Author: VWin Ventures

Written by: Paolo@Shengli Securities Partner, Andy@VDX Senior Researcher

TLDR:

• Stablecoins are the value mapping of its underlying fiat currency on the blockchain, and are the trading medium that links fiat currency with crypto assets.

• The core scenarios of stablecoins are divided into transactions and payments, which are used to perform permissionless transaction settlement for financial assets and commodity trade on the global flat blockchain clearing and settlement network.

• Trading scenarios: The head is concentrated, and the future increase comes from new financial assets being put on the chain. The stablecoin competition pattern gradually evolves from the on-chain/exchange trading scenario competition to the on-chain market competition of traditional financial transactions .

• Payment scenario: Payment is the largest incremental market for stablecoins at present, especially cross-border remittances and local acceptances . There is a real and huge demand. Stablecoins are eroding the core interest chain of the traditional clearing system represented by SWIFT and card organizations. Licensed financial institutions provide customers with compliant and stable trading venues.

• The leading stablecoin players USDT and USDC have begun to rely on early channels and traffic binding , and compete in later competition for liquidity and ecological networks . Tether relied on the natural expansion of distributed networks of black and gray industries in the early days, and Circle relied on compliant identity to expand mainstream financial channels.

• The US dollar stablecoin essentially carries the "degeochemical" output of the US dollar's new round of financial sovereignty , establishes a US dollar network that can be circulated globally without traditional banks and central banks, promoting free circulation on the capital side and concentrating the head of the asset side . The United States can remotely control the flow of US dollar on the global chain through regulatory policies and KYC reviews, forming a new digital colonization model .

The underlying logic of stablecoins – the shadow dollar on the global

fresh clearance settlement network

Stablecoins initially solved the problem of value stability in the digital asset world, but essentially, they met the global demand for "debanked dollars". This digital dollar can flow freely for 7*24 hours without restrictions on the bank and central bank systems, quickly occupying the "gray zone" that banks cannot reach.

By acquiescing private institutions to issue stablecoins, the United States extends the US dollar to areas that are difficult to cover in traditional regulation, forming a decentralized but essentially controllable "dollar digital colonization system".

Stablecoins are a business that realizes liquidity by credit. Making a stablecoin means becoming a private "global central bank", with extremely low storage absorption costs and marginal expansion costs, and mastering two-way redemption fees, fund precipitation and interest generation, and some underwater multiple profit models. In the entire Crypto industry, stablecoins can be called "casino chips" and "mine shovels", serving "gray" needs such as speculative arbitrage and leveraged trading; stablecoins are one of the very few core businesses in the Crypto industry that have real long-term value.

The core scenario of stablecoins – permissionless transaction settlement

of financial assets and commodity trade

The current total issuance scale of stablecoins exceeds US$200 billion, which is mainly divided into two core scenarios: transaction vs payment.

Scenario 1: Trading market (stock dominant, flywheel effect strong)

Trading scenarios, stablecoins, as safe-haven assets and trading media, have become more concentrated in the top spots. USDT/USDC has a deep moat and has obvious network effects:

• Stock market: At this stage, the lack of high-quality assets on the chain further attracts liquidity, the growth of stablecoins in trading scenarios is hindered, and competition is fierce;

• Incremental direction: The future growth point lies in the fact that RWA (real world assets) will be launched, gradually developing from standard products (such as bonds) to non-standard equity assets, forming new opportunities similar to "on-chain Nasdaq";

• New player opportunities: capture new assets and new scenarios- Taking FDUSD binding to Binance Exchange as an example, relying on specific vertical scenarios to build network barriers; or Ethena and Usual develop on-chain fixed-income wealth management products similar to Yu'ebao to seize the scenario-based entrance to users' financial needs.

In the future development of trading scenarios, they will gradually shift from simple trading tools to asset financialization and securities chain development. Players compete with resource integration and scene barrier construction.

Scenario 2: Payment Market (current largest incremental source of

stablecoins)

Compared with transaction scenarios, stablecoins in the payment field have greater potential, which comes from the stock conversion of the traditional payment market:

• Cross-border payment demand: Especially in developing countries, the traditional financial system is weak, the cost advantage of stable currency is obvious, and the demand is huge. Stable currency has seriously impacted the monopoly position of the traditional banking system.

• Core competitive elements in the payment scenario: In the stablecoin payment scenario, credit endorsement and liquidity support are the foundation, and the core of competition lies in the construction of channel networks. Although the business model is relatively homogeneous, in the early blue ocean market, by extending upstream and downstream, it can still seize dividends on the asset side or traffic side to form a bilateral network effect.

• Path play method:

  • Top-down: Circle has obtained a global compliance license, promoting traditional financial institutions to accept USDC with official credit and first-mover advantages;

  • From bottom to top: represented by USDT, it has grown wildly through local non-compliant financial institutions and OTC channels, quickly occupying market share, but there are long-term compliance risks.

Compared with stablecoin issuers (Issuers), channel distributors (such as payment companies, brokers, etc.) can also obtain market expansion and customer acquisition benefits, focus on downstream channel construction, build regional distribution networks, capture incremental market dividends, and have rich gross profits in the early stage, but market barriers are weaker than the network effect of issuers.

The development path of the top stablecoins – the starting point depends

on traffic, success or failure supply chain

The core elements of stablecoin competition are: 1. Credit endorsement; 2. Liquidity support; 3. Channels and customer acquisition capabilities. The competitive landscape of top stablecoins has evolved from the competition of on-chain/exchange trading scenarios to the competition for markets and channels in non-encrypted scenarios such as cross-border payment settlement.

Tether (USDT issuer, issuance volume exceeds US$140 billion, market share exceeds 60%): The development path is similar to the three stages of US dollar development. Tron, which cooperates with censorship-resistant Tron, has naturally expanded the distributed network of black and gray products, has formed a strong network effect.

Circle (USDC issuer, with an issuance volume of over US$60 billion, with a market share of over 25%):

• Early binding exchanges and public chain cold starts (Coinbase & Base, Solana, Binance Launchpool)

• Globally obtaining compliance licenses has formed barriers, and its competitors have withdrawn (BUSD was sanctioned by the United States and MiCA cleared USDT in Europe), becoming the largest trusted compliance stablecoin in the capital market

• Use compliance endorsement to continuously expand compliant financial channels (exchanges, payment companies, banks) and seize global incremental scenarios (payment, RWA and other new asset transactions)

Circle officially submitted IPO application documents to the US SEC in April 2025, and is expected to become the first stablecoin target in the US stock market; the main growth scenarios of stablecoins in the future come from cross-border trade and global cross-border payment chain, and the compliance market is a larger source of incremental growth. USDC, as the compliance leader, is favored by mainstream US institutions and is expected to seize major market share. Circle is expected to achieve significant fundamental growth in the long run.

Future Challenges

• Can Tether be "recruited" by compliance? To some extent, Tether helped the US dollar expand, becoming the top 20 US bond investment institution in the world, and also had deep relationships with the former asset management company of Commerce Secretary Lutnick.

• The interest rate cut cycle has begun and the issuer's interest income has declined. How to improve diversified profitability?

• Against the backdrop of Deregulation, more and more traditional financial giants (banks, payment companies, etc.) have entered the compliance track to compete. How many bonus periods does Circle have to lead the compliance position?

Payment scenarios become the main battlefield for stablecoins in the

future competition, cross-border payment chain has huge room for growth

In 2024, the global stablecoin transaction volume has reached US$15.6 trillion, surpassing the scale of traditional payment giants Visa and Mastercard during the same period, becoming one of the most important value transmission networks in the world. Conservatively estimated that more than half of the volume comes from cross-border payment scenarios.

Traditional payment scenarios have long processes and involve many intermediate links, and stablecoins have obvious advantages in cross-border payment. Stablecoin payment has two main core business scenarios:

Scenario 1: To B business

To B is more like a web2.5 business, adding a "fiat currency-stable currency" process to the original payment chain (also the main source of profit), which can reduce costs and increase efficiency compared to the compliance system, and achieve regulatory arbitrage in areas with foreign exchange difficulties or sanctions, and solve real needs.

To B has a large business scale, stable cash flow, and real business scenarios, including virtual service customers (eg language chat, online spinach, etc.) and traditional goods and trade customers:

• Most of the virtual service customers have stablecoins one-way off ramp demands, such as Crypto on the income side, and fiat currency on the expense side (investment, salary payment, etc.). This scenario is seriously homogenized and gradually saturated, and it emphasizes operation and sales capabilities.

• The needs of traditional goods and trade customers generally involve the entire process of cross-border payment: local collection – local acceptance – cross-border transfer – foreign exchange – payment on behalf of others , and some also include foreign exchange settlement and tax refunds and other needs. There are higher gross profits in small long-tail countries, competing for stable capital flow channels, channel network construction, and localized operation capabilities. In comparison, the chain is longer, and more inefficient links in the traditional payment chain have been replaced and integrated, with higher room for value chain optimization and profit improvement.

Compliance pressure exists when To B business reaches a certain order of magnitude, and Hong Kong MSO/Singapore MPI and other licenses have become a necessary compliance cost after scale.

Scenario 2: To C business

The typical business format of To C business is U card issuers, which mainly serves end customers whose underbank is not fully served by banks. The overall business currently has a low gross profit margin. The service link is:

C-end customer – Second-level card issuer [acceptance of third-party acceptance] – First-level card issuer (such as commercial banks, payment companies, etc.) – Card organization (Visa, Mastercard)

Since the threshold for expanding upstream to first-level card issuers is high, crypto cards are a business with higher risks than returns, but they can be used as a means of customer acquisition and the drainage tool for expanding asset management and other businesses through deposit-absorbing and savings, and have also become a natural choice for the business expansion of major exchanges.

Whether it is B-end or C-end users conducting exchanges, compliance and security have always been the biggest pain points in the market. As the market advances to institutionalization and mainstreaming, licensed financial institutions have become the most compliant and safe trading channels, such as the Hong Kong Compliance Exchange and listed brokerage firm Victor Securities, etc., providing customers with safe and reliable trading options.

The future development trend of stablecoins: Compliance dispute

Stablecoin payment is currently in a relatively gray area, and the compliant stablecoin settlement scenario has huge potential growth space. As the upstream of the payment scenario, stablecoins can significantly improve business barriers by binding to core channels.

The current compliance development path of the stablecoin market is difficult because the traditional financial system has a large conflict of interests and a high compliance threshold. But in the long run, the compliance route is more strategic:

• In the context of geopolitical conflicts and financial sanctions, trading companies need compliant, safe, audit-recognized, and consistent interests;

• Mainstream institutions have entered the market (Fidelity, Wyoming State, World Liberty Finance, etc.) to seize the transformation of the traditional existing payment market + high-quality assets on the chain;

• Local protection and local leading players appear, such as the emergence of compliant stablecoins in Europe and Hong Kong. New players include local banks, payment companies, Internet companies, etc. The license is the stepping stone. The core of competition is to seize and build core channel resources and exchange networks;

• Under the trend of de-dollarization of international trade, such as the opportunity to implement offshore RMB in the Belt and Road trade scenario

Strategic competition: Stablecoins help the US dollar achieve financial hegemony output?

From a higher global strategic competition perspective, the US dollar stablecoin carries the "degeochemical" output of the US dollar's new round of financial sovereignty. Stablecoins map the US dollar to blockchain, a global permissionless clearing network, help capital and liquidity to achieve smoother circulation around the world on the capital side, and intensify the "globalization Matthew effect" and head concentration on the asset side.

Stablecoins have greatly reduced obstacles to the global liquidity of the US dollar, bypassing the banking and central banking systems to directly target global users. In the past, the dollar hegemony relied on the central bank for trade settlement. Currently, in many markets, especially in developing countries, people spontaneously use stablecoins as a means of denomination payment and storage value. Stablecoins have achieved free circulation of the US dollar across national borders, which is convenient for attracting global funds to US dollar assets such as US bonds and US stocks, and at the same time is conducive to the US 's asset harvest through US dollar tides.

Central banks of developing countries are therefore in a passive position. The dollar hegemony continues to extend through stablecoins in compliance and grey legs:

• Gray expansion: USDT is typical, backed by regulatory arbitrage demand, and is widely used in gray scenarios such as speculation, evasion of financial supervision, etc., and is widely used in foreign exchange control areas such as Southeast Asia, Latin America, and Africa, rapidly expanding user base and market penetration.

• Compliance expansion: represented by USDC, supported by US regulatory support, mainstream financial institutions are gradually included, and building an on-chain compliant USD clearing and settlement network is of great long-term value, but due to certain conflicts of interest with the traditional payment system, the current growth is relatively slow, and the development path is more dependent on official supervision and institutional endorsement.

The US regulatory strategy is reflected in acquiesce to the wild growth of the gray field (USDT), and actively support the development of compliance scenarios (USDC). The two jointly build a strategic moat of the US dollar on the chain, realizing the siphon effect on global financial liquidity.

As a strategic projection tool for the dollar hegemony, stablecoins are essentially a "programmable financial sanctions" weapon, and the United States controls the seemingly decentralized network clearing network. The United States can accurately attack targets through regulatory compliance and smart contract freezing assets (such as USDC freezing Tornado Cash-related addresses).

How to avoid becoming a "digital dollar colony" for policy makers in developing countries or elsewhere:

• If a credible local on-chain financial system is not built, it will become a passive user of the US dollar stablecoin system for a long time.

• The "clearance is hegemony" in the new era: controlling the liquidation flow on the chain is like controlling the global water source - it seems free, but in fact it has valves. It is possible to consider introducing domestic or regional on-chain financial infrastructure (such as local stablecoins, CBDCs) to reduce excessive dependence on the on-chain system of the US dollar.

Conclusion: Stablecoins, the strategic weapon of US dollar hegemony in

the new era and the historical opportunity for the reshaping of the global financial order

The implementation and popularization of stablecoins rely on real transaction needs and clearing efficiency to build a structural and sustainable capital flow network around the world.

The current stablecoins are relatively stable in the crypto trading scenario, with leading players monopolizing the market share, and the increment comes from the new financial assets being put on the chain; and the payment scenario, especially cross-border payments, is the current main incremental blue ocean and structural breakthrough.

The on-chain payment and clearance settlement network built around stablecoins is eroding the cross-border payment system dominated by traditional banks and SWIFT, giving birth to a huge payment and exchange market with a size of trillions of dollars, providing a historic opportunity to redefine its role for global financial institutions, payment companies and even national-level financial infrastructure.

The rise and widespread popularity of stablecoins essentially continues the penetration of US dollar hegemony in the financial system, but only upgrades it to a more hidden, broader, more strategic and precise on-chain version. The competition in the stablecoin era is no longer a game at the financial instrument level, but a strategic competition between global monetary sovereignty and the discourse power of global financial order.