. Ideally, a balance needs to be reached before the two are achieved.

Second, from the technical agreement level, decentralization is an inherent requirement of the underlying technology and cannot be achieved by the application level. The application layer is difficult to achieve decentralization due to the need to take into account many factors such as user convenience and functional integrity. However, the underlying protocol must be decentralized. Taking the blockchain protocol as an example, it has the characteristics of open source, openness, no license, and free, which is similar to the IP protocol, UDP protocol, HTTP protocol, etc. in the Internet . These protocols do not require any subject permission and are universally used worldwide and have typical decentralized characteristics. It is this decentralized feature that enables the Internet and blockchain technology to achieve extensive interconnection and interoperability on a global scale.

Third, in the field of data privacy protection, decentralization means that individuals have sovereignty over their own data. From the perspective of data privacy protection, the underlying protocol is required to be decentralized to protect personal data rights. However, in the context of global interconnection, if there are many different underlying protocols on the Internet, it will lead to problems in interconnection. Since the application layer needs to generate huge social benefits, it must accept supervision, eliminate negative external effects through supervision, and enhance positive external effects. Therefore, it is an inevitable requirement for the application layer to present centralized features.